Question 1

Figure 3-2
  
-In Figure 3-2, the production possibilities frontier has a bowed-out shape because of the law of

Accepted Answer

A)  decreasing costs. 
B)  increasing costs. 
C)  demand. 
D)  comparative advantage. 
A)  decreasing costs. 
B)  increasing costs. 
C)  demand. 
D)  comparative advantage.

Question 2

For a given production possibilities frontier, which points are attainable?

Accepted Answer

A)  points inside the frontier 
B)  points outside the frontier 
C)  points on or outside the frontier 
D)  points on the frontier only 
E)  points on or inside the frontier 
A)  points inside the frontier 
B)  points outside the frontier 
C)  points on or outside the frontier 
D)  points on the frontier only 
E)  points on or inside the frontier

Question 3

Efficiency is defined as minimizing waste.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following does not determine the position and shape of a society's PPF?

Accepted Answer

A)  physical resources 
B)  price level 
C)  skills and technology 
D)  past construction of factories and research 
A)  physical resources 
B)  price level 
C)  skills and technology 
D)  past construction of factories and research

Question 5

In terms of efficiency, any point on a production possibilities frontier is as good another.

Accepted Answer

A) True 
 B)False

Question 6

Do markets solve all of society's problems?

Accepted Answer

A)  Yes, markets are efficient and work well under nearly all circumstances. 
B)  Yes, markets solve the problems of production and distribution. 
C)  No, they do not solve problems such as unemployment and inflation. 
D)  No, they hardly solve any problems at all. 
E)  Uncertain, economic theory has no answer to this question. 
A)  Yes, markets are efficient and work well under nearly all circumstances. 
B)  Yes, markets solve the problems of production and distribution. 
C)  No, they do not solve problems such as unemployment and inflation. 
D)  No, they hardly solve any problems at all. 
E)  Uncertain, economic theory has no answer to this question.

Question 7

What would be the opportunity cost of a child using a coupon for a free ice cream cone?

Accepted Answer

A)  the dollar cost of the cone she selected 
B)  the other types of ice cream she could have selected 
C)  zero - because the good was not a durable good 
D)  zero - because the good was free 
A)  the dollar cost of the cone she selected 
B)  the other types of ice cream she could have selected 
C)  zero - because the good was not a durable good 
D)  zero - because the good was free

Question 8

The total amount of consumption of a society can be increased if

Accepted Answer

A)  firms allow each worker to perform multiple tasks. 
B)  resources are allocated by a central planning group. 
C)  individuals engage in specialization and voluntary trade. 
D)  barter exchange is used in place of money. 
A)  firms allow each worker to perform multiple tasks. 
B)  resources are allocated by a central planning group. 
C)  individuals engage in specialization and voluntary trade. 
D)  barter exchange is used in place of money.

Question 9

One popular definition of economics is the study of

Accepted Answer

A)  how scarcity increases opportunities to meet ends. 
B)  how markets overcome scarcity. 
C)  one goal and three tasks. 
D)  how to use limited means to meet unlimited wants. 
E)  wants versus needs. 
A)  how scarcity increases opportunities to meet ends. 
B)  how markets overcome scarcity. 
C)  one goal and three tasks. 
D)  how to use limited means to meet unlimited wants. 
E)  wants versus needs.

Question 10

If you discover that the opportunity cost of raising your economics grade is zero, you

Accepted Answer

A)  are studying too hard and receiving a higher grade than is optimal for you. 
B)  must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
C)  must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
D)  must be producing more of other goods than is optimal for you. 
A)  are studying too hard and receiving a higher grade than is optimal for you. 
B)  must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
C)  must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
D)  must be producing more of other goods than is optimal for you.

Question 11

Why would it be a mistake to treat opportunity costs and explicit monetary costs as identical?

Accepted Answer

A)  Because sometimes the market does not function well. 
B)  Because opportunity costs are different for different goods. 
C)  Because there are trade-offs involved in any decision. 
D)  Because of existence of efficient markets. 
A)  Because sometimes the market does not function well. 
B)  Because opportunity costs are different for different goods. 
C)  Because there are trade-offs involved in any decision. 
D)  Because of existence of efficient markets.

Question 12

When the federal budget deficit was eliminated in the late 1990s the

Accepted Answer

A)  Congress and President Clinton easily agreed on spending priorities. 
B)  Congress and President Clinton still disagreed on spending priorities. 
C)  federal government no longer faced any budgetary problems. 
D)  federal government was able to satisfy all of its constituents. 
A)  Congress and President Clinton easily agreed on spending priorities. 
B)  Congress and President Clinton still disagreed on spending priorities. 
C)  federal government no longer faced any budgetary problems. 
D)  federal government was able to satisfy all of its constituents.

Question 13

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 14

Adam Smith noted that people are adept at which of the following?

Accepted Answer

A)  Confusing themselves if given the chance. 
B)  Proving the truth of "Murphy's Law." 
C)  Denying themselves for the sake of others. 
D)  Pursuing their own self-interest. 
E)  All of the above are correct. 
A)  Confusing themselves if given the chance. 
B)  Proving the truth of "Murphy's Law." 
C)  Denying themselves for the sake of others. 
D)  Pursuing their own self-interest. 
E)  All of the above are correct.

Question 15

While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.

Accepted Answer

A) True 
 B)False

Question 16

In order to make an optimal choice we must use

Accepted Answer

A)  percentage analysis. 
B)  total analysis. 
C)  average analysis. 
D)  marginal analysis. 
A)  percentage analysis. 
B)  total analysis. 
C)  average analysis. 
D)  marginal analysis.

Question 17

What is Jim's opportunity cost of operating his own business?

Accepted Answer

A)  the total amount of money he puts into capital equipment 
B)  the value of his labor that is put into the business 
C)  the cost of hiring his laborers 
D)  All of the above are correct. 
A)  the total amount of money he puts into capital equipment 
B)  the value of his labor that is put into the business 
C)  the cost of hiring his laborers 
D)  All of the above are correct.

Question 18

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 19

If an economy wants to experience economic growth, what decision must it make and carry out? Explain.

Accepted Answer

People in the economy must decide to con

Question 20

Efficient production can be carried out anywhere on or below the production possibilities frontier.

Accepted Answer

A) True 
 B)False

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Figure 3-2 -In Figure 3-2, the production possibilities frontier has a bowed-out shape because of the law of

For a given production possibilities frontier, which points are attainable?

Efficiency is defined as minimizing waste.

Which of the following does not determine the position and shape of a society's PPF?

In terms of efficiency, any point on a production possibilities frontier is as good another.

Do markets solve all of society's problems?

What would be the opportunity cost of a child using a coupon for a free ice cream cone?

The total amount of consumption of a society can be increased if

One popular definition of economics is the study of

If you discover that the opportunity cost of raising your economics grade is zero, you

Why would it be a mistake to treat opportunity costs and explicit monetary costs as identical?

When the federal budget deficit was eliminated in the late 1990s the

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.

Adam Smith noted that people are adept at which of the following?

While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.

In order to make an optimal choice we must use

What is Jim's opportunity cost of operating his own business?

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

If an economy wants to experience economic growth, what decision must it make and carry out? Explain.

Efficient production can be carried out anywhere on or below 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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