Question 1

The opportunity cost of any decision is the forgone value of the next best alternative that is not chosen.

Accepted Answer

A) True 
 B)False

Question 2

The scarcity of physical resources such as fuel means:

Accepted Answer

A) we should keep our homes cooler in the winter 
B) we should keep our homes warmer in the summer 
C) we should live close to our jobs to conserve fuel 
D) all of these are true. 
A) we should keep our homes cooler in the winter 
B) we should keep our homes warmer in the summer 
C) we should live close to our jobs to conserve fuel 
D) all of these are true.

Question 3

The tendency of opportunity cost to increase as production increases

Accepted Answer

A) is an example of theory that has not been proven by facts. 
B) is a general principle, but not a universal fact. 
C) is a universal fact, with no known exceptions. 
D) rarely holds in reality, but is a useful theory. 
E) cannot be tested with standard economic tools. 
A) is an example of theory that has not been proven by facts. 
B) is a general principle, but not a universal fact. 
C) is a universal fact, with no known exceptions. 
D) rarely holds in reality, but is a useful theory. 
E) cannot be tested with standard economic tools.

Question 4

If a farmer's opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then her opportunity cost of producing 50,000 bushels of soybeans must also be 20,000 fewer bushels of wheat.

Accepted Answer

A) True 
 B)False

Question 5

The production possibilities frontier has a tendency to bow outward from the origin.

Accepted Answer

A) True 
 B)False

Question 6

The notion of opportunity cost can be represented graphically by the

Accepted Answer

A) area inside the production possibilities frontier. 
B) slope of the production possibilities frontier. 
C) vertical distance from the horizontal axis to the production possibilities frontier. 
D) horizontal distance from the vertical axis to the production possibilities frontier. 
E) sum of the horizontal and vertical distances to the production possibilities frontier. 
A) area inside the production possibilities frontier. 
B) slope of the production possibilities frontier. 
C) vertical distance from the horizontal axis to the production possibilities frontier. 
D) horizontal distance from the vertical axis to the production possibilities frontier. 
E) sum of the horizontal and vertical distances to the production possibilities frontier.

Question 7

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 8

What is the basic task that economists expect the market to carry out?

Accepted Answer

A) deal with the fundamental problem of scarcity 
B) balance the government's budget 
C) lessen wants to the level of income available 
D) meet all human wants 
A) deal with the fundamental problem of scarcity 
B) balance the government's budget 
C) lessen wants to the level of income available 
D) meet all human wants

Question 9

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 10

Free markets further all of society's goals.​

Accepted Answer

A) True 
 B)False

Question 11

While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.

Accepted Answer

A) True 
 B)False

Question 12

Rational decision making must always be based on the concept of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 13

Scarcity of resources implies that people must make decisions consistent with the means they have available to them.

Accepted Answer

A) True 
 B)False

Question 14

If the budget deficit was eliminated, the federal government would have more money than it could spend.

Accepted Answer

A) True 
 B)False

Question 15

In an attempt to boost enrollment, in January, 1996, a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located.For students who accepted the offer, how did this offer affect the opportunity cost of attending college?

Accepted Answer

A) The opportunity cost did not change, since lost earnings were still a factor. 
B) The opportunity cost became zero for the typical student. 
C) The opportunity cost was very low, because the only cost was for books and supplies. 
D) The opportunity cost did not change, since tuition was not a factor in computing opportunity cost. 
E) The opportunity cost was lower than if tuition was charged, but there was still a cost. 
A) The opportunity cost did not change, since lost earnings were still a factor. 
B) The opportunity cost became zero for the typical student. 
C) The opportunity cost was very low, because the only cost was for books and supplies. 
D) The opportunity cost did not change, since tuition was not a factor in computing opportunity cost. 
E) The opportunity cost was lower than if tuition was charged, but there was still a cost.

Question 16

Some authors claim that any point not on the frontier cannot be best.What is their reasoning to support this?

Accepted Answer

A) A point inside the frontier implies that society is not facing up to the problem of scarcity. 
B) A point inside the frontier limits growth, and growth is always a goal worth pursuing. 
C) A point inside the frontier represents inflation, and inflation is a dangerous situation. 
D) A point inside the frontier results in fewer goods, and more is always better. 
E) A point inside the frontier is inefficient, and represents wasted resources. 
A) A point inside the frontier implies that society is not facing up to the problem of scarcity. 
B) A point inside the frontier limits growth, and growth is always a goal worth pursuing. 
C) A point inside the frontier represents inflation, and inflation is a dangerous situation. 
D) A point inside the frontier results in fewer goods, and more is always better. 
E) A point inside the frontier is inefficient, and represents wasted resources.

Question 17

Scarcity is the fundamental problem of the economy.

Accepted Answer

A) True 
 B)False

Question 18

For a given production possibilities frontier, which points are attainable?

Accepted Answer

A) points inside the frontier 
B) points outside the frontier 
C) points on or outside the frontier 
D) points on the frontier only 
E) points on or inside the frontier 
A) points inside the frontier 
B) points outside the frontier 
C) points on or outside the frontier 
D) points on the frontier only 
E) points on or inside the frontier

Question 19

Inputs in production processes are called resources.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 3: The Fundamental Economic Problem Scarcity and Choice

The opportunity cost of any decision is the forgone value of the next best alternative that is not chosen.

The scarcity of physical resources such as fuel means:

The tendency of opportunity cost to increase as production increases

If a farmer's opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then her opportunity cost of producing 50,000 bushels of soybeans must also be 20,000 fewer bushels of wheat.

The production possibilities frontier has a tendency to bow outward from the origin.

The notion of opportunity cost can be represented graphically by the

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

What is the basic task that economists expect the market to carry out?

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.

Free markets further all of society's goals.​

While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.

Rational decision making must always be based on the concept of opportunity cost.

Scarcity of resources implies that people must make decisions consistent with the means they have available to them.

If the budget deficit was eliminated, the federal government would have more money than it could spend.

In an attempt to boost enrollment, in January, 1996, a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located.For students who accepted the offer, how did this offer affect the opportunity cost of attending college?

Some authors claim that any point not on the frontier cannot be best.What is their reasoning to support this?

Scarcity is the fundamental problem of the economy.

For a given production possibilities frontier, which points are attainable?

Inputs in production processes are called resources.

The idea of opportunity cost is relevant

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

Free markets further all of society's goals.