Question 1

Opportunity costs exist for

Accepted Answer

A)  households but not businesses or governments. 
B)  businesses but not households or governments. 
C)  businesses and households but not governments. 
D)  households, businesses, and governments. 
A)  households but not businesses or governments. 
B)  businesses but not households or governments. 
C)  businesses and households but not governments. 
D)  households, businesses, and governments.

Question 2

Figure 3-5
  
-At present, faculty in the Economics Department teach introductory and upper-level courses.Which graph in Figure 3-5 represents the change in the production possibilities of the Economics Department after a policy of using graduate students in addition to faculty to teach introductory sections was implemented?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 3

The first economist to point out the importance of specialization of labor was

Accepted Answer

A)  Leonardo da Vinci. 
B)  Adam Smith. 
C)  David Ricardo. 
D)  John Maynard Keynes. 
E)  Enrico Caruso. 
A)  Leonardo da Vinci. 
B)  Adam Smith. 
C)  David Ricardo. 
D)  John Maynard Keynes. 
E)  Enrico Caruso.

Question 4

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 5

Carefully define the following terms and explain their importance to the study of economics.
a.resources
b.rational decision
c.scarcity
d.opportunity cost

Accepted Answer

a.Resources are the instruments provided

Question 6

A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home.The researcher included all costs including the imputed value of time involved to prepare the meal at home.This study illustrates the

Accepted Answer

A)  value of marginal analysis. 
B)  law of increasing costs. 
C)  difference between real costs and money costs. 
D)  cost disease of the service sector. 
A)  value of marginal analysis. 
B)  law of increasing costs. 
C)  difference between real costs and money costs. 
D)  cost disease of the service sector.

Question 7

Only a market economy must answer the questions of what goods to produce, how to produce them, and for whom to produce them.

Accepted Answer

A) True 
 B)False

Question 8

Economics examines the options open to households and business firms, but ignores the options of governments and entire societies.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following observations is true?

Accepted Answer

A)  Free markets will achieve all of society's goals. 
B)  The ability to buy goods is divided equally among consumers. 
C)  The market deals with efficiency in production through the profit motive. 
D)  The market system encourages firms to use inputs wastefully. 
A)  Free markets will achieve all of society's goals. 
B)  The ability to buy goods is divided equally among consumers. 
C)  The market deals with efficiency in production through the profit motive. 
D)  The market system encourages firms to use inputs wastefully.

Question 10

Adam Smith's book, one of the first systematic treatments of economics, was entitled

Accepted Answer

A)  The Plan of the Ages. 
B)  The General Theory of Money, Taxes, and Income. 
C)  The Wealth of Nations. 
D)  Principles of Economics. 
E)  Concepts in Moral Philosophy. 
A)  The Plan of the Ages. 
B)  The General Theory of Money, Taxes, and Income. 
C)  The Wealth of Nations. 
D)  Principles of Economics. 
E)  Concepts in Moral Philosophy.

Question 11

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 12

A production possibilities curve always slopes downward to the right because resources

Accepted Answer

A)  are not scarce. 
B)  have no opportunity cost. 
C)  are freely available. 
D)  are limited. 
E)  are not related to outputs. 
A)  are not scarce. 
B)  have no opportunity cost. 
C)  are freely available. 
D)  are limited. 
E)  are not related to outputs.

Question 13

Monetary costs and opportunity costs are always identical.

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

A market system solves the

Accepted Answer

A)  "what" and "how" decisions but not the "to whom." 
B)  "what" and "to whom" decisions but not the "how." 
C)  "how" and "to whom" decisions but not the "what." 
D)  "what," "how," and "to whom" decisions. 
A)  "what" and "how" decisions but not the "to whom." 
B)  "what" and "to whom" decisions but not the "how." 
C)  "how" and "to whom" decisions but not the "what." 
D)  "what," "how," and "to whom" decisions.

Question 16

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 17

What is the opportunity cost of economic growth?

Accepted Answer

A)  investment in the current time period 
B)  improved technology in the current time period 
C)  capital goods in the current time period 
D)  consumption in the current time period 
A)  investment in the current time period 
B)  improved technology in the current time period 
C)  capital goods in the current time period 
D)  consumption in the current time period

Question 18

Economists define "efficiency" as the absence of waste.

Accepted Answer

A) True 
 B)False

Question 19

In a market economy, the decision regarding allocation of resources is made by

Accepted Answer

A)  automatic forces of supply and demand. 
B)  authorities in Washington, D.C. 
C)  planners in state capitals. 
D)  committees from a variety of economic interest groups. 
E)  All of the above are correct. 
A)  automatic forces of supply and demand. 
B)  authorities in Washington, D.C. 
C)  planners in state capitals. 
D)  committees from a variety of economic interest groups. 
E)  All of the above are correct.

Question 20

A typical economy produces thousands of different goods.Is it accurate to say that society faces a production possibilities frontier?

Accepted Answer

A)  No, because two dimensions cannot capture the complexity of a full economy. 
B)  No, although a graph with several thousand dimensions would be appropriate. 
C)  Yes, although society does not face opportunity cost and the model does not apply. 
D)  Yes, because scarcity always imposes opportunity costs. 
E)  Uncertain-economic theory has no answer to this question. 
A)  No, because two dimensions cannot capture the complexity of a full economy. 
B)  No, although a graph with several thousand dimensions would be appropriate. 
C)  Yes, although society does not face opportunity cost and the model does not apply. 
D)  Yes, because scarcity always imposes opportunity costs. 
E)  Uncertain-economic theory has no answer to this question.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Opportunity costs exist for

The first economist to point out the importance of specialization of labor was

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

Carefully define the following terms and explain their importance to the study of economics. a.resources b.rational decision c.scarcity d.opportunity cost

A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home.The researcher included all costs including the imputed value of time involved to prepare the meal at home.This study illustrates the

Only a market economy must answer the questions of what goods to produce, how to produce them, and for whom to produce them.

Economics examines the options open to households and business firms, but ignores the options of governments and entire societies.

Which of the following observations is true?

Adam Smith's book, one of the first systematic treatments of economics, was entitled

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

A production possibilities curve always slopes downward to the right because resources

Monetary costs and opportunity costs are always identical.

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.

A market system solves the

Which of the following events create an outward shift of the production possibilities curve?

What is the opportunity cost of economic growth?

Economists define "efficiency" as the absence of waste.

In a market economy, the decision regarding allocation of resources is made by

A typical economy produces thousands of different goods.Is it accurate to say that society faces a 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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