Question 1

Figure 3-6
  
-In Figure 3-6 assume this economy is currently operating at point D.What is the opportunity cost of moving to B?

Accepted Answer

A) about 200 bushels of wheat 
B) 200 bushels of soybeans 
C) Infinite, B cannot be produced at any cost. 
D) 0 
A) about 200 bushels of wheat 
B) 200 bushels of soybeans 
C) Infinite, B cannot be produced at any cost. 
D) 0

Question 2

While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.

Accepted Answer

A) True 
 B)False

Question 3

Hutch Technology makes computer monitors, which sell for $100 each.What is the opportunity cost of ten monitors?

Accepted Answer

A) $1,000. 
B) the other goods that could be produced with the resources that produce the ten monitors 
C) the profits that Hutch earns when it sells the ten monitors 
D) the profits that Hutch loses if it does not produce the monitors 
E) All of the above are correct. 
A) $1,000. 
B) the other goods that could be produced with the resources that produce the ten monitors 
C) the profits that Hutch earns when it sells the ten monitors 
D) the profits that Hutch loses if it does not produce the monitors 
E) All of the above are correct.

Question 4

The opportunity cost of any decision is the forgone value of the next best alternative that is not chosen.

Accepted Answer

A) True 
 B)False

Question 5

Any point on or outside the PPF is attainable.

Accepted Answer

A) True 
 B)False

Question 6

The production possibilities frontier for a country is usually drawn

Accepted Answer

A) as a straight line, sloping downward. 
B) as a straight line, sloping upward. 
C) bowed outward from the origin. 
D) bowed inward toward the origin. 
E) as a dotted line when sloping downward and as a full line when sloping upward. 
A) as a straight line, sloping downward. 
B) as a straight line, sloping upward. 
C) bowed outward from the origin. 
D) bowed inward toward the origin. 
E) as a dotted line when sloping downward and as a full line when sloping upward.

Question 7

In early 1996, the upper Midwest suffered record cold, with wind chills of fifty degrees below zero or worse.Yet, grocery stores stocked fresh citrus fruit (obviously not grown locally).Why did grocers stock the fruit?

Accepted Answer

A) the desire for profit 
B) concern for their neighbors 
C) the need to dispose of excess production 
D) government orders to distribute fruit 
E) All of the above are correct. 
A) the desire for profit 
B) concern for their neighbors 
C) the need to dispose of excess production 
D) government orders to distribute fruit 
E) All of the above are correct.

Question 8

Goods that are actually produced by firms are not really limited in supply, because the firms can always produce more of them.

Accepted Answer

A) True 
 B)False

Question 9

According to the law of comparative advantage, a doctor who is also a talented auto mechanic should

Accepted Answer

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

Question 10

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

Accepted Answer

A) full-employment policies 
B) a technological advance in the production of apples only 
C) an increase in land available for agriculture 
D) a transfer of available resources from apples to wheat 
A) full-employment policies 
B) a technological advance in the production of apples only 
C) an increase in land available for agriculture 
D) a transfer of available resources from apples to wheat

Question 11

If the PPF for guns and butter is bowed outward from the origin, this indicates constant opportunity cost between the two goods.

Accepted Answer

A) True 
 B)False

Question 12

The concept of opportunity cost in a fully employed economy with technology and resources held constant tells us that

Accepted Answer

A) expansion of output in one industry means expansion cannot occur in another industry. 
B) expansion of output in one industry means output in another industry must contract. 
C) output cannot be increased in any industry. 
D) output of all industries must contract until more resources are found. 
A) expansion of output in one industry means expansion cannot occur in another industry. 
B) expansion of output in one industry means output in another industry must contract. 
C) output cannot be increased in any industry. 
D) output of all industries must contract until more resources are found.

Question 13

Economists define "efficiency" as the absence of waste.

Accepted Answer

A) True 
 B)False

Question 14

The divergence between money costs and opportunity costs is the least in which of the following situations?

Accepted Answer

A) China uses millions of otherwise unemployable workers to build roads with picks and shovels. 
B) Wilhelm, an engineer at Exxon, is drafted-his army salary is $2,000 per month. 
C) Colleen quits her job to stay at home and raise her children. 
D) A university, using a private contractor, builds a field house on land it purchased at full market value from a local farmer. 
A) China uses millions of otherwise unemployable workers to build roads with picks and shovels. 
B) Wilhelm, an engineer at Exxon, is drafted-his army salary is $2,000 per month. 
C) Colleen quits her job to stay at home and raise her children. 
D) A university, using a private contractor, builds a field house on land it purchased at full market value from a local farmer.

Question 15

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 16

The production possibilities frontier can be used to show a manufacturer's possible combinations of output of two goods.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Economists define efficiency as

Accepted Answer

A) output maximization. 
B) the absence of waste. 
C) input maximization. 
D) the presence of surplus. 
A) output maximization. 
B) the absence of waste. 
C) input maximization. 
D) the presence of surplus.

Question 19

Being on the PPF 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 20

A production possibilities curve has a downward slope because

Accepted Answer

A) increased production of one good always reduces the additional profit of production. 
B) decreased production of one good is associated with lower profit from that good. 
C) economists have a negative view of life and human nature. 
D) increased production of one good always reduces production of the other. 
E) increased production of one good necessarily causes production of other goods to increase. 
A) increased production of one good always reduces the additional profit of production. 
B) decreased production of one good is associated with lower profit from that good. 
C) economists have a negative view of life and human nature. 
D) increased production of one good always reduces production of the other. 
E) increased production of one good necessarily causes production of other goods to increase.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Figure 3-6 -In Figure 3-6 assume this economy is currently operating at point D.What is the opportunity cost of moving to B?

While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.

Hutch Technology makes computer monitors, which sell for $100 each.What is the opportunity cost of ten monitors?

The opportunity cost of any decision is the forgone value of the next best alternative that is not chosen.

Any point on or outside the PPF is attainable.

The production possibilities frontier for a country is usually drawn

In early 1996, the upper Midwest suffered record cold, with wind chills of fifty degrees below zero or worse.Yet, grocery stores stocked fresh citrus fruit (obviously not grown locally).Why did grocers stock the fruit?

Goods that are actually produced by firms are not really limited in supply, because the firms can always produce more of them.

According to the law of comparative advantage, a doctor who is also a talented auto mechanic should

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

If the PPF for guns and butter is bowed outward from the origin, this indicates constant opportunity cost between the two goods.

The concept of opportunity cost in a fully employed economy with technology and resources held constant tells us that

Economists define "efficiency" as the absence of waste.

The divergence between money costs and opportunity costs is the least in which of the following situations?

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

The production possibilities frontier can be used to show a manufacturer's possible combinations of output of two goods.

Opportunity cost can best be defined as the

Economists define efficiency as

Being on the PPF 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 production possibilities curve has a downward slope because

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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