Question 1

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

Question 2

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 3

A typical economy produces thousands of different goods.Is it accurate to say that society faces a production possibilities frontier?

Accepted Answer

A)  No, because two dimensions cannot capture the complexity of a full economy.
B)  No, although a graph with several thousand dimensions would be appropriate.
C)  Yes, although society does not face opportunity cost and the model does not apply.
D)  Yes, because scarcity always imposes opportunity costs.
E)  Uncertain-economic theory has no answer to this question.F) All of the above
G) B) and E)

Question 4

A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home.The researcher included all costs including the imputed value of time involved to prepare the meal at home.This study illustrates the

Accepted Answer

A)  value of marginal analysis.
B)  law of increasing costs.
C)  difference between real costs and money costs.
D)  cost disease of the service sector.E) A) and C)
F) B) and C)

Question 5

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

Question 6

In a market economy, the decision regarding allocation of resources is made by

Accepted Answer

A)  automatic forces of supply and demand.
B)  authorities in Washington, D.C.
C)  planners in state capitals.
D)  committees from a variety of economic interest groups.
E)  All of the above are correct.F) C) and E)
G) A) and D)

Question 7

Individuals face scarcity; whole societies do not.

Accepted Answer

A) True 
 B)False

Question 8

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?E) None of the above
F) B) and C)

Question 9

Opportunity cost can best be defined as the

Accepted Answer

A)  money cost of a good or service.
B)  money cost plus interest on money borrowed to buy a good or service.
C)  cost of the resources used to produce a good or service.
D)  value of the best alternative forgone when the alternative at hand is chosen.E) B) and C)
F) None of the above

Question 10

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

Question 11

​How do economists define efficiency? Elaborate.

Accepted Answer

Economists define efficiency as the abse...

Question 12

Firms are encouraged by the profit motive to use inputs efficiently.

Accepted Answer

A) True 
 B)False

Question 13

Figure 3-6 
-In Figure 3-6 assume this economy is currently operating at point D.What is the opportunity cost of moving to B?

Accepted Answer

A)  about 200 bushels of wheat
B)  200 bushels of soybeans
C)  Infinite, B cannot be produced at any cost.
D)  0E) A) and D)
F) All of the above

Question 14

The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.

Accepted Answer

A) True 
 B)False

Question 15

The definition of efficiency implies that production is carried out on the production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 16

Because resources tend to be specialized, increased production of military goods tends to

Accepted Answer

A)  decrease the opportunity cost of more military goods.
B)  increase the opportunity cost of more non-military goods.
C)  increase the opportunity cost of more military goods.
D)  change the position of the production possibilities curve.
E)  alter the slope of the production possibilities curve.F) C) and D)
G) B) and C)

Question 17

Economics studies the logic of choices made from among available possibilities.

Accepted Answer

A) True 
 B)False

Question 18

Society can produce at a point outside the production possibilities frontier, but only if it is using all of its resources efficiently.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Figure 3-4 
-Suppose the U.S.government has an annual budget of about $3.03 trillion.Does the U.S.government face the problem of scarcity?

Accepted Answer

A)  No, a government with $3.03 trillion 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) A) and E)
G) A) and B)

Exam 3: The Fundamental Economic Problem Scarcity and Choice

​How do economists define efficiency? Elaborate.

Correct AnswerverifiedEconomists define efficiency as the abse...View AnswerShow Answer

Firms are encouraged by the profit motive to use inputs efficiently.

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Economics is generally concerned with

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Society can produce at a point outside the production possibilities frontier, but only if it is using all of its resources efficiently.

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A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home.The researcher included all costs including the imputed value of time involved to prepare the meal at home.This study illustrates the

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A typical economy produces thousands of different goods.Is it accurate to say that society faces a production possibilities frontier?

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Voluntary exchange

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List the three coordination decisions made by every economy.

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Economics studies the logic of choices made from among available possibilities.

Correct AnswerverifiedShow Answer

In a market economy, the decision regarding allocation of resources is made by

Correct AnswerverifiedShow Answer

The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.

Correct AnswerverifiedShow Answer

Opportunity cost can best be defined as the

Correct AnswerverifiedShow Answer

The definition of efficiency implies that production is carried out on the production possibilities frontier.

Correct AnswerverifiedShow Answer

Because resources tend to be specialized, increased production of military goods tends to

Correct AnswerverifiedShow Answer

Figure 3-6 -In Figure 3-6 assume this economy is currently operating at point D.What is the opportunity cost of moving to B?

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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

Individuals face scarcity; whole societies do not.

Correct AnswerverifiedShow Answer

The production possibilities curve illustrates the basic principle that

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

Figure 3-4 -Suppose the U.S.government has an annual budget of about $3.03 trillion.Does the U.S.government face the problem of scarcity?

Correct AnswerverifiedShow Answer

How do economists define efficiency? Elaborate.

Correct Answer
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Economists define efficiency as the abse...
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If economic agents engage in voluntary t...
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Correct Answer
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You will earn $200 a year if you take th...
View Answer

Correct Answer
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