Multiple choice problems related to production possibilities frontier, free business, circular-flow model, normative statement.

1) The production possibilities frontier will shift outward for all of the subsequent reasons except ______.

a) an increase in the unemployment rate

b) an increase in the labour force

c) an improvement in technology

d) an increase in worker productivity

2) Free business among countries _______.

a) should be based on absolute advantage

b) will allow wealthy countries to exploit less developed nations

c) will shift the domestic production possibilities frontier to the right

d) will allow for greater levels of consumption than without business

3) Which of the subsequent statements is true?

a) Some very talented people have a comparative advantage in everything they do.

b) Some very untalented people have a comparative advantage in nothing they do.

c) Some very talented people have a very low opportunity cost in everything they do.

d) It is possible to have an absolute disadvantage in doing something but still have a comparative advantage in the same thing.

4) The simplest circular-flow model shows the interaction among households and companies. In this model ______.

a) only barter transactions take place

b) households and companies interact in the market for goods and services, but companies are the only participants in the factor

markets

c) companies supply goods and services to households which, in turn, supply factors of production to companies

d) attention is focused on "real" flows of goods, services, and factors of production, but money flows among households and companies are ignored for simplicity

5) Which of the subsequent is a normative statement?

a) International business leads to expanded consumption opportunities.

b) Higher expenditures on health care will reduce infant mortality rates.

c) We would all be better off if we could reduce our dependence on oil imports.

d) Increased defence spending will lead to higher budget deficits.