Question

1) Economic growth:

a. can be more rapid if the nation devotes most of its resources to production of consumer goods.

b. may be represented by a movement from one end of the production possibilities curve to the other.

c. may be shown as a rightward shift of the production possibilities curve.

d.cannot be achieved with better technology.

2) The invention of LED technology significantly reduced the market for "traditional" incandescent light bulbs. This is an example of:

a. command economy advantages.

b. the difference between normal and economic profits.

c. capital accumulation.

d. creative destruction.

3) When economists say an "increase in demand" for umbrellas was observed, they mean that:

a. product price has fallen so consumers move down to a new point on the demand curve.

b.the quantity demanded at each price in a set of prices is greater.

c. a leftward shift of the demand curve has occurred.

d. the quantity demanded at each price in a set of prices is smaller.

4) Which way an advancement in the production technology will be reflected by the graph?

a. Shift the supply curve to the right.

b. Shift the demand curve to the left.

c. Shift the supply curve to the left.

d. Increase equilibrium price.

Answer 1

1. Option C

Explanation: When economic growth takes place, the economy's production capacity increases, and the production-possibility curve shirts out.

2. Option D

Explanation: In creative destruction, old systems, processes or technologies are replaced by new and more innovative systems, processes or technologies.

3. Option B

Explanation: When demand increases, the demand curve shifts towards the right and quantity demanded increases at each price level.

4. Option A

Explanation: An advancement in the production technology would increase production at each price level and the supply curve would shift towards the right.