In Figure 1.6, if the opportunity cost of producing cars was zero at all levels of production, the production possibilities curve would be best be represented by a
A. Circle.
B. 45-degree line starting at the origin.
C. Vertical line.
D. Horizontal line.
Answer: C
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As the U.S. dollar's foreign exchange value falls, we should expect to see
a. more Americans travelling abroad. b. American import levels rising. c. more foreigners visiting the United States. d. increased foreign investment by American firms.
Which statement is false?
A. Rent is an excellent means of efficiently allocating the use of scarce land. B. There is a very strong current in economic thought that denies the landlord's claim to rent. C. "The land shall not be sold forever" is a biblical admonition with which some people still agree. D. None of the statements is false.
If two countries agree to specialize and trade based on comparative advantage, which of the following is most likely to be true?
A) Both of the countries will consume outside their respective production possibilities curves. B) One of the countries will end up receiving all of the gains from trade. C) One of the countries will both consume and produce on its production possibilities curve. D) Only one of the countries will produce on and consume outside its production possibilities curve.
Keynes and his followers believed that
A. capitalism was one economic system that guaranteed full employment. B. the economy could not operate at any level of real Gross Domestic Product (GDP) less than full capacity. C. wages and prices in the short run were flexible. D. there was no guarantee that a capitalist economy would reach a full employment equilibrium.