Question 1

Opportunity cost is the combined value of all other alternatives that go unchosen.

Accepted Answer

A) True 
 B)False

Question 2

Opportunity cost is best defined as the value of

Accepted Answer

A)  all of the other possible options that the decision maker could have chosen. 
B)  the alternative which the decision maker would choose if more resources were available. 
C)  what is gained from the alternative which is chosen. 
D)  resources that are given up to obtain the alternative that is chosen. 
E)  the next best alternative that the decision forces one to give up. 
A)  all of the other possible options that the decision maker could have chosen. 
B)  the alternative which the decision maker would choose if more resources were available. 
C)  what is gained from the alternative which is chosen. 
D)  resources that are given up to obtain the alternative that is chosen. 
E)  the next best alternative that the decision forces one to give up.

Question 3

Rational production decisions require an understanding of

Accepted Answer

A)  trade-offs. 
B)  opportunity costs. 
C)  scarcity of resources. 
D)  All of the above are correct. 
A)  trade-offs. 
B)  opportunity costs. 
C)  scarcity of resources. 
D)  All of the above are correct.

Question 4

The U.S.government spent over $3.6 trillion in budget year 2010.

Accepted Answer

A) True 
 B)False

Question 5

The principle of comparative advantage explains specialization and trade among countries but not among individuals.

Accepted Answer

A) True 
 B)False

Question 6

A student has a chance to see Eric Clapton in concert.The student also has a major economics exam in the morning.If the student goes to the concert,

Accepted Answer

A)  she will get a lower grade on the economics exam. 
B)  the opportunity cost of the concert is time spent studying. 
C)  this decision implies a trade-off. 
D)  All of the above are correct. 
A)  she will get a lower grade on the economics exam. 
B)  the opportunity cost of the concert is time spent studying. 
C)  this decision implies a trade-off. 
D)  All of the above are correct.

Question 7

The main reason that finished goods are scarce is that

Accepted Answer

A)  raw material resources are scarce. 
B)  factories are not operated efficiently. 
C)  distribution systems are clogged. 
D)  taxes are destroying work incentives. 
E)  All of the above are correct. 
A)  raw material resources are scarce. 
B)  factories are not operated efficiently. 
C)  distribution systems are clogged. 
D)  taxes are destroying work incentives. 
E)  All of the above are correct.

Question 8

A society must make three sorts of decision: what goods to produce, how to produce them, and how to distribute them.

Accepted Answer

A) True 
 B)False

Question 9

If the quantity of one good that must be forgone increases as successive units of another good are produced, then there is said to be increasing opportunity cost between the two goods.

Accepted Answer

A) True 
 B)False

Question 10

A large government faces a production possibilities frontier much like a business firm does.

Accepted Answer

A) True 
 B)False

Question 11

Firms are encouraged by the profit motive to use inputs efficiently.

Accepted Answer

A) True 
 B)False

Question 12

Because of scarcity, every economic decision involves

Accepted Answer

A)  a trade-off. 
B)  a free good. 
C)  a trade-in. 
D)  an increasing cost. 
E)  a money payment. 
A)  a trade-off. 
B)  a free good. 
C)  a trade-in. 
D)  an increasing cost. 
E)  a money payment.

Question 13

Suppose a presidential candidate campaigns on the need to improve U.S.infrastructure, a term for capital goods like bridges, highways, and technology (much of it publicly owned).Which would lead to faster growth: government expenditure on capital goods or expenditure on consumption goods such as sports stadiums? Illustrate your answer, drawing appropriate production possibilities frontiers accompanied by an explanation.

Accepted Answer

Draw a PPF labeling one axis (say, Y) ca

Question 14

Workers in Adam Smith's famous pin factory example, who were proficient in pin production, then faced the problem of

Accepted Answer

A)  too many different tasks. 
B)  becoming bored with their jobs. 
C)  having to exchange pins for other goods and services. 
D)  not having enough pins to purchase other goods and services. 
A)  too many different tasks. 
B)  becoming bored with their jobs. 
C)  having to exchange pins for other goods and services. 
D)  not having enough pins to purchase other goods and services.

Question 15

From a society's viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up some of another thing.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is likely to affect the position and shape of society's production possibilities frontier?

Accepted Answer

A)  volume of physical resources 
B)  level of labor skills 
C)  level of technology 
D)  amount of factories on hand 
E)  All of the above are correct. 
A)  volume of physical resources 
B)  level of labor skills 
C)  level of technology 
D)  amount of factories on hand 
E)  All of the above are correct.

Question 17

Figure 3-2
  
-In Figure 3-2, a point such as A

Accepted Answer

A)  is preferable over B. 
B)  is an efficient use of resources. 
C)  represents a misallocation of resources. 
D)  is not obtainable. 
A)  is preferable over B. 
B)  is an efficient use of resources. 
C)  represents a misallocation of resources. 
D)  is not obtainable.

Question 18

Figure 3-6
  
-In Figure 3-6 assume this economy is currently operating at point D.What is the opportunity cost of moving to B?

Accepted Answer

A)  about 200 bushels of wheat 
B)  200 bushels of soybeans 
C)  Infinite, B cannot be produced at any cost. 
D)  0 
A)  about 200 bushels of wheat 
B)  200 bushels of soybeans 
C)  Infinite, B cannot be produced at any cost. 
D)  0

Question 19

Although finished goods are scarce, the inputs to produce them are not scarce.

Accepted Answer

A) True 
 B)False

Question 20

Opportunity cost can best be defined as the

Accepted Answer

A)  money cost of a good or service. 
B)  money cost plus interest on money borrowed to buy a good or service. 
C)  cost of the resources used to produce a good or service. 
D)  value of the best alternative forgone when the alternative at hand is chosen. 
A)  money cost of a good or service. 
B)  money cost plus interest on money borrowed to buy a good or service. 
C)  cost of the resources used to produce a good or service. 
D)  value of the best alternative forgone when the alternative at hand is chosen.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Opportunity cost is the combined value of all other alternatives that go unchosen.

Opportunity cost is best defined as the value of

Rational production decisions require an understanding of

The U.S.government spent over $3.6 trillion in budget year 2010.

The principle of comparative advantage explains specialization and trade among countries but not among individuals.

A student has a chance to see Eric Clapton in concert.The student also has a major economics exam in the morning.If the student goes to the concert,

The main reason that finished goods are scarce is that

A society must make three sorts of decision: what goods to produce, how to produce them, and how to distribute them.

If the quantity of one good that must be forgone increases as successive units of another good are produced, then there is said to be increasing opportunity cost between the two goods.

A large government faces a production possibilities frontier much like a business firm does.

Firms are encouraged by the profit motive to use inputs efficiently.

Because of scarcity, every economic decision involves

Workers in Adam Smith's famous pin factory example, who were proficient in pin production, then faced the problem of

From a society's viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up some of another thing.

Which of the following is likely to affect the position and shape of society's production possibilities frontier?

Figure 3-2 -In Figure 3-2, a point such as A

Figure 3-6 -In Figure 3-6 assume this economy is currently operating at point D.What is the opportunity cost of moving to B?

Although finished goods are scarce, the inputs to produce them are not scarce.

Opportunity cost can best be defined as the

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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