Term
True or False?
If a country produces a combination of goods that uses all of the resources available in the economy, then the country has eliminated scarcity. |
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Definition
FALSE.
If a country produces a combination of goods that uses all of the resources available in the economy, then the country is producing on its production possibilities frontier. When a country produces on its PPF, it is fully utilizing its scarce resources, but it has not eliminated scarcity. |
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Term
True or False?
If an economy is producing efficiently, then it is possible for that economy to produce more of one good without producing less of the other. |
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Definition
FALSE.
If an economy is producing efficiently, then it is impossible for that economy to produce more of one good without producing less of the other. |
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Term
Holding all else constant, which of the following is correct?
1. An economy can only produce on its production possibilities frontier
2. An economy can only produce outside or inside its production possibilities frontier
3. An economy can only produce inside or on its production possibilities frontier.
4. An economy can only produce outside or on its production possibilities frontier.
5. An economy can produce inside, outside, or on its production possibilities frontier. |
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Definition
| 3. An economy can only produce inside or on its production possibilities frontier. |
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Term
True or False?
An economy experiencing unemployment of some resources must be producing inside its production possibilities frontier. |
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Definition
|
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Term
True or False?
A straight-line production possibilities frontier is more realistic than a bowed-out production possibilities frontier. |
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Definition
FALSE.
A bowed-out production possibilities frontier is more realistic than a straight-line production possibilities frontier. |
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Term
An inward shift of a country's production possibilities frontier can occur due to:
1. unemployment
2. a war that destroys some of the country's resources
3. a change in the amount of the two goods that society wishes to continue
4. an increase in the labor force
5. more than one of the above is correct |
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Definition
| 2. a war that destroys some of the country's resources |
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Term
True or False?
The only way for an economy to experience economic growth is for the economy to gain resources. |
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Definition
FALSE.
An economy can experience economic growth if technology improves because an improvement in technology makes it possible for an economy to produce more goods and services with the same amount of resources. |
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Term
True or False?
It is possible for a country to have absolute advantage in the production of a good without having comparative advantage in the production of that good. |
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Definition
|
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Term
True or False?
A country with comparative advantage in the production of a good must also have absolute advantage in the production of that good. |
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Definition
|
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Term
True or False?
Trade based on comparative advantage allows participants to consume outside their production possibilities frontier. |
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Definition
|
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Term
True or False?
It is possible for a country as a whole to gain from trade while some individuals in that country are harmed from trade. |
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Definition
|
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Term
True or False?
Trade restrictions increase the gains from trade. |
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Definition
FALSE.
Trade restrictions reduce or eliminate the gains from trade. |
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Term
Which of the following transactions does not take place in the factor markets in the circular-flow diagram?
1. a landowner leases land to a farmer
2. a farmer hires a teenager to help with harvest
3. a retired farmer sells his combine to a new farmer
4. a woman buys vegetables for dinner |
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Definition
| 4. a woman buys vegetables for dinner |
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Term
In a market system, which of the following groups brings together the factors of production in order to produce goods and services?
1. the government
2. lawyers
3. economists
4. entrepreneurs
5. consumers |
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Definition
|
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Term
True or False?
Households are suppliers of the factors of production that are used by firms to produce goods and services. |
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Definition
|
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Term
True or False?
The outcome of enforcing property rights and contracts in a market system is decreased economic activity. |
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Definition
FALSE.
The outcome of enforcing property rights and contracts in a market system is increased economic activitiy. |
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