Question 1

Trade-offs can always be considered in terms of opportunity costs.

Accepted Answer

A) True 
 B)False

Question 2

The definition of efficiency implies that production is carried out on the production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 3

The fundamental goal of economics is to

Accepted Answer

A) provide all people with five yachts and two automobiles. 
B) redistribute income and eliminate poverty. 
C) reduce unemployment so that welfare payments are not necessary. 
D) learn to handle the scarcity of virtually all resources. 
A) provide all people with five yachts and two automobiles. 
B) redistribute income and eliminate poverty. 
C) reduce unemployment so that welfare payments are not necessary. 
D) learn to handle the scarcity of virtually all resources.

Question 4

"OPEC is exploiting the United States by selling us oil at inflated prices." Agree or disagree.

Accepted Answer

Trade is voluntary and only takes place

Question 5

Inefficiency in an economy can be caused by

Accepted Answer

A) misallocating resources. 
B) underemploying resources. 
C) discrimination. 
D) All of the responses are correct. 
A) misallocating resources. 
B) underemploying resources. 
C) discrimination. 
D) All of the responses are correct.

Question 6

The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.

Accepted Answer

A) True 
 B)False

Question 7

Opportunity cost can best be defined as the

Accepted Answer

A) money cost of a good or service. 
B) money cost plus interest on money borrowed to buy a good or service. 
C) cost of the resources used to produce a good or service. 
D) value of the best alternative forgone when the alternative at hand is chosen. 
A) money cost of a good or service. 
B) money cost plus interest on money borrowed to buy a good or service. 
C) cost of the resources used to produce a good or service. 
D) value of the best alternative forgone when the alternative at hand is chosen.

Question 8

All of the points inside a production possibilities frontier are ____; all of the points on the production possibilities frontier are ____.

Accepted Answer

A) efficient; inefficient 
B) inefficient; efficient 
C) attainable; unattainable 
D) rational; zero-cost 
E) unattainable; efficient 
A) efficient; inefficient 
B) inefficient; efficient 
C) attainable; unattainable 
D) rational; zero-cost 
E) unattainable; efficient

Question 9

The law of comparative advantage implies that a doctor who is also a talented auto mechanic should

Accepted Answer

A) get a part-time job at a gas station. 
B) do his or her own auto repairs and those of his or her neighbors. 
C) hire a professional mechanic to repair his or her car. 
D) only repair the cars of other doctors. 
A) get a part-time job at a gas station. 
B) do his or her own auto repairs and those of his or her neighbors. 
C) hire a professional mechanic to repair his or her car. 
D) only repair the cars of other doctors.

Question 10

A production possibilities curve always slopes downward to the right because resources

Accepted Answer

A) are not scarce. 
B) have no opportunity cost. 
C) are freely available. 
D) are limited. 
E) are not related to outputs. 
A) are not scarce. 
B) have no opportunity cost. 
C) are freely available. 
D) are limited. 
E) are not related to outputs.

Question 11

As a strategy to boost enrollment, in January 1996, a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located. For students who accepted the offer, how did this offer affect the opportunity cost of attending college?

Accepted Answer

A) The opportunity cost did not change, since lost earnings were still a factor. 
B) The opportunity cost became zero for the typical student. 
C) The opportunity cost was very low, because the only cost was for books and supplies. 
D) The opportunity cost did not change, since tuition was not a factor in computing opportunity cost. 
E) The opportunity cost was lower than if tuition was charged, but there was still a cost. 
A) The opportunity cost did not change, since lost earnings were still a factor. 
B) The opportunity cost became zero for the typical student. 
C) The opportunity cost was very low, because the only cost was for books and supplies. 
D) The opportunity cost did not change, since tuition was not a factor in computing opportunity cost. 
E) The opportunity cost was lower than if tuition was charged, but there was still a cost.

Question 12

Scarcity is the fundamental problem of the economy.

Accepted Answer

A) True 
 B)False

Question 13

During World War II, Hitler would often order his army to hold a particular town or river "at all costs." Was this rational? If so, explain. If not, indicate which economic idea it violated.

Accepted Answer

The orders were irrational, as they igno

Question 14

Few bother to think about what makes Florida oranges show up daily in South Dakota supermarkets, but the people of South Dakota are likely to think a great deal about this. Why does someone take the time and energy to assure that oranges that are grown in Florida move more than 1,000 miles before they appear on grocery shelves?

Accepted Answer

In a market economy, there is profit to

Question 15

If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the

Accepted Answer

A) larger the opportunity cost of producing an extra unit of good "A." 
B) larger the quantity of resources being devoted to the production of good "B." 
C) smaller the quantity of resources being devoted to the production of good "A." 
D) smaller the opportunity cost of producing an extra unit of good "A." 
E) greater the returns to scale in the production of good "A." 
A) larger the opportunity cost of producing an extra unit of good "A." 
B) larger the quantity of resources being devoted to the production of good "B." 
C) smaller the quantity of resources being devoted to the production of good "A." 
D) smaller the opportunity cost of producing an extra unit of good "A." 
E) greater the returns to scale in the production of good "A."

Question 16

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.

Question 17

Opportunity cost always arises when a trade-off decision is made.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) both tuition and the value of the student's time. 
B) tuition but not the value of the student's time, which is a cash cost. 
C) the value of the student's time but not tuition, which is a monetary cost. 
D) neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. 
E) neither tuition nor the value of the student's time, at least at subsidized state universities. 
A) both tuition and the value of the student's time. 
B) tuition but not the value of the student's time, which is a cash cost. 
C) the value of the student's time but not tuition, which is a monetary cost. 
D) neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. 
E) neither tuition nor the value of the student's time, at least at subsidized state universities.

Question 19

All of the points inside a production possibilities frontier are ____; all of the points outside the production possibilities frontier are ____.

Accepted Answer

A) efficient; inefficient 
B) optimal; irrational 
C) attainable; unattainable 
D) rational; zero-cost 
E) unattainable; efficient 
A) efficient; inefficient 
B) optimal; irrational 
C) attainable; unattainable 
D) rational; zero-cost 
E) unattainable; efficient

Question 20

One common 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.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Trade-offs can always be considered in terms of opportunity costs.

The definition of efficiency implies that production is carried out on the production possibilities frontier.

The fundamental goal of economics is to

"OPEC is exploiting the United States by selling us oil at inflated prices." Agree or disagree.

Inefficiency in an economy can be caused by

The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.

Opportunity cost can best be defined as the

All of the points inside a production possibilities frontier are ____; all of the points on the production possibilities frontier are ____.

The law of comparative advantage implies that a doctor who is also a talented auto mechanic should

A production possibilities curve always slopes downward to the right because resources

As a strategy to boost enrollment, in January 1996, a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located. For students who accepted the offer, how did this offer affect the opportunity cost of attending college?

Scarcity is the fundamental problem of the economy.

During World War II, Hitler would often order his army to hold a particular town or river "at all costs." Was this rational? If so, explain. If not, indicate which economic idea it violated.

If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the

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

Opportunity cost always arises when a trade-off decision is made.

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

All of the points inside a production possibilities frontier are ____; all of the points outside the production possibilities frontier are ____.

One common definition of economics is the study of

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

All of the points inside a production possibilities frontier are ; all of the points on the production possibilities frontier are .

All of the points inside a production possibilities frontier are ; all of the points outside the production possibilities frontier are .