Question 1

If a farmer's opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans,then her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.

Accepted Answer

A) True 
 B)False

Question 2

What is the opportunity cost of economic growth?

Accepted Answer

A)  investment in the current time period
B)  improved technology in the current time period
C)  capital goods in the current time period
D)  consumption in the current time period

Question 3

An optimal decision is one that chooses

Accepted Answer

A)  the most desirable alternative among the possibilities permitted by the resources available.
B)  the lowest cost method of meeting goals, without regard to quality or any other feature.
C)  among various possible goals and offends no one, so that all are equally happy.
D)  among equally important goals, and thereby avoids the "indispensable necessity" syndrome.
E)  among possible goals in such a way that spends as little money as possible.

Question 4

In a properly functioning economy,money costs approximate opportunity costs.

Accepted Answer

A) True 
 B)False

Question 5

Scarcity of resources implies that people must make decisions consistent with the means they have available to them.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Inputs in production processes are called resources.

Accepted Answer

A) True 
 B)False

Question 8

The opportunity cost of increased production of some good can be measured with

Accepted Answer

A)  the slope of a ray to the production possibilities curve.
B)  the area under the curve of a production possibilities curve.
C)  the area of the rectangle bounded by the axes and the point on the production possibilities curve.
D)  the slope of the production possibilities curve.
E)  All of the above are correct.

Question 9

Millionaires do not face the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 10

Is faster economic growth unambiguously better?

Accepted Answer

A)  No, because growth has an opportunity cost.
B)  No, because growth serves no useful purpose.
C)  Yes, because more goods and services are always better.
D)  Yes, because it expands the production possibilities of an economy.
E)  Uncertain-economic growth has no answer to this question.

Question 11

In an attempt to boost enrollment,in January,1996,a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located.For students who accepted the offer,how did this offer affect the opportunity cost of attending college?

Accepted Answer

A)  The opportunity cost did not change, since lost earnings were still a factor.
B)  The opportunity cost became zero for the typical student.
C)  The opportunity cost was very low, because the only cost was for books and supplies.
D)  The opportunity cost did not change, since tuition was not a factor in computing opportunity cost.
E)  The opportunity cost was lower than if tuition was charged, but there was still a cost.

Question 12

Economics is generally concerned with

Accepted Answer

A)  the operation of banks and the stock market.
B)  business management.
C)  how resources are allocated among alternative goals.
D)  the right time to start a business.

Question 13

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 14

Every economic decision involves a trade-off because of

Accepted Answer

A)  theory.
B)  opportunism.
C)  consumption.
D)  scarcity.
E)  efficiency.

Question 15

Which of the following quotations best captures the idea of opportunity cost?

Accepted Answer

A)  "Opportunity knocks but once."
B)  "Every choice involves a sacrifice."
C)  "Let's not ask for the moon; we have the stars."
D)  "Fools rush in where wise men fear to tread."
E)  "All that glitters is not gold."

Question 16

Given its size,the United States does not have to worry about limitations on resources.

Accepted Answer

A) True 
 B)False

Question 17

Specialization in production

Accepted Answer

A)  raises productivity.
B)  requires money.
C)  stimulates exchange.
D)  All of the above are correct.

Question 18

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 19

In terms of the production possibilities diagram,the principle of increasing cost simply asserts that the frontier is

Accepted Answer

A)  downward sloping.
B)  upward sloping.
C)  bowed inward.
D)  bowed outward.
E)  undefined, because no market will exist in this case.

Question 20

Do all valuable items have price tags?

Accepted Answer

A)  No, because some valuable items have no opportunity cost.
B)  Yes, because everything has its price.
C)  Yes, because price is the measure of opportunity cost.
D)  No, some have no explicit price on them.
E)  Yes, because only items that can be sold in markets have value.

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

Specialization in production

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List the three coordination decisions made by every economy.

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The central question in economics is how to

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Millionaires do not face the problem of scarcity.

Correct AnswerverifiedShow Answer

Economics is generally concerned with

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In a properly functioning economy,money costs approximate opportunity costs.

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Do all valuable items have price tags?

Correct AnswerverifiedShow Answer

If a farmer's opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans,then her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.

Correct AnswerverifiedShow Answer

Every economic decision involves a trade-off because of

Correct AnswerverifiedShow Answer

In terms of the production possibilities diagram,the principle of increasing cost simply asserts that the frontier is

Correct AnswerverifiedShow Answer

Inputs in production processes are called resources.

Correct AnswerverifiedShow Answer

In an attempt to boost enrollment,in January,1996,a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located.For students who accepted the offer,how did this offer affect the opportunity cost of attending college?

Correct AnswerverifiedShow Answer

The opportunity cost of increased production of some good can be measured with

Correct AnswerverifiedShow Answer

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

Which of the following quotations best captures the idea of opportunity cost?

Correct AnswerverifiedShow Answer

What is the opportunity cost of economic growth?

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Is faster economic growth unambiguously better?

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Scarcity of resources implies that people must make decisions consistent with the means they have available to them.

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Given its size,the United States does not have to worry about limitations on resources.

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An optimal decision is one that chooses

Correct AnswerverifiedShow Answer

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The market deals with efficiency in prod...
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