Question 1

If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the

Accepted Answer

A)   larger the opportunity cost of producing an extra unit of good "A."
B)   larger the quantity of resources being devoted to the production of good "B."
C)   smaller the quantity of resources being devoted to the production of good "A."
D)   smaller the opportunity cost of producing an extra unit of good "A."
E)   greater the returns to scale in the production of good "A."

Question 2

In Figure 3-7, if we compare a move from point B to C with a move from point A to point B, we can see that

Accepted Answer

A)   the opportunity cost of the move from B to C is higher than the opportunity cost of a move from A to B.
B)   the opportunity cost of the move from B to C is lower than the opportunity cost of a move from A to B.
C)   the opportunity cost of the move from B to C is equal to the opportunity cost of a move from A to B.
D)   the production possibilities frontier has a positive slope.

Question 3

From the data given in Table 3-2, the opportunity cost of increased cotton in moving from A to B is

Accepted Answer

A)   16 units of corn.
B)   31 units of corn.
C)   15 units of corn.
D)   4 units of corn.
E)   1 unit of corn.

Question 4

In the Wealth of Nations , Adam Smith wrote about how countries could increase their consumption of goods and services through specialization and trade with other countries.

Accepted Answer

A) True 
 B)False

Question 5

Waiting in line for a free ticket involves no opportunity cost.

Accepted Answer

A) True 
 B)False

Question 6

Market economies are not constrained by scarcity; only planned economies have that problem.

Accepted Answer

A) True 
 B)False

Question 7

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.

Question 8

Individuals face scarcity; whole societies do not.

Accepted Answer

A) True 
 B)False

Question 9

The fact that resources tend to be specialized is one reason the production possibilities frontier is drawn

Accepted Answer

A)   bowed outward.
B)   bowed inward.
C)   as a straight line (but not horizontal) .
D)   as a horizontal straight line.

Question 10

List the three coordination decisions made by every economy.

Accepted Answer

A)   Where? When? How?
B)   How? What? To whom?
C)   Why? Where? What?
D)   When? To Whom? Where?

Question 11

Economics examines the options open to households and business firms, but ignores the options of governments and entire societies.

Accepted Answer

A) True 
 B)False

Question 12

The U.S. federal government spent more than $4 trillion in 2018, which implies that there were no opportunity costs faced by the United States.

Accepted Answer

A) True 
 B)False

Question 13

The fundamental goal of economics is to

Accepted Answer

A)   provide all people with five yachts and two automobiles.
B)   redistribute income and eliminate poverty.
C)   reduce unemployment so that welfare payments are not necessary.
D)   learn to handle the scarcity of virtually all resources.

Question 14

Adam Smith noted that people are adept at which of the following?

Accepted Answer

A)   Confusing themselves if given the chance.
B)   Proving the truth of "Murphy's Law."
C)   Denying themselves for the sake of others.
D)   Pursuing their own self-interest.
E)   All of the responses are correct.

Question 15

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 estimates of the rate of re...

Question 16

An economist claims that any point not on a production possibilities frontier cannot be best. What is his 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.

Question 17

In Table 3-2, from combination C , the opportunity cost of 2 more units of cotton would be

Accepted Answer

A)   4 units of corn.
B)   8 units of corn.
C)   14 units of corn.
D)   16 units of corn.

Question 18

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.

Question 19

Explain the relationship between opportunity costs and money costs. Can they be treated as identical?

Accepted Answer

The two costs are usually closely tied b...

Question 20

The production possibilities frontier can show a manufacturer's possible combinations of output resulting from the combination of two goods.

Accepted Answer

A) True 
 B)False

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

The fact that resources tend to be specialized is one reason the production possibilities frontier is drawn

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedNo. Although estimates of the rate of re...View AnswerShow Answer

Market economies are not constrained by scarcity; only planned economies have that problem.

Correct AnswerverifiedShow Answer

Individuals face scarcity; whole societies do not.

Correct AnswerverifiedShow Answer

The U.S. federal government spent more than $4 trillion in 2018, which implies that there were no opportunity costs faced by the United States.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain the relationship between opportunity costs and money costs. Can they be treated as identical?

Correct AnswerverifiedThe two costs are usually closely tied b...View AnswerShow Answer

If good "A" is represented on the horizontal axis and good "B" on the vertical axis, then the steeper the production possibilities frontier at a given level of production of good "A," the

Correct AnswerverifiedShow Answer

Adam Smith noted that people are adept at which of the following?

Correct AnswerverifiedShow Answer

The production possibilities frontier can show a manufacturer's possible combinations of output resulting from the combination of two goods.

Correct AnswerverifiedShow Answer

In Figure 3-7, if we compare a move from point B to C with a move from point A to point B, we can see that

Correct AnswerverifiedShow Answer

The fundamental goal of economics is to

Correct AnswerverifiedShow Answer

Waiting in line for a free ticket involves no opportunity cost.

Correct AnswerverifiedShow Answer

An economist claims that any point not on a production possibilities frontier cannot be best. What is his reasoning to support this?

Correct AnswerverifiedShow Answer

List the three coordination decisions made by every economy.

Correct AnswerverifiedShow Answer

The central question in economics is how to

Correct AnswerverifiedShow Answer

In the Wealth of Nations , Adam Smith wrote about how countries could increase their consumption of goods and services through specialization and trade with other countries.

Correct AnswerverifiedShow Answer

From the data given in Table 3-2, the opportunity cost of increased cotton in moving from A to B is

Correct AnswerverifiedShow Answer

In Table 3-2, from combination C , the opportunity cost of 2 more units of cotton would be

Correct AnswerverifiedShow Answer

Economics examines the options open to households and business firms, but ignores the options of governments and entire societies.

Correct AnswerverifiedShow Answer

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No. Although estimates of the rate of re...
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The two costs are usually closely tied b...
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