Question 1

Explain the relationship between opportunity costs and money costs.Can they be treated as identical?

Accepted Answer

The two costs are usually closely tied b

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Economics examines the options open to households, business firms, governments, and entire societies by the limited resources at their command.

Accepted Answer

A) True 
 B)False

Question 4

The law of comparative advantage explains why

Accepted Answer

A)  individuals choose specialized careers. 
B)  firms specialize in the production of certain goods. 
C)  nations develop strengths in certain industries. 
D)  All of the above are correct. 
A)  individuals choose specialized careers. 
B)  firms specialize in the production of certain goods. 
C)  nations develop strengths in certain industries. 
D)  All of the above are correct.

Question 5

What mechanism assures that firms produce outputs that consumers actually desire?

Accepted Answer

A)  governmental regulations on the mix of outputs 
B)  altruism 
C)  the desire for profit 
D)  a desire to serve others without thought of reward 
E)  All of the above are correct. 
A)  governmental regulations on the mix of outputs 
B)  altruism 
C)  the desire for profit 
D)  a desire to serve others without thought of reward 
E)  All of the above are correct.

Question 6

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 7

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 8

Is increased capital spending the only way for an economy to expand its production possibilities frontier?

Accepted Answer

A)  No, an economy can also expand by invention and innovation. 
B)  No, an economy can also grow by investment instead of capital spending. 
C)  Yes, more capital is the only way to expand its production possibilities frontier. 
D)  Yes, although more capital clearly has a high opportunity cost. 
E)  Yes, because capital is the only constraining resource that limits growth. 
A)  No, an economy can also expand by invention and innovation. 
B)  No, an economy can also grow by investment instead of capital spending. 
C)  Yes, more capital is the only way to expand its production possibilities frontier. 
D)  Yes, although more capital clearly has a high opportunity cost. 
E)  Yes, because capital is the only constraining resource that limits growth.

Question 9

A country can gain by importing a good from abroad even if that good can be produced more efficiently at home.Is this statement true?

Accepted Answer

This statement could be true.Such import

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Individuals face scarcity; whole societies do not.

Accepted Answer

A) True 
 B)False

Question 14

Table 3-1
 $$\begin{array} { c c } 
\text { Peanuts } & \text { Carn } \
\underline { \text { (Bushels) }} & \underline { \text { (Bushels) }} \
0& 55 \
10 & 50 \
20 & 42 \
30 & 28 \
40 & 0
\end{array}$$
-Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts.According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is

Accepted Answer

A)  8 bushels of corn. 
B)  42 bushels of corn. 
C)  50 bushels of corn. 
D)  impossible to determine from the information given. 
A)  8 bushels of corn. 
B)  42 bushels of corn. 
C)  50 bushels of corn. 
D)  impossible to determine from the information given.

Question 15

Any point on or outside the PPF is attainable.

Accepted Answer

A) True 
 B)False

Question 16

A society which is inside its production possibilities frontier is efficient.

Accepted Answer

A) True 
 B)False

Question 17

The central question in economics is how to

Accepted Answer

A)  make the best use of scarce resources. 
B)  use government planning agencies. 
C)  induce people to want less. 
D)  increase human knowledge. 
A)  make the best use of scarce resources. 
B)  use government planning agencies. 
C)  induce people to want less. 
D)  increase human knowledge.

Question 18

Is faster economic growth unambiguously better?

Accepted Answer

A)  No, because growth has an opportunity cost. 
B)  No, because growth serves no useful purpose. 
C)  Yes, because more goods and services are always better. 
D)  Yes, because it expands the production possibilities of an economy. 
E)  Uncertain-economic growth has no answer to this question. 
A)  No, because growth has an opportunity cost. 
B)  No, because growth serves no useful purpose. 
C)  Yes, because more goods and services are always better. 
D)  Yes, because it expands the production possibilities of an economy. 
E)  Uncertain-economic growth has no answer to this question.

Question 19

The divergence between money costs and opportunity costs will be greatest in which of the following situations?

Accepted Answer

A)  A university purchases 100 computers. 
B)  A university employs people from town in the commissary (people prefer this job to working in the paper factory). 
C)  A university employs otherwise unemployed teenagers to paint crosswalks and curbs. 
D)  A university replaces the roof of the fine arts building. 
A)  A university purchases 100 computers. 
B)  A university employs people from town in the commissary (people prefer this job to working in the paper factory). 
C)  A university employs otherwise unemployed teenagers to paint crosswalks and curbs. 
D)  A university replaces the roof of the fine arts building.

Question 20

The definition of efficiency implies that production is carried out on the production possibilities frontier.

Accepted Answer

A) True 
 B)False

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Explain the relationship between opportunity costs and money costs.Can they be treated as identical?

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

Economics examines the options open to households, business firms, governments, and entire societies by the limited resources at their command.

The law of comparative advantage explains why

What mechanism assures that firms produce outputs that consumers actually desire?

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.

Is increased capital spending the only way for an economy to expand its production possibilities frontier?

A country can gain by importing a good from abroad even if that good can be produced more efficiently at home.Is this statement true?

The economic problem of scarcity

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

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

Individuals face scarcity; whole societies do not.

Table 3-1 Peanuts Carn 0 55 10 50 20 42 30 28 40 0 -Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts.According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is

Any point on or outside the PPF is attainable.

A society which is inside its production possibilities frontier is efficient.

The central question in economics is how to

Is faster economic growth unambiguously better?

The divergence between money costs and opportunity costs will be greatest in which of the following situations?

The definition of efficiency implies that production is carried out on the production possibilities frontier.

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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