Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

Money is scarce, but resources are not.

Accepted Answer

A) True 
 B)False  False

Question 3

In early 1996, the upper Midwest suffered record cold, with wind chills of 50° below zero or worse. Yet, grocery stores stocked fresh citrus fruit (which was clearly not grown locally). Why did grocers stock the fruit?

Accepted Answer

A) The desire for profit 
B) Concern for their neighbors 
C) The need to dispose of excess production 
D) Government orders to distribute fruit 
E) All of the responses are correct. 
A) The desire for profit 
B) Concern for their neighbors 
C) The need to dispose of excess production 
D) Government orders to distribute fruit 
E) All of the responses are correct. A

Question 4

Inputs in production processes are called resources.

Accepted Answer

A) True 
 B)False

Question 5

The production possibilities curve illustrates the basic principle that

Accepted Answer

A) an economy's capacity to produce increases in proportion to its population. 
B) if all resources of an economy are in use, more of one good can be produced only if less of another is produced. 
C) an economy will automatically seek that output at which all of its resources are employed. 
D) no opportunity cost exists in production. 
A) an economy's capacity to produce increases in proportion to its population. 
B) if all resources of an economy are in use, more of one good can be produced only if less of another is produced. 
C) an economy will automatically seek that output at which all of its resources are employed. 
D) no opportunity cost exists in production.

Question 6

Whenever two individuals trade with each other, one will benefit and the other will lose.

Accepted Answer

A) True 
 B)False

Question 7

In his concept of "the invisible hand," Adam Smith explains that

Accepted Answer

A) if each person looks out for himself or herself, then chaos will inevitably ensue. 
B) the pursuit of self-interest promotes economic well-being for society as a whole. 
C) governmental rule actually results in greater good than is apparent at the time. 
D) traditional religion is an appropriate guide for human behavior. 
E) All of the responses are correct. 
A) if each person looks out for himself or herself, then chaos will inevitably ensue. 
B) the pursuit of self-interest promotes economic well-being for society as a whole. 
C) governmental rule actually results in greater good than is apparent at the time. 
D) traditional religion is an appropriate guide for human behavior. 
E) All of the responses are correct.

Question 8

A government, based upon its policy decisions, can determine the position and shape of the production possibilities frontier that the economy faces.

Accepted Answer

A) True 
 B)False

Question 9

In a properly functioning economy, money costs approximate opportunity costs.

Accepted Answer

A) True 
 B)False

Question 10

Why might the money price for something be higher than the opportunity cost? Why might it be lower? Give an example of each to illustrate your answer.

Accepted Answer

Money price can be higher than opportuni

Question 11

In terms of the production possibilities diagram, the principle of increasing cost simply asserts that the frontier is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) bowed inward. 
D) bowed outward. 
E) undefined, because no market will exist in this case. 
A) downward sloping. 
B) upward sloping. 
C) bowed inward. 
D) bowed outward. 
E) undefined, because no market will exist in this case.

Question 12

The opportunity cost of a college education does not include any income that is foregone while enrolled in school, since this is not measured using monetary costs.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Given its size, the United States does not have to worry about limitations on resources.

Accepted Answer

A) True 
 B)False

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

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 17

Although specialization of labor increases efficiency of production, another step is necessary

Accepted Answer

A) to exchange goods among producers. 
B) to remain fully employed. 
C) to a reallocation of natural resources. 
D) to assure that exchange leads to mutual gains. 
E) All of the responses are correct. 
A) to exchange goods among producers. 
B) to remain fully employed. 
C) to a reallocation of natural resources. 
D) to assure that exchange leads to mutual gains. 
E) All of the responses are correct.

Question 18

Specialization and division of labor are made easier by the existence of money.

Accepted Answer

A) True 
 B)False

Question 19

The negative slope of a production possibilities frontier is a graphic representation of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 20

-If the producer is at combination B as shown in Table 3-2, the opportunity cost of increasing corn production by 1 unit is

Accepted Answer

A) 29 units of cotton. 
B) 5 units of cotton. 
C) 12 units of cotton. 
D) 4 units of cotton. 
E) 1 unit of cotton. 
A) 29 units of cotton. 
B) 5 units of cotton. 
C) 12 units of cotton. 
D) 4 units of cotton. 
E) 1 unit of cotton.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

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

Money is scarce, but resources are not.

In early 1996, the upper Midwest suffered record cold, with wind chills of 50° below zero or worse. Yet, grocery stores stocked fresh citrus fruit (which was clearly not grown locally). Why did grocers stock the fruit?

Inputs in production processes are called resources.

The production possibilities curve illustrates the basic principle that

Whenever two individuals trade with each other, one will benefit and the other will lose.

In his concept of "the invisible hand," Adam Smith explains that

A government, based upon its policy decisions, can determine the position and shape of the production possibilities frontier that the economy faces.

In a properly functioning economy, money costs approximate opportunity costs.

Why might the money price for something be higher than the opportunity cost? Why might it be lower? Give an example of each to illustrate your answer.

In terms of the production possibilities diagram, the principle of increasing cost simply asserts that the frontier is

The opportunity cost of a college education does not include any income that is foregone while enrolled in school, since this is not measured using monetary costs.

In order to make an optimal choice, we must use

Given its size, the United States does not have to worry about limitations on resources.

A market system solves 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.

Although specialization of labor increases efficiency of production, another step is necessary

Specialization and division of labor are made easier by the existence of money.

The negative slope of a production possibilities frontier is a graphic representation of opportunity cost.

-If the producer is at combination B as shown in Table 3-2, the opportunity cost of increasing corn production by 1 unit is

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

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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters