Chapter 2 Reading Quiz

1. A town can produce one pound bags of raisins or bottles of wine. The table below displays the production possibilities frontier. 

What is the opportunity cost if this town were to move production levels from point B to C?

1. 2 bags of raisins 
2. 10 bottles of wine
3. 35 bottles of wine
4. 14 bags of raisins 

2.   Which of the following statements is an example of a normative statement?

1. The inflation rate should be 2% 
2. The inflation rate is under 2%
3. The inflation rate is over 2%
4. Inflation is harmful 

 
3. A point on the production possibility frontier is

1. not feasible but efficient 
2. not feasible 
3. feasible and efficient
4. feasible but inefficient 

4.  Sam has a weekly budget of $3 for a mid-morning snack. Donuts cost $0.50 and cup of coffee is $1. The table below shows the possible combinations of coffee and donuts Sam can consume.

What is the opportunity cost of consuming one more cup of coffee?

1. one coffee 
2. zero donuts 
3. two donuts 
4. one donut 

5. Pat decides to leave her job as an engineer to start a her own business. She estimates that her costs in rent, inventory, supplies, total $150,000. She will also give up her $80,000 salary as an engineer to work in her business. How much is her implicit cost? 

1. $150,000 
2. $230,000 
3. $70,000
4. $80,000 

6.  In economics, happiness or satisfaction can be measured using 

1. opportunity cost 
2. utility
3. regulations 
4. economies of scale 

7. Which of the following is an example of a positive statement?

1. The inflation rate should be under 5% 
2. The inflation rate is about 5% 
3. The inflation rate should be 2% 
4. The government ought to do more about lowering the inflation rate 

8. A town can produce one pound bags of raisins or bottles of wine. The table below displays the production possibilities frontier. 

What is the opportunity cost if this town were to move production levels from point C to A?

1. 4 bags of raisins 
2. 10 bags of raisins
3. 15 bottles of wine
4. 50 bottles of wine 

9. A point outside the budget constraint is 

1. not within the budget 
2. affordable, but not all of the budget is spent
3. affordable and all of the budget is spent
4. within the budget 

10.   Which of the following displays the Law of Diminishing Marginal Utility?

1. TABLE 1 and 2 
2. TABLE 1 only
3. none 
4. TABLE 2 only