Question 1

What determines the position and shape of a society's production possibilities frontier?

Accepted Answer

A)  the physical resources of that society 
B)  the skills of the workforce 
C)  the level of technology of the society 
D)  the amount of factories in the society 
E)  All of the above are correct. 
A)  the physical resources of that society 
B)  the skills of the workforce 
C)  the level of technology of the society 
D)  the amount of factories in the society 
E)  All of the above are correct. E

Question 2

In early 1996, the upper Midwest suffered record cold, with wind chills of fifty degrees below zero or worse.Yet, grocery stores stocked fresh citrus fruit (obviously not grown locally).Why did grocers stock the fruit?

Accepted Answer

A)  the desire for profit 
B)  concern for their neighbors 
C)  the need to dispose of excess production 
D)  government orders to distribute fruit 
E)  All of the above are correct. 
A)  the desire for profit 
B)  concern for their neighbors 
C)  the need to dispose of excess production 
D)  government orders to distribute fruit 
E)  All of the above are correct. A

Question 3

Millionaires do not face the problem of scarcity.

Accepted Answer

A) True 
 B)False  False

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

A market society will always protect the natural environment.

Accepted Answer

A) True 
 B)False

Question 8

Opportunity cost can always be measured in money terms.

Accepted Answer

A) True 
 B)False

Question 9

The production possibilities frontier slopes downward and to the right because of limited resources.

Accepted Answer

A) True 
 B)False

Question 10

An optimal decision is one that is selected based on an analysis of

Accepted Answer

A)  explicit costs but not implicit costs. 
B)  implicit costs but not explicit costs. 
C)  both explicit costs and implicit costs. 
D)  neither explicit costs nor implicit costs. 
A)  explicit costs but not implicit costs. 
B)  implicit costs but not explicit costs. 
C)  both explicit costs and implicit costs. 
D)  neither explicit costs nor implicit costs.

Question 11

Resources are used to create goods and services.

Accepted Answer

A) True 
 B)False

Question 12

Money costs and opportunity costs are concepts that are

Accepted Answer

A)  not related in any meaningful way. 
B)  used by tax accountants. 
C)  related through relative prices of goods and services. 
D)  used by economists to learn the most efficient level of output. 
A)  not related in any meaningful way. 
B)  used by tax accountants. 
C)  related through relative prices of goods and services. 
D)  used by economists to learn the most efficient level of output.

Question 13

Figure 3-2
  
-In Figure 3-2, at point B

Accepted Answer

A)  it is impossible to increase production of consumer goods. 
B)  it is impossible to increase production of capital goods. 
C)  it is possible to increase production of both capital goods and consumer goods simultaneously. 
D)  it is impossible to increase production of both capital goods and consumer goods simultaneously. 
A)  it is impossible to increase production of consumer goods. 
B)  it is impossible to increase production of capital goods. 
C)  it is possible to increase production of both capital goods and consumer goods simultaneously. 
D)  it is impossible to increase production of both capital goods and consumer goods simultaneously.

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

What are the three coordination tasks which markets resolve?

Accepted Answer

They are (1) how to produce an

Question 16

The U.S.government has an annual budget of about $1,600 billion.Does the U.S.government face the problem of scarcity?

Accepted Answer

A)  No, a government with $1,600 billion faces no real constraints. 
B)  No, scarcity does not apply to governments. 
C)  Yes, resources are limited even for the U.S.government. 
D)  Yes, although the U.S.government can easily obtain more resources. 
E)  Uncertain-economic theory has no answer to this question. 
A)  No, a government with $1,600 billion faces no real constraints. 
B)  No, scarcity does not apply to governments. 
C)  Yes, resources are limited even for the U.S.government. 
D)  Yes, although the U.S.government can easily obtain more resources. 
E)  Uncertain-economic theory has no answer to this question.

Question 17

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

Accepted Answer

It is inefficient because the society ha

Question 18

Market system works very well in solving some basic problems of the economy but it fails in some cases.Provide examples.

Accepted Answer

The market deals with efficiency in prod

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

What determines the position and shape of a society's production possibilities frontier?

In early 1996, the upper Midwest suffered record cold, with wind chills of fifty degrees below zero or worse.Yet, grocery stores stocked fresh citrus fruit (obviously not grown locally).Why did grocers stock the fruit?

Millionaires do not face the problem of scarcity.

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.

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

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

A market society will always protect the natural environment.

Opportunity cost can always be measured in money terms.

The production possibilities frontier slopes downward and to the right because of limited resources.

An optimal decision is one that is selected based on an analysis of

Resources are used to create goods and services.

Money costs and opportunity costs are concepts that are

Figure 3-2 -In Figure 3-2, at point B

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

What are the three coordination tasks which markets resolve?

The U.S.government has an annual budget of about $1,600 billion.Does the U.S.government face the problem of scarcity?

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

Market system works very well in solving some basic problems of the economy but it fails in some cases.Provide examples.

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

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

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 I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

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

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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