Question 1

Figure 3-4  
-Which of the following would make point Q in Figure 3-4 attainable?

Accepted Answer

A) Full-employment policies 
B) A technological advance strictly applicable to the production of apples 
C) An increase in land available for agricultural use 
D) A transfer of available resources from apples to wheat production 
A) Full-employment policies 
B) A technological advance strictly applicable to the production of apples 
C) An increase in land available for agricultural use 
D) A transfer of available resources from apples to wheat production

Question 2

Any point on or outside the production possibilities frontier is attainable.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following quotations best captures the idea of opportunity cost?

Accepted Answer

A) "Opportunity knocks but once." 
B) "Every choice involves a sacrifice." 
C) "Let's not ask for the moon; we have the stars." 
D) "Fools rush in where wise men fear to tread." 
E) "All that glitters is not gold." 
A) "Opportunity knocks but once." 
B) "Every choice involves a sacrifice." 
C) "Let's not ask for the moon; we have the stars." 
D) "Fools rush in where wise men fear to tread." 
E) "All that glitters is not gold."

Question 4

The concept of opportunity cost in a fully employed economy with technology and resources held constant tells us that

Accepted Answer

A) expansion of output in one industry means expansion cannot occur in another industry. 
B) expansion of output in one industry means output in another industry must contract. 
C) output cannot be increased in any industry. 
D) output of all industries must contract until more resources are found. 
A) expansion of output in one industry means expansion cannot occur in another industry. 
B) expansion of output in one industry means output in another industry must contract. 
C) output cannot be increased in any industry. 
D) output of all industries must contract until more resources are found.

Question 5

Centrally planned economies are not constrained by the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Free markets promote all of society's goals.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The U.S.federal government spent more than $4 trillion in 2018, which implies that there were no opportunity costs faced by the United States.

Accepted Answer

A) True 
 B)False

Question 11

If an economy is operating inefficiently, then

Accepted Answer

A) the economy can increase production of consumption goods without reducing capital goods. 
B) there is always a positive opportunity cost to increasing output. 
C) output can only be increased through capital investment. 
D) output cannot be increased. 
A) the economy can increase production of consumption goods without reducing capital goods. 
B) there is always a positive opportunity cost to increasing output. 
C) output can only be increased through capital investment. 
D) output cannot be increased.

Question 12

How are money cost and opportunity cost related to each other?

Accepted Answer

A) If markets function well, they are closely related. 
B) They are always identical in any economic system. 
C) Opportunity cost must always exceed money cost. 
D) Money cost is greater than or equal to opportunity cost. 
E) In a market economy, they must be equal to each other. 
A) If markets function well, they are closely related. 
B) They are always identical in any economic system. 
C) Opportunity cost must always exceed money cost. 
D) Money cost is greater than or equal to opportunity cost. 
E) In a market economy, they must be equal to each other.

Question 13

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 14

As a general rule, an increase in the capital available to a society

Accepted Answer

A) reduces the slope of the production possibilities frontier, making it shallower. 
B) increases the slope of the production possibilities frontier, making it steeper. 
C) shifts the production possibilities frontier outward, away from the origin. 
D) shifts the production possibilities frontier inward, toward the origin. 
E) makes the production possibilities frontier more bowed out. 
A) reduces the slope of the production possibilities frontier, making it shallower. 
B) increases the slope of the production possibilities frontier, making it steeper. 
C) shifts the production possibilities frontier outward, away from the origin. 
D) shifts the production possibilities frontier inward, toward the origin. 
E) makes the production possibilities frontier more bowed out.

Question 15

If production involves increasing opportunity cost, then on the production possibilities frontier, moving to a point closer to the horizontal axis will increase the opportunity cost of

Accepted Answer

A) the good that is shown on the horizontal axis. 
B) the good that is shown on the vertical axis. 
C) both of the goods shown on the axes. 
D) neither of the goods shown on the axes. 
A) the good that is shown on the horizontal axis. 
B) the good that is shown on the vertical axis. 
C) both of the goods shown on the axes. 
D) neither of the goods shown on the axes.

Question 16

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 17

A point lying inside (under) a production possibilities frontier indicates that

Accepted Answer

A) the economy is saving money. 
B) there are no associated opportunity costs. 
C) more output could be produced with existing resources. 
D) technology limits production. 
A) the economy is saving money. 
B) there are no associated opportunity costs. 
C) more output could be produced with existing resources. 
D) technology limits production.

Question 18

Which of these options best reflects Jim's opportunity cost of operating his own business?

Accepted Answer

A) The total amount of money he spends to obtain capital equipment 
B) The value of Jim's managerial skills that are used to run the business 
C) The cost of hiring his laborers 
D) All of the responses are correct. 
A) The total amount of money he spends to obtain capital equipment 
B) The value of Jim's managerial skills that are used to run the business 
C) The cost of hiring his laborers 
D) All of the responses are correct.

Question 19

Money is scarce, but resources are not.

Accepted Answer

A) True 
 B)False

Question 20

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 cafeteria (the other alternative is to work at a paper mill). 
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 cafeteria (the other alternative is to work at a paper mill). 
C) A university employs otherwise unemployed teenagers to paint crosswalks and curbs. 
D) A university replaces the roof of the fine arts building.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Figure 3-4 -Which of the following would make point Q in Figure 3-4 attainable?

Any point on or outside the production possibilities frontier is attainable.

Which of the following quotations best captures the idea of opportunity cost?

The concept of opportunity cost in a fully employed economy with technology and resources held constant tells us that

Centrally planned economies are not constrained by the problem of scarcity.

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

Free markets promote all of society's goals.

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

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

The U.S.federal government spent more than $4 trillion in 2018, which implies that there were no opportunity costs faced by the United States.

If an economy is operating inefficiently, then

How are money cost and opportunity cost related to each other?

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

As a general rule, an increase in the capital available to a society

If production involves increasing opportunity cost, then on the production possibilities frontier, moving to a point closer to the horizontal axis will increase the opportunity cost of

The tendency of opportunity cost to increase as production increases

A point lying inside (under) a production possibilities frontier indicates that

Which of these options best reflects Jim's opportunity cost of operating his own business?

Money is scarce, but resources are not.

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

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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