Chapter 2 The Economic Problem: Scarcity and Choice

22) Saving is an example of

A) exchanging capital for cash.

B) exchanging scarce resources for unlimited resources.

C) trading present benefits for future benefits.

D) trading future benefits for present benefits.

23) The opportunity cost of investment in capital is forgone present consumption when

A) resources are scarce.

B) resources are unlimited.

C) capital is in greater supply than labor.

D) the public chooses consumption over investment.

24) An example of an investment is

A) the purchase of an iPhone by a company for one of its salesmen.

B) the purchase of a share of Berkshire Hathaway stock.

C) the purchase of a government Treasury bill.

D) all of the above

25) Because resources are scarce, the opportunity cost of investment in capital is

A) past investment.

B) past consumption.

C) foregone present consumption.

D) future consumption.

26) If the unemployment rate decreases from 9% to 6%, the economy will

A) move closer to a point on the ppf.

B) move away from the ppf toward the origin.

C) remain on the ppf.

D) remain on the origin.

27) Periods of full employment correspond to

A) points outside the ppf.

B) points inside the ppf.

C) points on the ppf.

D) either points inside or outside the ppf.

Refer to the information provided in Figure 2.1 below to answer the questions that follow.

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Figure 2.1

28) Refer to Figure 2.1. The economy is currently operating at Point A. The best explanation for this is that

A) the economy has experienced increasing technology.

B) the economy’s resources are being underemployed.

C) the economy has too few resources to operate on the production curve.

D) the economy is operating above full employment.

29) Refer to Figure 2.1. The economy’s production possibility frontier ________ due to specialized resources.

A) is convex to the origin

B) displays constant opportunity costs

C) demonstrates decreasing opportunity costs

D) is bowed out from the origin

30) Refer to Figure 2.1. The shape of the economy’s production possibility frontier shows

A) decreasing opportunity costs.

B) constant opportunity costs.

C) increasing opportunity costs.

D) random opportunity costs.

31) If an economy is fully utilizing its resources, it can produce more of one product only if it

A) doubles manufacturing of the product.

B) produces less of another product.

C) adds more people to the labor force.

D) reduces the price of the most expensive products.