Question 1

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

Accepted Answer

A) No, because two dimensions cannot capture the complexity of a full economy. 
B) No, although a graph with several thousand dimensions would be appropriate. 
C) Yes, although society does not face opportunity cost and the model does not apply. 
D) Yes, because scarcity always imposes opportunity costs. 
E) Uncertain-economic theory has no answer to this question. 
A) No, because two dimensions cannot capture the complexity of a full economy. 
B) No, although a graph with several thousand dimensions would be appropriate. 
C) Yes, although society does not face opportunity cost and the model does not apply. 
D) Yes, because scarcity always imposes opportunity costs. 
E) Uncertain-economic theory has no answer to this question.

Question 2

An optimal decision is one that chooses

Accepted Answer

A) the most desirable alternative among the possibilities permitted by the resources available. 
B) the lowest cost method of meeting goals, without regard to quality or any other feature. 
C) among various possible goals and offends no one, so that all are equally happy. 
D) among equally important goals, and thereby avoids the "indispensable necessity" syndrome. 
E) among possible goals in such a way that spends as little money as possible. 
A) the most desirable alternative among the possibilities permitted by the resources available. 
B) the lowest cost method of meeting goals, without regard to quality or any other feature. 
C) among various possible goals and offends no one, so that all are equally happy. 
D) among equally important goals, and thereby avoids the "indispensable necessity" syndrome. 
E) among possible goals in such a way that spends as little money as possible.

Question 3

Monetary costs and opportunity costs are always identical.

Accepted Answer

A) True 
 B)False

Question 4

Specialization in production

Accepted Answer

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The term "satisficing" indicates an optimal choice.

Accepted Answer

A) True 
 B)False

Question 7

If you discover that the opportunity cost of raising your economics grade is zero, you

Accepted Answer

A) are studying too hard and receiving a higher grade than is optimal for you. 
B) must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
C) must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
D) must be producing more of other goods than is optimal for you. 
A) are studying too hard and receiving a higher grade than is optimal for you. 
B) must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
C) must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
D) must be producing more of other goods than is optimal for you.

Question 8

Suppose the U.S.government has an annual budget of about $3.03 trillion.Does the U.S.government face the problem of scarcity?

Accepted Answer

A) No, a government with $3.03 trillion faces no real constraints. 
B) No, scarcity does not apply to governments. 
C) Yes, resources are limited even for the U.S.government. 
D) Yes, although the U.S.government can easily obtain more resources. 
E) Uncertain-economic theory has no answer to this question. 
A) No, a government with $3.03 trillion faces no real constraints. 
B) No, scarcity does not apply to governments. 
C) Yes, resources are limited even for the U.S.government. 
D) Yes, although the U.S.government can easily obtain more resources. 
E) Uncertain-economic theory has no answer to this question.

Question 9

A point lying inside (under) a production possibilities curve indicates that

Accepted Answer

A) the economy is saving money. 
B) there are no associated opportunity costs. 
C) more output could be produced with existing resources. 
D) technology limits production. 
A) the economy is saving money. 
B) there are no associated opportunity costs. 
C) more output could be produced with existing resources. 
D) technology limits production.

Question 10

A decrease in the unemployment rate will shift the PPF outward from the origin.

Accepted Answer

A) True 
 B)False

Question 11

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 above 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 above are correct.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The division of labor usually refers to splitting

Accepted Answer

A) the three coordination decisions among different sets of planners. 
B) the parts of a complex task among different workers. 
C) the production of consumption goods and capital goods among different workers. 
D) political leaders into radical and conservative camps each year. 
A) the three coordination decisions among different sets of planners. 
B) the parts of a complex task among different workers. 
C) the production of consumption goods and capital goods among different workers. 
D) political leaders into radical and conservative camps each year.

Question 14

In a market system, ____ distributes goods among consumers in accord with their tastes and preferences, using voluntary exchange to determine who gets what.

Accepted Answer

A) a price system 
B) a regulatory framework 
C) a democratic government 
D) a closed system 
A) a price system 
B) a regulatory framework 
C) a democratic government 
D) a closed system

Question 15

As a general rule, an increase in the capital available to a society

Accepted Answer

A) reduces the slope of the production possibilities frontier, making it shallower. 
B) increases the slope of the production possibilities frontier, making it steeper. 
C) shifts the production possibilities frontier outward, away from the origin. 
D) shifts the production possibilities frontier inward, toward the origin. 
E) makes the production possibilities frontier more bowed out. 
A) reduces the slope of the production possibilities frontier, making it shallower. 
B) increases the slope of the production possibilities frontier, making it steeper. 
C) shifts the production possibilities frontier outward, away from the origin. 
D) shifts the production possibilities frontier inward, toward the origin. 
E) makes the production possibilities frontier more bowed out.

Question 16

Economics is generally concerned with

Accepted Answer

A) the operation of banks and the stock market. 
B) business management. 
C) how resources are allocated among alternative goals. 
D) the right time to start a business. 
A) the operation of banks and the stock market. 
B) business management. 
C) how resources are allocated among alternative goals. 
D) the right time to start a business.

Question 17

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 18

The statement "Resources employed in producing X are better suited to making Y" is another way of saying resources

Accepted Answer

A) are specialized. 
B) are scarce. 
C) are used inefficiently. 
D) are unproductive. 
E) have no opportunity cost. 
A) are specialized. 
B) are scarce. 
C) are used inefficiently. 
D) are unproductive. 
E) have no opportunity cost.

Question 19

"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 20

Opportunity costs exist for

Accepted Answer

A) households but not businesses or governments. 
B) businesses but not households or governments. 
C) businesses and households but not governments. 
D) households, businesses, and governments. 
A) households but not businesses or governments. 
B) businesses but not households or governments. 
C) businesses and households but not governments. 
D) households, businesses, and governments.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

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

An optimal decision is one that chooses

Monetary costs and opportunity costs are always identical.

Specialization in production

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

The term "satisficing" indicates an optimal choice.

If you discover that the opportunity cost of raising your economics grade is zero, you

Suppose the U.S.government has an annual budget of about $3.03 trillion.Does the U.S.government face the problem of scarcity?

A point lying inside (under) a production possibilities curve indicates that

A decrease in the unemployment rate will shift the PPF outward from the origin.

The market system provides a way

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

The division of labor usually refers to splitting

In a market system, ____ distributes goods among consumers in accord with their tastes and preferences, using voluntary exchange to determine who gets what.

As a general rule, an increase in the capital available to a society

Economics is generally concerned with

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

The statement "Resources employed in producing X are better suited to making Y" is another way of saying resources

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

Opportunity costs exist for

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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