Question

1. Although specialization of labor increases efficiency of production, another step is necessary
   a.   to a reallocation of natural resources.
   b.   to exchange goods among producers.
   c.   to remain fully employed.
   d.   to assure that exchange leads to mutual gains.
   e.   All of the responses are correct.

2. If it is not possible to increase the output of one good without decreasing the output of the other, when there are only two goods, then
   a.   All of these outcomes are correct.
   b.   this situation would describe a point on a production possibilities frontier for the producer.
   c.   the outcome can be described as efficient.
   d.   there is no unemployment of resources.

3. A strike at the Financial News in London shut down its production, and the sales of a competing newspaper, the Broad Street Journal, increased dramatically, with no increase in price. Based upon this, what can you say about the Broad Street Journal’s supply curve?
   a.   Its supply curve is horizontal.
   b.   Its supply curve has a positive slope.
   c.   Its supply curve is vertical.
   d.   Its supply curve has shifted.

4.  There are possible policies that could significantly reduce income inequality but opponents argue that such policies would be likely to lead to
   a.   higher unemployment.
   b.   higher levels of economic growth.
   c.   a reduction in unemployment.
   d.   higher inflation.
   e.   no impact on inequality.

Answer 1

1.  (e).  All of the responses are correct.

Because after specialisation of labour and Increase efficiency of production, important is allocate natural resources if any, availability of raw material (ie.Goods exchange among Producers),

remain full employed( because due Increase in efficiency must have opted for maximum labour, any reduction in labour could cost firm).

2.  (b). this situation would describe a point on a production possibilities frontier for the producer.

Because firm has to forgoe production of one product while producing another one, this is an explanation of opportunity cost. And it could be best described by production possibilities curve, which explains the same ie. Opportunity Cost through graph.

3. (d). Its supply curve has shifted.

Because there's no change in price of Broad Street Journal but the sale of the newspaper has increased dramatically, this would shift supply( ie. Increase in supply of newspapers) at same price. While other option is just irrelevant, none of them showing relevant effect of this case on it's supply curve.

4. (d). Higher inflation.

As per various of observation it's propounded that there's an Inverse relationship between income inequality and inflation. Ie. At low income inequality levels, higher inflation and vice versa.

Because reduction in income inequality would enhance purchasing power of the almost every consumers in the nation, now everyone would be able to most of the goods of services. This is what reduce the value of money, thus leads to Higher inflation.