CHAPTER
ONE
Practice Question 1.1 2
Assume that the US is only producing two goods, which are
guns and roses.
A. Draw a production possibility frontier, which shows an
increasing opportunity cost for both goods. Using the
production possibility frontier that you have drawn,
illustrate the following:
1. The economy is being inefficient and not making full use
of its resources
2. The economy is being efficient and make full use of its
resources
3. The point that is unattainable by the economy
constrained by sufficiency of resources
B. Draw a production possibility frontier, which shows a
constant opportunity cost for both goods.
A. PPF – increasing opportunity
cost
1. A – inefficient point
2. B – efficient point
3. C – unattainable point
Roses
∙B
PPF1
∙A ∙C
Guns
B. PPF – constant opportunity cost
1. A – inefficient point
2. B – efficient point
3. C – unattainable point
Roses
∙B
∙C
∙A
PPF1 Guns
Practice Question 1.2 5
1. Economics is defined as ______________.
A. science of efficiency
B. science of scarcity
C. study of markets
D. study of human activity
2. The economic problem of scarcity refers to
______________.
A. limited wants and unlimited resources
B. unlimited wants and unlimited resources
C. limited resources and unlimited wants
D. limited resources and limited wants
3. All the following are basic economic
questions EXCEPT ______________.
A. how to produce?
B. what to produce?
C. where to produce?
D. for whom to produce?
4. Microeconomics is the branch of
economics that deals with human
behaviour and choices as they relate to
______________.
A. what is
B. what should be
C. relatively small units in the economy
D. aggregates or the entire economy
5. If there is always a three-for-one (3:1)
tradeoff between goods X and Y, then the PPF
between X and Y is
A. a downward-sloping curve that is bowed
outward.
B. a downward-sloping curve that is bowed
inward.
C. a downward-sloping straight line.
D. an upward-sloping straight line.
6. The PPF between goods X and Y will be a
downward-sloping
A. straight line if increasing opportunity costs
exist.
B. straight line if decreasing opportunity
costs exist.
C. curve that is bowed outward if increasing
opportunity costs exist.
D. curve that is bowed outward if constant
opportunity costs exist.