Login

Scarcity, Choice, and the Production Possibilities Curve Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. Rebeca is the CEO of a large marketing company. After paying taxes, her company was left with $18,000,000 of disposable income. She can reinvest this money into her company in infrastructure spending and salary increase, or she can invest it into the stock market. The cost of choosing one over the other is called the _____ cost.

Question 2 2. Jenifer owns a company which grows and distributes organic food throughout four continents. She is considering going into a joint venture with another company, but she also is considering spending money to increase the satisfaction of her employees. What is a key assumption for her to be able to use opportunity cost to find a solution?

Question 3 3. Tom owns a company and he is analyzing his company's capital structure. Which of the following is he NOT likely to find?

Question 4 4. Which of the following is a key assumption of the production possibilities model?

Question 5 5. Jim has invested $1,000 in government bonds, while he could have invested $500 in a small startup. Calculate the opportunity cost:

Page 2

Question 6 6. Why is scarcity central to understanding economics?

Question 7 7. Which of the following is FALSE regarding incentives?

Question 8 8. James is considering opening a new line of fast food restaurants. He has a great idea of making many affordable restaurants and hopes to develop his own franchise. He will need to rent some space in order to be able to do so and he will need at least $16,000,000 to start implementing his idea. Why is this an example of the use of factors of production?

Question 9 9. Why are all resources essentially scarce?

Question 10 10. John is considering whether he should work for an hour, or go running for an hour. What is the opportunity cost of going running?

Page 3

Question 11 11. Rachel is considering how several factors may help her company's productivity. She is considering using advances in technology, more investment into human capital and she is trying to predict the changing trends in the labor force. Which of the following would be MOST beneficial to this scenario?

Question 12 12.

Which of the following may be a component of a company's capital structure?

I. Long-term debt

II. Short-term debt

III. Equity

Question 13 13. You can invest in the stock market with an expected return of 9% or invest in the bond market with an expected return of 6%. What's your opportunity cost if you invest in bonds?

Question 14 14. Carl owns a computer company. On any given day, he can produce either 500 desktop computers or 300 laptops. What's his opportunity cost if he decides to produce desktops?

Question 15 15. Assume that you have two hours to spend at the mall. You can either visit the bookstore or enjoy a movie at the theater. The opportunity cost of watching a movie is equivalent to which of the following?

Page 4

Question 16 16. Which of the following best describes opportunity cost?

Question 17 17. Assume that land can be used either for producing corn or producing beef. The opportunity cost of converting an acre from producing corn to raising cattle for beef is equal to which of the following?

Question 18 18. The perpetual problem in economics is:

Question 19 19. Because resources are scarce, but wants are not:

Question 20 20. Scarcity means:

Page 5

Question 21 21. Outward shifts (to the right) in the production possibilities curve will result in which of the following?

Question 22 22. Why doesn't the output continue to increase on the production possibilities curve?

Question 23 23. How are capital goods different from consumer goods?

Question 24 24. With the same amount of resources, Country A can produce 25 tons of chicken or 50 tons of wheat. What is Country A's opportunity cost of producing 1 ton of wheat?

Question 25 25. In one hour, Sally can complete 4 reports or she can write 9 computer programs. Which scenario would give her the greatest economic advantage?

Page 6

Question 26 26. Assuming there are only two countries, Country A can produce 10 tons of wheat or 20 tons of rice, while Country B can produce 5 tons of wheat or 15 tons of rice. Which country has the highest opportunity cost for producing 1 ton of rice?

Question 27 27. What does the production possibilities model show?

Question 28 28. The production possibilities curve for two goods is bowed outward because _____.

Question 29 29. Which is TRUE of points located outside of the production possibility curve?

Question 30 30. A CFO can invest company profits in stocks with projected returns of 10%, or use the money to add a new assembly line, projected to yield 14% after payment of the debt. What is the opportunity cost of investing in stocks instead of the factory upgrade?

Scarcity, Choice, and the Production Possibilities Curve Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next question. You can skip questions if you would like and come back to them later with the "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. You will lose your work if you close or refresh this page. Good luck!

Economics 102: Macroeconomics  /  Business Courses
Support