Question 1

The shape of the production possibilities frontier in Figure 3-1 implies that

Accepted Answer

A) some resources are better suited for producing wheat than for producing barley. 
B) the opportunity cost of producing more wheat falls as wheat production rises. 
C) the farmer's technology is not subject to the principle of increasing costs. 
D) the financial cost of producing wheat is higher than the financial cost of producing barley. 
A) some resources are better suited for producing wheat than for producing barley. 
B) the opportunity cost of producing more wheat falls as wheat production rises. 
C) the farmer's technology is not subject to the principle of increasing costs. 
D) the financial cost of producing wheat is higher than the financial cost of producing barley.

Question 2

Do all valuable items have price tags?

Accepted Answer

A) No, because some valuable items have no opportunity cost. 
B) Yes, because everything has its price. 
C) Yes, because price is the measure of opportunity cost. 
D) No, some have no explicit price on them. 
E) Yes, because only items that can be sold in markets have value. 
A) No, because some valuable items have no opportunity cost. 
B) Yes, because everything has its price. 
C) Yes, because price is the measure of opportunity cost. 
D) No, some have no explicit price on them. 
E) Yes, because only items that can be sold in markets have value.

Question 3

If a farmer's opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans, then her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.

Accepted Answer

A) True 
 B)False

Question 4

President Barack Obama pushed forward a national health care plan to increase the availability of medical care for all Americans.How would one determine the opportunity cost of the proposal?

Accepted Answer

Every decision by government has an oppo

Question 5

Figure 3-5  
-Which of the following events create an outward shift of the production possibilities curve?

Accepted Answer

A) The United States moves resources from the production of goods for domestic production to the production of goods for export. 
B) Tax reductions reduce the cost and increase the volume of investment in factories, machinery, and research and development. 
C) There is an exodus of young people to another country where there is more political freedom. 
D) The unemployment rate falls from 33 percent to 12 percent. 
A) The United States moves resources from the production of goods for domestic production to the production of goods for export. 
B) Tax reductions reduce the cost and increase the volume of investment in factories, machinery, and research and development. 
C) There is an exodus of young people to another country where there is more political freedom. 
D) The unemployment rate falls from 33 percent to 12 percent.

Question 6

If the PPF for guns and butter is bowed outward from the origin, this indicates constant opportunity cost between the two goods.

Accepted Answer

A) True 
 B)False

Question 7

A point lying inside (under) a production possibilities curve indicates that

Accepted Answer

A) the economy is saving money. 
B) there are no associated opportunity costs. 
C) more output could be produced with existing resources. 
D) technology limits production. 
A) the economy is saving money. 
B) there are no associated opportunity costs. 
C) more output could be produced with existing resources. 
D) technology limits production.

Question 8

If society produces at a point inside the production possibilities frontier, it is characterized by full employment of resources.

Accepted Answer

A) True 
 B)False

Question 9

A production possibilities frontier shows the combinations of various goods that should be produced.

Accepted Answer

A) True 
 B)False

Question 10

An optimal decision is one that chooses

Accepted Answer

A) the most desirable alternative among the possibilities permitted by the resources available. 
B) the lowest cost method of meeting goals, without regard to quality or any other feature. 
C) among various possible goals and offends no one, so that all are equally happy. 
D) among equally important goals, and thereby avoids the "indispensable necessity" syndrome. 
E) among possible goals in such a way that spends as little money as possible. 
A) the most desirable alternative among the possibilities permitted by the resources available. 
B) the lowest cost method of meeting goals, without regard to quality or any other feature. 
C) among various possible goals and offends no one, so that all are equally happy. 
D) among equally important goals, and thereby avoids the "indispensable necessity" syndrome. 
E) among possible goals in such a way that spends as little money as possible.

Question 11

If a society uses the market system, it must rely solely on markets to solve all of its problems.

Accepted Answer

A) True 
 B)False

Question 12

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Accepted Answer

A) rational decisions are not always possible. 
B) you can allocate your resources to what gives you the highest value. 
C) you can create the supply to meet your own demand. 
D) you can maximize social welfare by making optimal decisions. 
A) rational decisions are not always possible. 
B) you can allocate your resources to what gives you the highest value. 
C) you can create the supply to meet your own demand. 
D) you can maximize social welfare by making optimal decisions.

Question 13

Millionaires do not face the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 14

If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the

Accepted Answer

A) larger the opportunity cost of producing an extra unit of good "A." 
B) larger the quantity of resources being devoted to the production of good "B." 
C) smaller the quantity of resources being devoted to the production of good "A." 
D) smaller the opportunity cost of producing an extra unit of good "A." 
E) greater the returns to scale in the production of good "A." 
A) larger the opportunity cost of producing an extra unit of good "A." 
B) larger the quantity of resources being devoted to the production of good "B." 
C) smaller the quantity of resources being devoted to the production of good "A." 
D) smaller the opportunity cost of producing an extra unit of good "A." 
E) greater the returns to scale in the production of good "A."

Question 15

Generally, the opportunity cost and the money cost of a good

Accepted Answer

A) are identical only if the good sells in a free market. 
B) are different. 
C) matter only to the purchaser of the good. 
D) are not reflected in its price. 
A) are identical only if the good sells in a free market. 
B) are different. 
C) matter only to the purchaser of the good. 
D) are not reflected in its price.

Question 16

In the 1960s, the lyrics of a rock song asked, "Did you ever have to make up your mind to say yes to one and leave the others behind?" What economic principle was demonstrated in the song? Explain.

Accepted Answer

The principle is that of oppor

Question 17

A market system is not considered an effective way of controlling self-interest.

Accepted Answer

A) True 
 B)False

Question 18

The economic problem of scarcity

Accepted Answer

A) is unique to a capitalist economy. 
B) requires that choices be made among alternatives. 
C) disappears as technology advances. 
D) affects only less-developed countries. 
A) is unique to a capitalist economy. 
B) requires that choices be made among alternatives. 
C) disappears as technology advances. 
D) affects only less-developed countries.

Question 19

Goods that are actually produced by firms are not really limited in supply, because the firms can always produce more of them.

Accepted Answer

A) True 
 B)False

Question 20

In a market system, the major coordination tasks are carried out

Accepted Answer

A) with the approval of central planners. 
B) as part of the regular appropriation process of Congress. 
C) irregularly by the major corporations. 
D) automatically by the market mechanism. 
A) with the approval of central planners. 
B) as part of the regular appropriation process of Congress. 
C) irregularly by the major corporations. 
D) automatically by the market mechanism.

Exam 3: The Fundamental Economic Problem Scarcity and Choice

The shape of the production possibilities frontier in Figure 3-1 implies that

Do all valuable items have price tags?

If a farmer's opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans, then her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.

President Barack Obama pushed forward a national health care plan to increase the availability of medical care for all Americans.How would one determine the opportunity cost of the proposal?

Figure 3-5 -Which of the following events create an outward shift of the production possibilities curve?

If the PPF for guns and butter is bowed outward from the origin, this indicates constant opportunity cost between the two goods.

A point lying inside (under) a production possibilities curve indicates that

If society produces at a point inside the production possibilities frontier, it is characterized by full employment of resources.

A production possibilities frontier shows the combinations of various goods that should be produced.

An optimal decision is one that chooses

If a society uses the market system, it must rely solely on markets to solve all of its problems.

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Millionaires do not face the problem of scarcity.

If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the

Generally, the opportunity cost and the money cost of a good

In the 1960s, the lyrics of a rock song asked, "Did you ever have to make up your mind to say yes to one and leave the others behind?" What economic principle was demonstrated in the song? Explain.

A market system is not considered an effective way of controlling self-interest.

The economic problem of scarcity

Goods that are actually produced by firms are not really limited in supply, because the firms can always produce more of them.

In a market system, the major coordination tasks are carried out

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

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