Question 1

Suppose the U.S.government has an annual budget of about $4 trillion.Does the U.S.government face the problem of scarcity?

Accepted Answer

A)  No, a government with $4 trillion in spending 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.F) B) and C)
G) C) and D)

Question 2

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 3

Optimal decisions are made based upon the concept of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 4

A market system is not considered an effective way of controlling self-interest.

Accepted Answer

A) True 
 B)False

Question 5

Probably the most important source of efficiency in production is

Accepted Answer

A)  investing in more capital goods.
B)  consuming rationally.
C)  expanding the production possibilities frontier.
D)  increasing inputs of energy and raw materials.
E)  the specialization of labor.F) B) and D)
G) C) and D)

Question 6

A market system solves the

Accepted Answer

A)  "what" and "how" decisions but not the "to whom."
B)  "what" and "to whom" decisions but not the "how."
C)  "how" and "to whom" decisions but not the "what."
D)  "what," "how," and "to whom" decisions.E) B) and D)
F) All of the above

Question 7

As the term "opportunity cost" is defined in the text, the opportunity cost of going to college includes

Accepted Answer

A)  both tuition and the value of the student's time.
B)  tuition but not the value of the student's time, which is a cash cost.
C)  the value of the student's time but not tuition, which is a monetary cost.
D)  neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future.
E)  neither tuition nor the value of the student's time, at least at subsidized state universities.F) A) and B)
G) A) and C)

Question 8

The production possibilities curve illustrates the basic principle that

Accepted Answer

A)  an economy's capacity to produce increases in proportion to its population.
B)  if all resources of an economy are in use, more of one good can be produced only if less of another is produced.
C)  an economy will automatically seek that output at which all of its resources are employed.
D)  no opportunity cost exists in production.E) B) and C)
F) A) and C)

Question 9

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.E) C) and D)
F) None of the above

Question 10

In a market economy, opportunity costs are always synonymous with explicit monetary costs.

Accepted Answer

A) True 
 B)False

Question 11

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 utilityE) C) and D)
F) A) and D)

Question 12

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 13

Which of the following observations is true?

Accepted Answer

A)  Free markets will achieve all of society's goals.
B)  The ability to buy goods is divided equally among consumers.
C)  The market leads to efficiency in production through the profit motive.
D)  The market system encourages firms to use inputs wastefully.E) A) and D)
F) B) and C)

Question 14

Scarcity is only a temporary problem that a society can solve by promoting economic growth.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  the production possibilities frontier is "bowed out."
B)  the production possibilities frontier is a straight line.
C)  the production possibilities frontier is "bowed in."
D)  resources are unproductive.
E)  resources have no opportunity cost.F) A) and B)
G) B) and E)

Question 16

The opportunity cost of a college education includes wages lost while enrolled in school.

Accepted Answer

A) True 
 B)False

Question 17

The principle of comparative advantage was first explained by David Ricardo in the early 1800s.

Accepted Answer

A) True 
 B)False

Question 18

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.E) A) and C)
F) A) and D)

Question 19

One role that markets play is

Accepted Answer

A)  to allocate resources.
B)  provide revenues for governments to spend.
C)  distribute income equally.
D)  provide for all human wants.E) A) and D)
F) A) and C)

Question 20

Being on the production possibilities frontier 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

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Scarcity is only a temporary problem that a society can solve by promoting economic growth.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One role that markets play is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The production possibilities curve illustrates the basic principle that

Correct AnswerverifiedShow Answer

Optimal decisions are made based upon the concept of opportunity cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The principle of comparative advantage was first explained by David Ricardo in the early 1800s.

Correct AnswerverifiedShow Answer

Which of the following observations is true?

Correct AnswerverifiedShow Answer

The economic problem of scarcity

Correct AnswerverifiedShow Answer

As the term "opportunity cost" is defined in the text, the opportunity cost of going to college includes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The opportunity cost of a college education includes wages lost while enrolled in school.

Correct AnswerverifiedShow Answer

A market system solves the

Correct AnswerverifiedShow Answer

A market system is not considered an effective way of controlling self-interest.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedThe principle is that of oppor...View AnswerShow Answer

In a market economy, opportunity costs are always synonymous with explicit monetary costs.

Correct AnswerverifiedShow Answer

Probably the most important source of efficiency in production is

Correct AnswerverifiedShow Answer

Suppose the U.S.government has an annual budget of about $4 trillion.Does the U.S.government face the problem of scarcity?

Correct AnswerverifiedShow Answer

Being on the production possibilities frontier implies that increasing the production of one good or service can only be accomplished by decreasing the quantity produced of another good or service.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The principle is that of oppor...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified