Exam 3: The Fundamental Economic Problem: Scarcity and Choice

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.

As the term "opportunity cost" is defined in the text, the opportunity cost of going to college includes

Which principle states that as the production of one good expands, the opportunity cost of producing another unit of this good generally increases?

Probably the most important source of efficiency in production is

The principle of comparative advantage was first explained by David Ricardo in the early 1800s.

Being on the production possibilities frontier implies that increasing the production of one good or service can only be accomplished by decreasing the quantity produced of another good or service.

A market system is not considered an effective way of controlling self-interest.

The opportunity cost of a college education includes wages lost while enrolled in school.

In a market economy, opportunity costs are always synonymous with explicit monetary costs.

The statement "Resources employed in producing X are better suited to making Y" is another way of saying

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

The production possibilities curve illustrates the basic principle that

Suppose the U.S.government has an annual budget of about $4 trillion.Does the U.S.government face the problem of scarcity?

The economic problem of scarcity

One role that markets play is

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

Which of the following observations is true?

Scarcity is only a temporary problem that a society can solve by promoting economic growth.

Optimal decisions are made based upon the concept of opportunity cost.

A market system solves the