Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

What determines the position and shape of a society's production possibilities frontier?

Accepted Answer

A)  The physical resources of that society
B)  The skills of the workforce
C)  The level of technology of the society
D)  The amount of factories in the society
E)  All of the responses are correct.

Question 3

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.

Question 4

Karl Marx was critical of markets on the grounds that they are not efficient.

Accepted Answer

A) True 
 B)False

Question 5

At various times, the United States has undergone the painful process of reducing military spending. Military bases from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide which bases to shut down, given the necessity of jobs?

Accepted Answer

One must examine the opportunity cost of...

Question 6

Which of the following events create an outward shift of the production possibilities curve?

Accepted Answer

A)  The United States moves resources from the production of goods for domestic production to the production of goods for export.
B)  Tax reductions reduce the cost and increase the amount of investment in factories, machinery, and research and development.
C)  There is an migration of young people to another country where there is more political freedom.
D)  The unemployment rate falls from 33 percent to 12 percent.

Question 7

The political party that is in power determines the position and shape of the production possibilities frontier that constrains the choices of the economy.

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

The concavity or bowed-out shape of the production possibilities frontier is the result of

Accepted Answer

A)  the law of downward-sloping demand.
B)  the law of upward-sloping demand.
C)  the principle of increasing cost.
D)  complementarity in consumption.

Question 10

Economics examines the options open to households, business firms, governments, and entire societies by the limited resources at their command.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

High opportunity costs go hand in hand with high money costs in a properly functioning economy.

Accepted Answer

A) True 
 B)False

Question 13

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 14

The opportunity cost and the money cost of a good

Accepted Answer

A)  can be the same in a well-functioning free market.
B)  are never the same.
C)  matter only to the purchaser of the good.
D)  are not reflected in its price.

Question 15

An optimal choice can be characterized as a decision made by someone who is satisficing.

Accepted Answer

A) True 
 B)False

Question 16

A market system works very well in solving some basic problems of the economy but it fails in some cases. Provide examples.

Accepted Answer

The market deals with efficiency in prod...

Question 17

According to the principle of increasing costs, as the production of one good expands, the opportunity cost of producing another unit of the good tends to increase.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Voluntary exchange

Accepted Answer

A)  is usually beneficial to one party, but not the other.
B)  is always beneficial to both parties.
C)  is occasionally beneficial to both parties.
D)  occurs only between nations, not between individuals.

Question 20

Which of the following does not determine the position and shape of a society's production possibilities frontier?

Accepted Answer

A)  Physical resources
B)  Price level
C)  Skills and technology
D)  Past investment in factories and in research

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

What determines the position and shape of a society's production possibilities frontier?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The political party that is in power determines the position and shape of the production possibilities frontier that constrains the choices of the economy.

Correct AnswerverifiedShow Answer

A market system works very well in solving some basic problems of the economy but it fails in some cases. Provide examples.

Correct AnswerverifiedThe market deals with efficiency in prod...View AnswerShow Answer

Economics examines the options open to households, business firms, governments, and entire societies by the limited resources at their command.

Correct AnswerverifiedShow Answer

Voluntary exchange

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The opportunity cost and the money cost of a good

Correct AnswerverifiedShow Answer

High opportunity costs go hand in hand with high money costs in a properly functioning economy.

Correct AnswerverifiedShow Answer

Which of the following does not determine the position and shape of a society's production possibilities frontier?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The concavity or bowed-out shape of the production possibilities frontier is the result of

Correct AnswerverifiedShow Answer

Which of the following events create an outward shift of the production possibilities curve?

Correct AnswerverifiedShow Answer

An optimal choice can be characterized as a decision made by someone who is satisficing.

Correct AnswerverifiedShow Answer

According to the principle of increasing costs, as the production of one good expands, the opportunity cost of producing another unit of the good tends to increase.

Correct AnswerverifiedShow Answer

At various times, the United States has undergone the painful process of reducing military spending. Military bases from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide which bases to shut down, given the necessity of jobs?

Correct AnswerverifiedOne must examine the opportunity cost of...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Karl Marx was critical of markets on the grounds that they are not efficient.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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The market deals with efficiency in prod...
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One must examine the opportunity cost of...
View Answer

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