Question 1

The economic problem of scarcity

Accepted Answer

A) is unique to a capitalist economy. 
B) requires that choices be made among alternatives. 
C) disappears as technology advances. 
D) affects only less-developed countries. 
A) is unique to a capitalist economy. 
B) requires that choices be made among alternatives. 
C) disappears as technology advances. 
D) affects only less-developed countries.

Question 2

A principle that economists emphasize is that the ____ of decision makers are always limited.

Accepted Answer

A) ideas 
B) goals 
C) resources 
D) opportunities 
E) offices 
A) ideas 
B) goals 
C) resources 
D) opportunities 
E) offices

Question 3

Individuals face scarcity; whole societies do not.

Accepted Answer

A) True 
 B)False

Question 4

Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools.

Accepted Answer

A) True 
 B)False

Question 5

Some authors claim that any point not on the frontier cannot be best.What is their reasoning to support this?

Accepted Answer

A) A point inside the frontier implies that society is not facing up to the problem of scarcity. 
B) A point inside the frontier limits growth, and growth is always a goal worth pursuing. 
C) A point inside the frontier represents inflation, and inflation is a dangerous situation. 
D) A point inside the frontier results in fewer goods, and more is always better. 
E) A point inside the frontier is inefficient, and represents wasted resources. 
A) A point inside the frontier implies that society is not facing up to the problem of scarcity. 
B) A point inside the frontier limits growth, and growth is always a goal worth pursuing. 
C) A point inside the frontier represents inflation, and inflation is a dangerous situation. 
D) A point inside the frontier results in fewer goods, and more is always better. 
E) A point inside the frontier is inefficient, and represents wasted resources.

Question 6

The principle of comparative advantage helps explain trade between nations.

Accepted Answer

A) True 
 B)False

Question 7

You have invested $1,000 in a stock whose price is increasing at 10 percent a year.Your stock broker, who is never wrong, recommends a stock rising at 20 percent a year.Assuming the broker earns 4 percent of the stock's value on any purchase or sale of the stock, should you take her recommendation?

Accepted Answer

You will earn $200 a year if you take th

Question 8

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

Accepted Answer

A) is preferable over B. 
B) is an efficient use of resources. 
C) represents a misallocation of resources. 
D) is not obtainable. 
A) is preferable over B. 
B) is an efficient use of resources. 
C) represents a misallocation of resources. 
D) is not obtainable.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

If a market system is functioning well, we can conclude that goods with

Accepted Answer

A) high opportunity costs tend to have high money costs. 
B) low opportunity costs tend to have high money costs. 
C) high opportunity costs tend to have low money costs. 
D) low opportunity costs tend to have zero money costs. 
E) high opportunity costs tend to have zero money costs. 
A) high opportunity costs tend to have high money costs. 
B) low opportunity costs tend to have high money costs. 
C) high opportunity costs tend to have low money costs. 
D) low opportunity costs tend to have zero money costs. 
E) high opportunity costs tend to have zero money costs.

Question 12

Some college students have claimed that because their incomes will be higher as a result of attending college, there is no opportunity cost of attending college.Do you agree?
 Explain.

Accepted Answer

No.Although the rate of return on colleg

Question 13

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

Accepted Answer

A) is not obtainable. 
B) is an efficient use of resources. 
C) represents an inefficient allocation of resources. 
D) indicates that the society is a capitalist society. 
A) is not obtainable. 
B) is an efficient use of resources. 
C) represents an inefficient allocation of resources. 
D) indicates that the society is a capitalist society.

Question 14

Figure 3-4
  
-In Figure 3-4, for which of the following would this statement be true: "To get more apples we have to give up wheat." A movement from

Accepted Answer

A) A to E 
B) C to D 
C) D to C 
D) D to E 
E) B to C 
A) A to E 
B) C to D 
C) D to C 
D) D to E 
E) B to C

Question 15

The central question in economics is how to

Accepted Answer

A) make the best use of scarce resources. 
B) use government planning agencies. 
C) induce people to want less. 
D) increase human knowledge. 
A) make the best use of scarce resources. 
B) use government planning agencies. 
C) induce people to want less. 
D) increase human knowledge.

Question 16

-Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts.According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is

Accepted Answer

A) 8 bushels of corn. 
B) 42 bushels of corn. 
C) 50 bushels of corn. 
D) impossible to determine from the information given. 
A) 8 bushels of corn. 
B) 42 bushels of corn. 
C) 50 bushels of corn. 
D) impossible to determine from the information given.

Question 17

A production possibilities frontier shows the combinations of various goods that should be produced.

Accepted Answer

A) True 
 B)False

Question 18

Karl Marx was critical of markets on the grounds that they are not efficient.

Accepted Answer

A) True 
 B)False

Question 19

High opportunity costs go hand in hand with high money costs in a properly functioning economy.

Accepted Answer

A) True 
 B)False

Question 20

The tendency of opportunity cost to increase as production increases

Accepted Answer

A) is an example of theory that has not been proven by facts. 
B) is a general principle, but not a universal fact. 
C) is a universal fact, with no known exceptions. 
D) rarely holds in reality, but is a useful theory. 
E) cannot be tested with standard economic tools. 
A) is an example of theory that has not been proven by facts. 
B) is a general principle, but not a universal fact. 
C) is a universal fact, with no known exceptions. 
D) rarely holds in reality, but is a useful theory. 
E) cannot be tested with standard economic tools.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

The economic problem of scarcity

A principle that economists emphasize is that the ____ of decision makers are always limited.

Individuals face scarcity; whole societies do not.

Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools.

Some authors claim that any point not on the frontier cannot be best.What is their reasoning to support this?

The principle of comparative advantage helps explain trade between nations.

You have invested $1,000 in a stock whose price is increasing at 10 percent a year.Your stock broker, who is never wrong, recommends a stock rising at 20 percent a year.Assuming the broker earns 4 percent of the stock's value on any purchase or sale of the stock, should you take her recommendation?

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

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

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.

If a market system is functioning well, we can conclude that goods with

Some college students have claimed that because their incomes will be higher as a result of attending college, there is no opportunity cost of attending college.Do you agree? Explain.

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

Figure 3-4 -In Figure 3-4, for which of the following would this statement be true: "To get more apples we have to give up wheat." A movement from

The central question in economics is how to

-Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts.According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is

A production possibilities frontier shows the combinations of various goods that should be produced.

Karl Marx was critical of markets on the grounds that they are not efficient.

High opportunity costs go hand in hand with high money costs in a properly functioning economy.

The tendency of opportunity cost to increase as production increases

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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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