Question 1

The negative slope of a production possibilities frontier is a graphic representation of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 2

How are the slope of a production possibilities frontier and the opportunity cost of the goods related?

Accepted Answer

A) The slope is a graphical representation of the cost of expanding production of both goods. 
B) The slope is a graphical measure of the growth rate of the economy. 
C) The slope is a graphical representation of the cost of decreasing unemployment. 
D) The slope is a graphical representation of the rate of trade-off between the goods. 
E) The slope is a graphical representation of the cost of economic growth in the economy. 
A) The slope is a graphical representation of the cost of expanding production of both goods. 
B) The slope is a graphical measure of the growth rate of the economy. 
C) The slope is a graphical representation of the cost of decreasing unemployment. 
D) The slope is a graphical representation of the rate of trade-off between the goods. 
E) The slope is a graphical representation of the cost of economic growth in the economy.

Question 3

Which of the following quotations best captures the idea of opportunity cost?

Accepted Answer

A) "Opportunity knocks but once." 
B) "Every choice involves a sacrifice." 
C) "Let's not ask for the moon; we have the stars." 
D) "Fools rush in where wise men fear to tread." 
E) "All that glitters is not gold." 
A) "Opportunity knocks but once." 
B) "Every choice involves a sacrifice." 
C) "Let's not ask for the moon; we have the stars." 
D) "Fools rush in where wise men fear to tread." 
E) "All that glitters is not gold."

Question 4

Since it spent over $3.6 trillion in 2010, opportunity cost was not an issue for the U.S.government.

Accepted Answer

A) True 
 B)False

Question 5

A decrease in the unemployment rate will shift the PPF outward from the origin.

Accepted Answer

A) True 
 B)False

Question 6

According to the law of comparative advantage, a doctor who is also a talented auto mechanic should

Accepted Answer

A) get a part-time job at a gas station. 
B) do her own auto repairs and those of her neighbors. 
C) hire a professional mechanic to repair her car. 
D) only repair the cars of other doctors. 
A) get a part-time job at a gas station. 
B) do her own auto repairs and those of her neighbors. 
C) hire a professional mechanic to repair her car. 
D) only repair the cars of other doctors.

Question 7

A large government faces a production possibilities frontier much like a business firm does.

Accepted Answer

A) True 
 B)False

Question 8

Opportunity cost is the value of the next best alternative that is given up.

Accepted Answer

A) True 
 B)False

Question 9

Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools.

Accepted Answer

A) True 
 B)False

Question 10

Why is it inefficient for an economy to be inside the production possibilities frontier?

Accepted Answer

It is inefficient because the society ha

Question 11

Opportunity cost cannot be measured in money terms, only in conceptual terms.

Accepted Answer

A) True 
 B)False

Question 12

Although finished goods are scarce, the inputs to produce them are not scarce.

Accepted Answer

A) True 
 B)False

Question 13

From a society's viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up some of another thing.

Accepted Answer

A) True 
 B)False

Question 14

During World War II, Hitler would often order his army to hold a particular town or river "at all costs." Was this rational? If so, explain.If not, indicate which economic idea it violated.

Accepted Answer

The orders were irrational, as they igno

Question 15

The scarcity of physical resources is far more fundamental to the study of economics than the scarcity of funds.

Accepted Answer

A) True 
 B)False

Question 16

All of the points inside a production possibilities frontier are ____; all of the points outside the production possibilities frontier are ____.

Accepted Answer

A) efficient, inefficient 
B) optimal, irrational 
C) attainable, unattainable 
D) rational, zero-cost 
E) unattainable, efficient 
A) efficient, inefficient 
B) optimal, irrational 
C) attainable, unattainable 
D) rational, zero-cost 
E) unattainable, efficient

Question 17

The division of labor benefits society only if

Accepted Answer

A) a system of exchange exists. 
B) society uses all of its resources efficiently. 
C) society has no specialized resources. 
D) labor resources are not scarce. 
A) a system of exchange exists. 
B) society uses all of its resources efficiently. 
C) society has no specialized resources. 
D) labor resources are not scarce.

Question 18

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

Question 19

A market economy allocates resources primarily in accordance with orders from government bureaucrats.

Accepted Answer

A) True 
 B)False

Question 20

Increasing opportunity cost tends to occur if

Accepted Answer

A) management is disorganized. 
B) markets do not equate money and opportunity cost. 
C) production is inefficient. 
D) resources are scarce. 
E) resources are specialized. 
A) management is disorganized. 
B) markets do not equate money and opportunity cost. 
C) production is inefficient. 
D) resources are scarce. 
E) resources are specialized.

Exam 3: The Fundamental Economic Problem Scarcity and Choice

The negative slope of a production possibilities frontier is a graphic representation of opportunity cost.

How are the slope of a production possibilities frontier and the opportunity cost of the goods related?

Which of the following quotations best captures the idea of opportunity cost?

Since it spent over $3.6 trillion in 2010, opportunity cost was not an issue for the U.S.government.

A decrease in the unemployment rate will shift the PPF outward from the origin.

According to the law of comparative advantage, a doctor who is also a talented auto mechanic should

A large government faces a production possibilities frontier much like a business firm does.

Opportunity cost is the value of the next best alternative that is given up.

Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools.

Why is it inefficient for an economy to be inside the production possibilities frontier?

Opportunity cost cannot be measured in money terms, only in conceptual terms.

Although finished goods are scarce, the inputs to produce them are not scarce.

From a society's viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up some of another thing.

During World War II, Hitler would often order his army to hold a particular town or river "at all costs." Was this rational? If so, explain.If not, indicate which economic idea it violated.

The scarcity of physical resources is far more fundamental to the study of economics than the scarcity of funds.

All of the points inside a production possibilities frontier are ____; all of the points outside the production possibilities frontier are ____.

The division of labor benefits society only if

Because of scarcity, every economic decision involves

A market economy allocates resources primarily in accordance with orders from government bureaucrats.

Increasing opportunity cost tends to occur if

What Is Economics

The Economy Myth and Reality

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Production Inputs and Cost Building Blocks for Supply Analysis

Output Price and Profit the Importance of Marginal Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

Filters

All of the points inside a production possibilities frontier are ; all of the points outside the production possibilities frontier are .