Economic Chapter Test 2 - from school

A student has nothing to do on a Friday evening. She withdraw $5 from the $100 she has in savings account and buys a present to take to a party, to which admission is free. What does this involve?

• an opportunity cost equal to $95

• an opportunity cost equal to other goods she could have bought for $5

• no opportunity cost, as entrance to the party is free

• no opportunity cost, as she had no better way of using the time

What is the purpose of an economy's production possibility curve (PPC)?

• It answers the question of what to produce in an economy

• It enables microeconomic decisions to be taken by firms

• It measures the supply of goods and services available in an economy

• It shows the productive capacity in an economy at a point in time

What would cause a shift in a country's production possibility curve?

• a fall in unemployment

• a recovery from a recession

• a rise in prices

• the destruction of factories in a war

A builder spends one hour travelling to and from work. He works 40 hours per week for $200. He is given a choice to work 50 hours a week for an extra $75. What would be the opportunity cost to the builder of working the extra hours?

• the ability to increase his purchasing power

• the additional time travelling to and from work

• the increased hourly earnings of $7.50

• the ten hours of leisure time

An economy experiences a recession and moves from full employment to 5% unemployment. Which movement from X to Y on the PPC diagram shows the consequences for the economy?

• 
• 
• 
• 

The diagram shows two production possibility curves for a country.

What might cause a shift from K to L in the country's production?

• a change in what consumers want to buy

• a recession

• more investment

• the use of previously unemployed resources

A country's infrastructure was damaged by a natural disaster. Before the disaster, the country was producing at point Y on the production possibility curve (PPC). Which point represents the country's production immediately after the disaster?

• A

• B

• C

• D

A farmer sells land used for crops to a firm that will use the land for wind turbines to produce electric power. What is the opportunity cost of this decision by the farmer?

• the cost of installing wind turbines

• the loss of revenue from crops that grow on the land

• the profit made from selling the land

• the reduced cost of producing renewable energy

The production possibility curve (PPC) shows the hours per day that a person has for either work or leisure.
This person works 6 hours a day but decides to work 9 hours a day.
Which movement shows this change?

• T to R

• T to U

• U to V

• U to T

The production possibility curve (PPC) shows the hours per day a student has for either entertainment or revision.

The student revises for 3 hours a day. As exam approach, the student decides to revise 9 hours a day.
What is the opportunity cost of this decision?

• 3 hours of revision

• 6 hours of entertainment

• 6 hours of revision

• 9 hours of entertainment