Question 1

What is the basic task that economists expect the market to carry out?

Accepted Answer

A)   deal with the fundamental problem of scarcity
B)   balance the government's budget
C)   lessen wants to the level of income available
D)   meet all human wantsE) None of the above
F) B) and C)

Question 2

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.E) All of the above
F) A) and B)

Question 3

Since it spent over $3.6 trillion in 2010, opportunity cost was not an issue for the U.S.government.

Accepted Answer

A) True 
 B)False

Question 4

If the production possibilities curve is a straight line,

Accepted Answer

A)   opportunity costs rise as output of either commodity is expanded.
B)   resources are not equally productive in the production of both goods.
C)   opportunity costs are negative.
D)   resources can be moved from the production of one good to production of others with no loss of productivity.E) B) and C)
F) A) and D)

Question 5

Which of the following must cope with scarcity?

Accepted Answer

A)   individuals
B)   companies
C)   governments
D)   families
E)   All of the above are correct.F) C) and D)
G) A) and B)

Question 6

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.F) A) and E)
G) All of the above

Question 7

Figure 3-1
 
-The shape of the production possibilities frontier in Figure 3-1 implies that

Accepted Answer

A)   some resources are better suited for producing wheat than for producing barley.
B)   the opportunity cost of producing more wheat falls as wheat production rises.
C)   the farmer's technology is not subject to the principle of increasing costs.
D)   the financial cost of producing wheat is higher than the financial cost of producing barley.E) None of the above
F) B) and D)

Question 8

What is division of labor? How does it raise efficiency and productivity?

Accepted Answer

Division of labor means breaking up a ta...

Question 9

You have invested $1,000 in a stock whose price is increasing at 10 percent a year.Your stock broker, who is never wrong, recommends a stock rising at 20 percent a year.Assuming the broker earns 4 percent of the stock's value on any purchase or sale of the stock, should you take her recommendation?

Accepted Answer

You will earn $200 a year if you take th...

Question 10

Both conservatives and liberals tend to approve of markets because

Accepted Answer

A)   markets are effective in solving many of society's problems.
B)   markets work well in all cases, and can be relied upon to solve problems.
C)   their goals are similar enough that they can rely on the same means.
D)   production is the most important goal, and market systems are very productive.
E)   of all of the above.F) A) and D)
G) All of the above

Question 11

Increasing opportunity cost tends to occur if

Accepted Answer

A)   management is disorganized.
B)   markets do not equate money and opportunity cost.
C)   production is inefficient.
D)   resources are scarce.
E)   resources are specialized.F) A) and E)
G) B) and D)

Question 12

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.F) C) and E)
G) B) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A society's decision to produce more tanks may require it to forgo production of some cars.

Accepted Answer

A) True 
 B)False

Question 15

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) C) and D)
G) A) and B)

Question 16

According to Baumol and Blinder, recognition of the usefulness of markets

Accepted Answer

A)   labels a person as an apologist (defender)  of capital.
B)   extends to some socialist countries, for example, China.
C)   should make totally free markets good for any society.
D)   makes one a radical.E) A) and C)
F) A) and B)

Question 17

Economic growth solves the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 18

If Japan and the United States engage in trade, and Japan gains as a result of the trade, does that mean the United States has lost in some manner?

Accepted Answer

If economic agents engage in voluntary t...

Question 19

Generally, the opportunity cost and the money cost of a good

Accepted Answer

A)   are identical only if the good sells in a free market.
B)   are different.
C)   matter only to the purchaser of the good.
D)   are not reflected in its price.E) B) and C)
F) All of the above

Question 20

The fundamental goal of economics is to

Accepted Answer

A)   allow everyone to have five yachts and two automobiles.
B)   redistribute income and eliminate poverty.
C)   reduce unemployment so that lower welfare payments are necessary.
D)   learn to cope with the scarcity of virtually all resources.E) All of the above
F) None of the above

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

A society's decision to produce more tanks may require it to forgo production of some cars.

Correct AnswerverifiedShow Answer

Increasing opportunity cost tends to occur if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

You have invested $1,000 in a stock whose price is increasing at 10 percent a year.Your stock broker, who is never wrong, recommends a stock rising at 20 percent a year.Assuming the broker earns 4 percent of the stock's value on any purchase or sale of the stock, should you take her recommendation?

Correct AnswerverifiedYou will earn $200 a year if you take th...View AnswerShow Answer

What is division of labor? How does it raise efficiency and productivity?

Correct AnswerverifiedDivision of labor means breaking up a ta...View AnswerShow Answer

Economic growth solves the problem of scarcity.

Correct AnswerverifiedShow Answer

Both conservatives and liberals tend to approve of markets because

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The fundamental goal of economics is to

Correct AnswerverifiedShow Answer

Which of the following must cope with scarcity?

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Since it spent over $3.6 trillion in 2010, opportunity cost was not an issue for the U.S.government.

Correct AnswerverifiedShow Answer

Figure 3-1 -The shape of the production possibilities frontier in Figure 3-1 implies that

Correct AnswerverifiedShow Answer

If Japan and the United States engage in trade, and Japan gains as a result of the trade, does that mean the United States has lost in some manner?

Correct AnswerverifiedIf economic agents engage in voluntary t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

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What is the basic task that economists expect the market to carry out?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to Baumol and Blinder, recognition of the usefulness of markets

Correct AnswerverifiedShow Answer

If the production possibilities curve is a straight line,

Correct AnswerverifiedShow Answer

Generally, the opportunity cost and the money cost of a good

Correct AnswerverifiedShow Answer

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You will earn $200 a year if you take th...
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Division of labor means breaking up a ta...
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If economic agents engage in voluntary t...
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