Exam 3: The Fundamental Economic Problem: Scarcity and Choice

If the U.S.government decides to increase military spending,one opportunity cost will be lower spending on education.

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.

The central question in economics is how to

In terms of efficiency,any point on a production possibilities frontier is as good another.

A typical economy produces thousands of different goods.Is it accurate to say that society faces a production possibilities frontier?

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

Economists define efficiency as

Opportunity cost is the combined value of all other alternatives that go unchosen.

Opportunity cost can best be defined as the

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.

Money is scarce,but resources are not.

If production involves increasing opportunity cost,then moving nearer the horizontal axis will increase the opportunity cost of

Which of the following characteristics of a PPF indicates that tradeoffs must be made?

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

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

Explain the relationship between opportunity costs and money costs.Can they be treated as identical?

For a given production possibilities frontier,which points are attainable?

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

Both conservatives and liberals tend to approve of markets because

Rational production decisions require an understanding of