Question 1

If an economy is producing inefficiently, it is

Accepted Answer

A) possible to increase production of all goods simultaneously. 
B) possible to increase production of one good at the expense of another. 
C) not possible to increase production of any good. 
D) not possible to increase economic growth. 
E) possible to increase production with no effort. 
A) possible to increase production of all goods simultaneously. 
B) possible to increase production of one good at the expense of another. 
C) not possible to increase production of any good. 
D) not possible to increase economic growth. 
E) possible to increase production with no effort.

Question 2

Figure 3-2 
  
-In Figure 3-2, at point B

Accepted Answer

A) it is impossible to increase production of consumer goods. 
B) it is impossible to increase production of capital goods. 
C) it is possible to increase production of both capital goods and consumer goods simultaneously. 
D) it is impossible to increase production of both capital goods and consumer goods simultaneously. 
A) it is impossible to increase production of consumer goods. 
B) it is impossible to increase production of capital goods. 
C) it is possible to increase production of both capital goods and consumer goods simultaneously. 
D) it is impossible to increase production of both capital goods and consumer goods simultaneously.

Question 3

A rational decision is one that

Accepted Answer

A) satisfies all desires. 
B) avoids the intentional allocation of resources. 
C) assigns available resources in the manner most preferred by decision makers. 
D) assigns available resources to the uses with the lowest opportunity costs. 
A) satisfies all desires. 
B) avoids the intentional allocation of resources. 
C) assigns available resources in the manner most preferred by decision makers. 
D) assigns available resources to the uses with the lowest opportunity costs.

Question 4

Optimal decisions take into account

Accepted Answer

A) the resources available. 
B) the alternatives that were not available to choose. 
C) the gratification produced by an outcome. 
D) the effect on the distribution of income. 
E) the outcomes that are not feasible. 
A) the resources available. 
B) the alternatives that were not available to choose. 
C) the gratification produced by an outcome. 
D) the effect on the distribution of income. 
E) the outcomes that are not feasible.

Question 5

Specialization in production

Accepted Answer

A) raises productivity. 
B) requires money. 
C) stimulates exchange. 
D) All of the responses are correct. 
A) raises productivity. 
B) requires money. 
C) stimulates exchange. 
D) All of the responses are correct.

Question 6

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 responses 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 responses are correct.

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

A society that is inside its production possibilities frontier is efficient.

Accepted Answer

A) True 
 B)False

Question 9

If a society produces at a point on the production possibilities frontier, this is consistent with the full employment of resources.

Accepted Answer

A) True 
 B)False

Question 10

The problem of scarcity

Accepted Answer

A) applies to market-based economies. 
B) applies to centrally planned economies. 
C) applies only to the economies of less-developed countries. 
D) applies to all of these economies, not just one type. 
A) applies to market-based economies. 
B) applies to centrally planned economies. 
C) applies only to the economies of less-developed countries. 
D) applies to all of these economies, not just one type.

Question 11

If two persons trade, one must gain at the expense of the other.

Accepted Answer

A) True 
 B)False

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

Carefully define the following terms and explain their importance to the study of economics. 
a. Resources 
b. Rational decision 
c. Scarcity 
d. Opportunity cost

Accepted Answer

a. Resources are the instruments provide

Question 14

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

Accepted Answer

A) Principle of total cost 
B) Principle of increasing cost 
C) Principle of opportunity cost 
D) Principle of increasing marginal utility 
A) Principle of total cost 
B) Principle of increasing cost 
C) Principle of opportunity cost 
D) Principle of increasing marginal utility

Question 15

The market system provides a way

Accepted Answer

A) to allow specialization and exchange to work in tandem. 
B) to improve the well-being of mankind. 
C) to harness self-interest. 
D) to allocate goods and services. 
E) All of the responses are correct. 
A) to allow specialization and exchange to work in tandem. 
B) to improve the well-being of mankind. 
C) to harness self-interest. 
D) to allocate goods and services. 
E) All of the responses are correct.

Question 16

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 17

Figure 3-1
 
-The shape of the production possibilities frontier in Figure 3-1 implies that

Accepted Answer

A) some resources are better suited for producing wheat than for producing barley. 
B) the opportunity cost of producing more wheat falls as wheat production rises. 
C) the farmer's technology is not subject to the principle of increasing costs. 
D) the financial cost of producing wheat is higher than the financial cost of producing barley. 
A) some resources are better suited for producing wheat than for producing barley. 
B) the opportunity cost of producing more wheat falls as wheat production rises. 
C) the farmer's technology is not subject to the principle of increasing costs. 
D) the financial cost of producing wheat is higher than the financial cost of producing barley.

Question 18

Figure 3-1
 
According to Figure 3-1, the opportunity cost of one more bushel of wheat is

Accepted Answer

A) higher at B than at D. 
B) lower at B than at D. 
C) equal at B and D. 
D) impossible to determine from the information given. 
A) higher at B than at D. 
B) lower at B than at D. 
C) equal at B and D. 
D) impossible to determine from the information given.

Question 19

Division of labor has caused output to rise dramatically since the industrial revolution.

Accepted Answer

A) True 
 B)False

Question 20

In a market economy, the decision regarding allocation of resources is made by

Accepted Answer

A) the operation of the forces of supply and demand. 
B) policy authorities in Washington, D.C. 
C) budget planners in state capitals. 
D) committees from a variety of economic interest groups. 
E) All of the responses are correct. 
A) the operation of the forces of supply and demand. 
B) policy authorities in Washington, D.C. 
C) budget planners in state capitals. 
D) committees from a variety of economic interest groups. 
E) All of the responses are correct.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

If an economy is producing inefficiently, it is

Figure 3-2 -In Figure 3-2, at point B

A rational decision is one that

Optimal decisions take into account

Specialization in production

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

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 society that is inside its production possibilities frontier is efficient.

If a society produces at a point on the production possibilities frontier, this is consistent with the full employment of resources.

The problem of scarcity

If two persons trade, one must gain at the expense of the other.

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

Carefully define the following terms and explain their importance to the study of economics. a. Resources b. Rational decision c. Scarcity d. Opportunity cost

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

The market system provides a way

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

Figure 3-1 -The shape of the production possibilities frontier in Figure 3-1 implies that

Figure 3-1 According to Figure 3-1, the opportunity cost of one more bushel of wheat is

Division of labor has caused output to rise dramatically since the industrial revolution.

In a market economy, the decision regarding allocation of resources is made by

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

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