Deck 1: Economics and the World of Scarcity  

Question 1

Which of the following statements is FALSE?

A) Even as society increases its wealth, the problem of scarcity remains.
B) While basic needs are few, wants are unlimited.
C) You will not incur any opportunity cost as long as you always make the right decisions.
D) Economics has traditionally been referred to as the dismal science.

Answer 1

You will not incur any opportunity cost as long as you always make the right decisions.

Question 2

The problem of economic scarcity applies

A) only in industrially developed countries, because sophisticated resources are scarce.
B) only in underdeveloped countries, because there are few productive resources.
C) only in non-democratic countries, where there are chronic shortages.
D) to all economic systems, regardless of their level of development.

Answer 2

to all economic systems, regardless of their level of development.

Question 3

"Using economics" means

A) saving money.
B) eliminating scarcity.
C) ignoring opportunity costs.
D) making choices.

Answer 3

making choices.

Question 4

Wants are goods and services that you

A) desire.
B) need.
C) already have.
D) can't afford.

Question 5

Opportunity costs arise from

A) scarcity.
B) poverty.
C) poor decisions.
D) wealth.

Question 6

Opportunity costs do not arise when

A) the decision being made is a political one.
B) the decision being made is a medical one.
C) the decision being made does not involve scarce resources.
D) everyone who will be affected by the decision has input.

Question 7

Opportunity cost is always

A) a financial cost.
B) the result of a poor decision.
C) a forgone alternative.
D) unmeasurable.

Question 8

Economic theory asserts that altruistic behavior

A) involves no opportunity cost.
B) is consistent with the assumption of rational self-interest.
C) will not be observed when scarcity is present.
D) is irrational.

Question 9

Economics has traditionally been referred to as the _________ science.

A) dismal
B) poorest
C) most creative
D) first

Question 10

Those things we like to have and consume are called

A) goods.
B) necessities.
C) needs.
D) impulse purchase items.

Question 11

Economics is best defined as the

A) study of self-interest.
B) study of how people make choices to satisfy their wants.
C) study of how government can most efficiently raise funds by taxation.
D) process by which goods are sold in free markets.

Question 12

When does a decision NOT result in an opportunity cost?

A) When you consume an item paid for by someone else
B) When someone else consumes an item you have paid for
C) When the resources involved are not scarce
D) When the work required to follow through on the decision is less than anticipated

Question 13

Suppose you have four choices-go to a movie, read a book, watch television, or go to a concert. You choose to go to a movie. The opportunity cost of the movie is

A) the value of the book not read.
B) the value of the television program not watched.
C) the value of the concert that you didn't attend.
D) the value of the activity that you would have selected if you hadn't gone to the movie.

Question 14

Figure 1.1

-A farmer owns land on which he can grow soybeans or corn. If he devotes all of the land to growing soybeans, he will have an output of 12,000 bushels of soybeans. On the other hand, if all of his land is planted with corn, 10,000 bushels of corn will be produced.
Figure 1.1 refers to the farmer's

A) production possibilities curve.
B) substitution options curve.
C) trade-offs curve.
D) opportunity cost curve.

Question 15

Figure 1.1

-If the farmer is producing 9,000 bushels of soybeans at point B in Figure 1, then the maximum quantity of corn he can produce is

A) 0 bushels.
B) 7,000 bushels.
C) 9,000 bushels.
D) 10,000 bushels.

Question 16

Figure 1.1

-In Figure 1.1, how many bushels of corn are produced at point A?

A) 0
B) 7,000
C) 9,000
D) 10,000

Question 17

Figure 1.1

-If the farmer is producing at point A in Figure 1.1,

A) he is using 6,000 worker-hours to produce 9,000 bushels of corn and no soybeans.
B) he is using 9,000 worker-hours to produce 6,000 bushels of corn and no soybeans
C) he is using 9,000 worker-hours to produce 6,000 bushels of soybeans and no corn.
D) he is using all of his resources to produce 6,000 bushels of soybeans and 9,000 bushels of corn.

Question 18

Figure 1.1

-Which one of the following statements is FALSE with regard to Figure 1.1?

A) Point A is an efficient point of production.
B) Point B is an efficient point of production.
C) The farmer incurs no opportunity cost as he expands production of soybeans.
D) The opportunity cost of producing more corn is the lost production of soybeans.

Question 19

Economic growth results from

A) lower prices.
B) higher unemployment.
C) an increase in productive resources.
D) an increase in government involvement in economic decision-making.

Question 20

The downward-slope of the production possibilities curve reflects the condition of

A) wealth.
B) poverty.
C) scarcity.
D) efficiency.

Question 21

The slope of the production possibilities curves tells you

A) how much of one good must be sacrificed in order to produce more of the other.
B) the size of the labor force.
C) the quantity of all inputs available for productive uses.
D) the length of time required to switch between two different economic activities.

Question 22

What might cause a country to operate within its production possibilities curve?

A) Unemployment
B) Total efficiency in industry
C) A new resource being discovered
D) A lack of modern products being produced

Question 23

When economists assume that people are motivated by rational self-interest, they are implying that

A) people seek to make society better off.
B) people respond only to material incentives.
C) people seek to do those things that are in their own best interests.
D) people seek to be self-sufficient.

Question 24

The production possibilities curve represents

A) possible combinations of maximum levels of output of two goods.
B) the trade-offs between self-interest and altruism.
C) the trade-offs between efficiency and equity.
D) the trade-offs between technology and ecology.

Question 25

Which one of the following statements is TRUE?

A) All points on the production possibilities curve represent an equal distribution of income.
B) The slope of the production possibilities curve reveals the current rate of economic growth.
C) When the economy is operating efficiently, it will be at a point inside its production possibilities curve.
D) Points outside the production possibilities curve are unattainable given current technology and resources.

Question 26

In moving from point to point along its production possibilities curve, the economy is changing

A) the size of its labor force.
B) the amount of resources available.
C) the allocation of resources between two different productive activities.
D) All of the above

Question 27

Technology can cause the production possibilities curve to shift outward because

A) it increases costs and contributes to lower production rates.
B) production will increase, thereby raising the standard of living.
C) production will fall, but jobs will be saved.
D) it causes increases in unemployment.

Question 28

Figure 1.2

-In Figure 1.2, the combination of civilian goods and military goods shown by point B

A) is not attainable at the point in time for which the graph is drawn.
B) can be attained only if some of society's resources are unemployed.
C) reflects an inefficient use of resources.
D) reflects an efficient use of resources.

Question 29

Figure 1.2

-At point C in Figure 1.2,

A) 275 units of labor are being used to produce 235 units of civilian goods.
B) the economy is producing 275 units of military goods and 235 units of civilian goods.
C) the economy is producing 235 units of military goods and 275 units of civilian goods.
D) society's resources are being inefficiently used.

Question 30

Figure 1.2

-If the economy starts at point B in Figure 1.2, what is the opportunity cost of producing an additional 75 units of military goods?

A) 65 units of civilian goods
B) 150 units of civilian goods
C) 235 units of civilian goods
D) 300 units of civilian goods

Question 31

Figure 1.2

-If the economy starts at point D in Figure 1.2, what is the opportunity cost of producing an additional 85 units of civilian goods?

A) 350 units of military goods
B) 275 units of military goods
C) 75 units of military goods
D) There is no opportunity cost.

Question 32

Figure 1.2

-What is happening if the economy moves from point A to point B in Figure 1.2?

A) Resources that were initially being used to produce military goods are now being used to produce civilian goods.
B) Resources that were initially being used to produce civilian goods are now being used to produce military goods.
C) Previously unemployed resources are now being used to produce more civilian goods.
D) Previously unemployed resources are now being used to produce more military goods.

Question 33

Figure 1.2

-What is happening if the economy moves from point A to point C in Figure 1.2?

A) Previously unemployed resources are now being used to produce more civilian goods and more military goods.
B) Resources that were initially being used to produce military goods are now being used to produce civilian goods.
C) Resources that were initially being used to produce civilian goods are now being used to produce military goods.
D) Unemployment has increased.

Question 34

Figure 1.2

-What is happening if the economy moves from point A to point D in Figure 1.2?

A) Resources that were initially being used to produce military goods are now being used to produce civilian goods.
B) Resources that were initially being used to produce civilian goods are now being used to produce military goods.
C) Previously unemployed resources are now being used to produce more civilian goods.
D) Previously unemployed resources are now being used to produce more military goods.

Question 35

Figure 1.2

-What is happening if the economy moves from point D to point C in Figure 2?

A) Resources that were initially being used to produce military goods are now being used to produce civilian goods.
B) Resources that were initially being used to produce civilian goods are now being used to produce military goods.
C) Previously unemployed resources are now being used to produce more civilian goods.
D) Previously unemployed resources are now being used to produce more military goods.

Question 36

Points beyond the production possibilities curve

A) correspond to high levels of unemployment.
B) are unattainable.
C) are highly efficient.
D) represent an equal income distribution.

Question 37

The president of the United States promises to simultaneously produce more defense goods without any decreases in the production of other goods. Under which of the following conditions could such a promise be valid?

A) If the United States were producing at a point on its production possibilities curve.
B) If the United States were producing inside its production possibilities curve.
C) If the United States were producing to the right of its production possibilities curve.
D) None of the above; the production possibilities curve must shift to the right.

Question 38

What would cause the production possibilities curve to shift inward?

A) An increase in the size of the labor force
B) An improvement in production technology
C) Deterioration of the economy's productive resources
D) A change in consumers' tastes

Question 39

An economy that moves from a point inside its production possibilities curve to a point on the curve

A) is creating a more equal income distribution.
B) is finding that all of its resources are equally well suited to producing all goods.
C) is producing the combination of outputs preferred by a majority of citizens.
D) is putting previously unemployed resources to work.

Question 40

What is TRUE of all output combinations represented by points on the production possibilities curve?

A) They all represent an efficient use of resources.
B) They all represent an equal distribution of income.
C) They all represent politically popular outcomes.
D) They all represent outcomes in which scarcity has been eliminated.

Question 41

What is TRUE of all output combinations represented by points lying outside the production possibilities curve?

A) They all represent outcomes in which scarcity has been eliminated.
B) They all represent an equal distribution of income.
C) They all represent unattainable outcomes.
D) They all represent outcomes characterized by unemployment of resources.

Question 42

If you can make $20,000 a year teaching, $25,000 a year typing, $30,000 a year driving a cab, and $40,000 a year as a chef, what is the opportunity cost of accepting employment as a chef?

A) $40,000.
B) $30,000.
C) $25,000.
D) $20,000.

Question 43

If you can earn $10 an hour as a retail clerk, $12 an hour as an office assistant, $16 an hour as a house painter, and $20 an hour repairing bicycles, what is your opportunity cost of working to repair bicycles?

A) $10 an hour
B) $12 an hour
C) $16 an hour
D) $20 an hour

Question 44

The goal of economic theory is to

A) help people make wise investments.
B) advise businesses on how to market their products well.
C) advise businesses on how to make good products.
D) predict how people will react to changes in the circumstances surrounding how they go about satisfying their wants.

Question 45

Economists assume that people are motivated

A) by rational self-interest.
B) only by altruistic desires.
C) only by material desires.
D) by idiosyncratic interests that defy prediction.

Question 46

Economic theory aims to _________ human behavior

A) explain
B) predict
C) change
D) criticize

Question 47

Figure 1.3

-If an economy is producing at point A in Figure 1.3,

A) it is producing 3300 units of housewares and 3300 units of consumer electronics.
B) it is producing 3300 units of housewares and 1800 units of consumer electronics.
C) it is producing 1800 units of housewares and 3300 units of consumer electronics.
D) it is producing 1800 units of housewares and 1800 units of consumer electronics.

Question 48

Figure 1.3

-If an economy is producing at point B in Figure 1.3,

A) it is producing 3000 units of housewares and 3000 units of consumer electronics.
B) it is producing 3000 units of housewares and 2500 units of consumer electronics.
C) it is producing 2500 units of housewares and 3000 units of consumer electronics.
D) it is producing 2500 units of housewares and 2500 units of consumer electronics.

Question 49

Figure 1.3

-In Figure 1.3, what change would occur if the economy moves from point A to point B?

A) Previously unemployed resources would be used to produce housewares.
B) Previously unemployed resources would be used to produce consumer electronics.
C) Resources previously devoted to producing consumer electronics would be used to produce housewares.
D) Resources previously devoted to producing housewares would be used to produce consumer electronics.

Question 50

Figure 1.3

-What change would occur if the economy moves from point C to point B in Figure 1.3?

A) Previously unemployed resources would be used to produce housewares.
B) Previously unemployed resources would be used to produce consumer electronics.
C) Resources previously devoted to producing consumer electronics would be used to produce housewares.
D) Resources previously devoted to producing housewares would be used to produce consumer electronics.

Question 51

Figure 1.3

-Which of the points on the graph is currently unattainable in Figure 1.3?

A) A
B) B
C) C
D) D

Question 52

Figure 1.3

-What change would have to occur in order to allow the economy to move from point B to point D in Figure 1.3?

A) There would have to be economic growth.
B) Resources would have to be re-directed from producing housewares to producing consumer electronics.
C) Resources would have to be re-directed from producing consumer electronics to producing housewares.
D) There would have to be an increase in the amount of inputs needed to produce a given quantity of housewares.

Question 53

Figure 1.3

-What would be TRUE of a movement from point A to point B in Figure 1.3?

A) The output of housewares would increase by 1200 units and the output of consumer electronics would fall by 800 units.
B) The output of housewares would increase by 3000 units and the output of consumer electronics would fall by 3300 units.
C) The output of housewares would increase by 3000 units and the output of consumer electronics would fall by 2500 units.
D) The output of housewares would increase by 3000 units and the output of consumer electronics would fall by 1000 units.

Question 54

Figure 1.3

-What would be TRUE of a movement from point C to point B in Figure 1.3?

A) The output of housewares would fall by 1200 units and the output of consumer electronics would increase by 800 units.
B) The output of housewares would fall by 900 units and the output of consumer electronics would increase by 2500 units.
C) The output of housewares would fall by 900 units and the output of consumer electronics would increase by 1500 units.
D) The output of housewares would fall by 900 units and the output of consumer electronics would increase by 1000 units.

Question 55

Figure 1.3

-What would be TRUE of a movement from point A to point C in Figure 1.3?

A) There would be a gain of 3900 units of housewares at the cost of 3300 units of consumer electronics.
B) There would be a gain of 3900 units of housewares at the cost of 800 units of consumer electronics.
C) There would be a gain of 2100 units of housewares at the cost of 3300 units of consumer electronics.
D) There would be a gain of 2100 units of housewares at the cost of 2300 units of consumer electronics.

Question 56

Figure 1.3

-What would be True of a movement from point C to point A in Figure 1.3?

A) The output of consumer electronics would expand; output of housewares would fall.
B) The output of housewares would expand; output of consumer electronics would fall.
C) The output of consumer electronics would expand; output of housewares would remain unchanged.
D) The output of housewares would expand; output of consumer electronics would remain unchanged.

Question 57

Figure 1.3

-If the economy moves from point B to point C in Figure 1.3, the output of housewares will rise by 900 units at an opportunity cost of _________ units of consumer electronics.

A) 3300
B) 2300
C) 2500
D) 1500

Question 58

We live with unlimited wants in a world of _________ resources.

Question 59

Those things we like to have and consume are called _________.

Question 60

The fact that resources are _________ means we cannot satisfy all of our unlimited wants.

Question 61

The goal of economic theory is to _________ how people will behave in response to changes in the economic environment.

Question 62

Traditionally, economics has been referred to as the _________ science.

Question 63

Opportunity costs arise when _________ are made.

Question 64

The opportunity cost of making a decision is the _________ forgone alternative.

Question 65

The downward slope of the _________ _________ _________ reflects the fact that trade-offs must be made in choosing which goods will be produced.

Question 66

A rightward shift of the production possibilities curve reflects _________ _________ .

Question 67

Points inside the production possibilities curve reflect _________ .

Question 68

All points lying on the production possibilities curve are _________ .

Question 69

The production possibilities curve shows the _________ combinations of two goods that can be produced, given a certain amount of inputs.

Question 70

Points lying outside the production possibilities curve are currently _________ .

Question 71

Moving from left to right along the production possibilities curve means producing more of the good on the _________ axis and less of the good on the _________ axis.

Question 72

The assumption of _________ self-interest means that people will behave in ways so as to make themselves better off.

Question 73

_________ forces you to make choices.

Question 74

Cost is always a _________ opportunity.

Question 75

Economic growth occurs when there is an _________ in the productive capacity of an economy.

Question 76

By devoting more resources to military uses during the war against Iraq, the United States had to take _________ away from civilian uses.

Question 77

When you select one profession for your employment, you incur an _________ _________ in terms of the line of work that would have been the next best alternative.

Question 78

When do you incur an opportunity cost?

Question 79

Why does the condition of scarcity imply that trade-offs must be made?

Question 80

According to economic theory, when would individuals engage in altruistic behavior?