Question 1

Because of scarcity, every economic decision involves

Accepted Answer

A)   a trade-off.
B)   a free good.
C)   a trade-in.
D)   an increasing cost.
E)   a money payment.F) A) and B)
G) A) and E)

Question 2

In terms of efficiency, any point on a production possibilities frontier is as good another.

Accepted Answer

A) True 
 B)False

Question 3

What mechanism assures that producers use inputs efficiently?

Accepted Answer

A)   Governmental regulations determining the allocation of resources
B)   Altruism
C)   The desire for profit
D)   An innate desire to be efficient
E)   All of the responses are correct.F) B) and C)
G) A) and C)

Question 4

One common definition of economics is the study of

Accepted Answer

A)   how scarcity increases opportunities to meet ends.
B)   how markets overcome scarcity.
C)   one goal and three tasks.
D)   how to use limited means to meet unlimited wants.
E)   wants versus needs.F) B) and D)
G) A) and B)

Question 5

The first economist to point out the importance of specialization of labor was

Accepted Answer

A)   Leonardo da Vinci.
B)   Adam Smith.
C)   David Ricardo.
D)   John Maynard Keynes.
E)   Enrico Caruso.F) C) and D)
G) None of the above

Question 6

The statement "Resources employed in producing X are better suited to making Y" is another way of saying

Accepted Answer

A)   the production possibilities frontier is "bowed out."
B)   the production possibilities frontier is a straight line.
C)   the production possibilities frontier is "bowed in."
D)   resources are unproductive.
E)   resources have no opportunity cost.F) A) and E)
G) A) and D)

Question 7

Division of labor has caused output to rise dramatically since the industrial revolution.

Accepted Answer

A) True 
 B)False  True

Question 8

A normal production possibilities frontier has a

Accepted Answer

A)   positive slope and is steeper near the horizontal axis than near the vertical axis.
B)   negative slope and is steeper near the horizontal axis than near the vertical axis.
C)   positive slope and is steeper near the vertical axis than near the horizontal axis.
D)   negative slope and is steeper near the vertical axis than near the horizontal axis.
E)   zero slope, and it does not touch the horizontal axis.F) B) and E)
G) A) and B)

Question 9

Which of these options best reflects Jim's opportunity cost of operating his own business?

Accepted Answer

A)   The total amount of money he spends to obtain capital equipment
B)   The value of Jim's managerial skills that are used to run the business
C)   The cost of hiring his laborers
D)   All of the responses are correct.E) A) and C)
F) C) and D) B

Question 10

A market system (market economy)  depends on the market to

Accepted Answer

A)   find the most efficient way of using resources.
B)   determine how large the budget deficit should be.
C)   decide how much government regulation there should be.
D)   provide minimum incomes for everyone.
E)   All of the responses are correct.F) A) and B)
G) B) and E)

Question 11

Draw a production possibilities frontier for an economy, with the axes labeled "military goods" and "peace goods." Indicate the region that is attainable and the region that is not. Explain the shape of the curve. What assumptions did you make in drawing it?

Accepted Answer

The curve should look like the figures i...

Question 12

The idea of opportunity cost is relevant

Accepted Answer

A)   only in consumption decisions.
B)   only in production decisions.
C)   only in financial decisions.
D)   in almost any kind of decision.E) A) and B)
F) C) and D)

Question 13

According to the principle of increasing costs, as the production of one good expands, the opportunity cost of producing another unit of the good tends to increase.

Accepted Answer

A) True 
 B)False

Question 14

A government, based upon its policy decisions, can determine the position and shape of the production possibilities frontier that the economy faces.

Accepted Answer

A) True 
 B)False

Question 15

The opportunity cost and the money cost of a good

Accepted Answer

A)   can be the same in a well-functioning free market.
B)   are never the same.
C)   matter only to the purchaser of the good.
D)   are not reflected in its price.E) B) and C)
F) All of the above

Question 16

Economists define efficiency as

Accepted Answer

A)   output maximization.
B)   the absence of waste.
C)   input maximization.
D)   the presence of surplus.E) A) and D)
F) All of the above

Question 17

The political party that is in power determines the position and shape of the production possibilities frontier that constrains the choices of the economy.

Accepted Answer

A) True 
 B)False

Question 18

At various times, the United States has undergone the painful process of reducing military spending. Military bases from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide which bases to shut down, given the necessity of jobs?

Accepted Answer

One must examine the opportunity cost of continuing to operate each base. As an example, the money used to operate the San Diego Naval Station might have a next best alternative use in improving California's state universities, which would add to productivity and so enhance growth. While closing the base would sacrifice military jobs, the opportunity cost would depend on the next best alternative employment for these workers. In the future, new jobs would be created for those trained. One would carry out the same exercise for each military installation and cut those with the highest opportunity cost. An example might be a New England base using antiquated defense equipment that provides little defense per dollar spent.

Question 19

Scarcity is a concept that applies to all of the following except

Accepted Answer

A)   time.
B)   natural resources.
C)   human wants.
D)   machinery.E) A) and B)
F) All of the above

Question 20

Any point on or outside the production possibilities frontier is attainable.

Accepted Answer

A) True 
 B)False

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Because of scarcity, every economic decision involves

Correct Answer
verified

In terms of efficiency, any point on a production possibilities frontier is as good another.

Correct Answer
verified

What mechanism assures that producers use inputs efficiently?

Correct Answer
verified

One common definition of economics is the study of

Correct Answer
verified

The first economist to point out the importance of specialization of labor was

Correct Answer
verified

The statement "Resources employed in producing X are better suited to making Y" is another way of saying

Correct Answer
verified

Division of labor has caused output to rise dramatically since the industrial revolution.

Correct Answer
verified
True

A normal production possibilities frontier has a

Correct Answer
verified

Which of these options best reflects Jim's opportunity cost of operating his own business?

Correct Answer
verified
B

A market system (market economy) depends on the market to

Correct Answer
verified

Draw a production possibilities frontier for an economy, with the axes labeled "military goods" and "peace goods." Indicate the region that is attainable and the region that is not. Explain the shape of the curve. What assumptions did you make in drawing it?

Correct Answer
verified
The curve should look like the figures i...
View Answer

The idea of opportunity cost is relevant

Correct Answer
verified

According to the principle of increasing costs, as the production of one good expands, the opportunity cost of producing another unit of the good tends to increase.

Correct Answer
verified

A government, based upon its policy decisions, can determine the position and shape of the production possibilities frontier that the economy faces.

Correct Answer
verified

The opportunity cost and the money cost of a good

Correct Answer
verified

Economists define efficiency as

Correct Answer
verified

The political party that is in power determines the position and shape of the production possibilities frontier that constrains the choices of the economy.

Correct Answer
verified

At various times, the United States has undergone the painful process of reducing military spending. Military bases from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide which bases to shut down, given the necessity of jobs?

Scarcity is a concept that applies to all of the following except

Correct Answer
verified

Any point on or outside the production possibilities frontier is attainable.

Correct Answer
verified

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Because of scarcity, every economic decision involves

Correct AnswerverifiedShow Answer

In terms of efficiency, any point on a production possibilities frontier is as good another.

Correct AnswerverifiedShow Answer

What mechanism assures that producers use inputs efficiently?

Correct AnswerverifiedShow Answer

One common definition of economics is the study of

Correct AnswerverifiedShow Answer

The first economist to point out the importance of specialization of labor was

Correct AnswerverifiedShow Answer

The statement "Resources employed in producing X are better suited to making Y" is another way of saying

Correct AnswerverifiedShow Answer

Division of labor has caused output to rise dramatically since the industrial revolution.

Correct AnswerverifiedTrue

A normal production possibilities frontier has a

Correct AnswerverifiedShow Answer

Which of these options best reflects Jim's opportunity cost of operating his own business?

Correct AnswerverifiedB

A market system (market economy) depends on the market to

Correct AnswerverifiedShow Answer

Draw a production possibilities frontier for an economy, with the axes labeled "military goods" and "peace goods." Indicate the region that is attainable and the region that is not. Explain the shape of the curve. What assumptions did you make in drawing it?

Correct AnswerverifiedThe curve should look like the figures i...View AnswerShow Answer

The idea of opportunity cost is relevant

Correct AnswerverifiedShow Answer

According to the principle of increasing costs, as the production of one good expands, the opportunity cost of producing another unit of the good tends to increase.

Correct AnswerverifiedShow Answer

A government, based upon its policy decisions, can determine the position and shape of the production possibilities frontier that the economy faces.

Correct AnswerverifiedShow Answer

The opportunity cost and the money cost of a good

Correct AnswerverifiedShow Answer

Economists define efficiency as

Correct AnswerverifiedShow Answer

The political party that is in power determines the position and shape of the production possibilities frontier that constrains the choices of the economy.

Correct AnswerverifiedShow Answer

At various times, the United States has undergone the painful process of reducing military spending. Military bases from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide which bases to shut down, given the necessity of jobs?

Scarcity is a concept that applies to all of the following except

Correct AnswerverifiedShow Answer

Any point on or outside the production possibilities frontier is attainable.

Correct AnswerverifiedShow Answer

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True

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B

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The curve should look like the figures i...
View Answer

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