Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

An optimal decision is one that chooses the most desirable from among all possibilities that are available.

Accepted Answer

A) True 
 B)False

Question 3

Adam Smith's discussion of the production in a pin factory illustrates the law of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 4

During World War II, Hitler would often order his army to hold a particular town or river "at all costs." Was this rational? If so, explain.If not, indicate which economic idea it violated.

Accepted Answer

The orders were irrational, as they igno

Question 5

Whenever two individuals trade with each other, one will benefit and the other will lose.

Accepted Answer

A) True 
 B)False

Question 6

Figure 3-3
​  
-In Figure 3-3, a shift from A to B seems most consistent with which of the following scenarios?

Accepted Answer

A) Society has decided to give guns lower priority. 
B) Technological advances have been greater for guns than for butter. 
C) The society has experienced a massive immigration of labor. 
D) There are unemployed resources in the production of both guns and butter. 
A) Society has decided to give guns lower priority. 
B) Technological advances have been greater for guns than for butter. 
C) The society has experienced a massive immigration of labor. 
D) There are unemployed resources in the production of both guns and butter.

Question 7

If you discover that the opportunity cost of raising your economics grade is zero, you

Accepted Answer

A) are studying too hard and receiving a higher grade than is optimal for you. 
B) must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
C) must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
D) must be producing more of other goods than is optimal for you. 
A) are studying too hard and receiving a higher grade than is optimal for you. 
B) must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
C) must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods. 
D) must be producing more of other goods than is optimal for you.

Question 8

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. 
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 9

The division of labor can benefit society only if

Accepted Answer

A) a system of exchange exists. 
B) society uses all of its resources efficiently. 
C) society has no specialized resources. 
D) labor resources are not scarce. 
A) a system of exchange exists. 
B) society uses all of its resources efficiently. 
C) society has no specialized resources. 
D) labor resources are not scarce.

Question 10

In early 1996, the upper Midwest suffered record cold, with wind chills of 50° below zero or worse.Yet, grocery stores stocked fresh citrus fruit (which was clearly not grown locally).Why did grocers stock the fruit?

Accepted Answer

A) The desire for profit 
B) Concern for their neighbors 
C) The need to dispose of excess production 
D) Government orders to distribute fruit 
E) All of the responses are correct. 
A) The desire for profit 
B) Concern for their neighbors 
C) The need to dispose of excess production 
D) Government orders to distribute fruit 
E) All of the responses are correct.

Question 11

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 12

Draw a production possibilities frontier for an economy, with the axes labeled "military goods" and "peace goods." Indicate the region that is attainable and the region that is not.Explain the shape of the curve.What assumptions did you make in drawing it?

Accepted Answer

The curve should look like the figures i

Question 13

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. 
A) are specialized. 
B) are scarce. 
C) are used inefficiently. 
D) are unproductive. 
E) have no opportunity cost.

Question 14

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

Question 15

The total amount of consumption of a society can be increased if

Accepted Answer

A) firms allow each worker to perform multiple tasks. 
B) resources are allocated by a central planning group. 
C) individuals engage in specialization and voluntary trade. 
D) barter exchange is used in place of money. 
A) firms allow each worker to perform multiple tasks. 
B) resources are allocated by a central planning group. 
C) individuals engage in specialization and voluntary trade. 
D) barter exchange is used in place of money.

Question 16

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 his or her recommendation?

Accepted Answer

You will earn $200 a year if you take th

Question 17

In his concept of "the invisible hand," Adam Smith explains that

Accepted Answer

A) if each person looks out for himself or herself, then chaos will inevitably ensue. 
B) the pursuit of self-interest promotes economic well-being for society as a whole. 
C) governmental rule actually results in greater good than is apparent at the time. 
D) traditional religion is an appropriate guide for human behavior. 
E) All of the responses are correct. 
A) if each person looks out for himself or herself, then chaos will inevitably ensue. 
B) the pursuit of self-interest promotes economic well-being for society as a whole. 
C) governmental rule actually results in greater good than is apparent at the time. 
D) traditional religion is an appropriate guide for human behavior. 
E) All of the responses are correct.

Question 18

Is increased capital spending the only way for an economy to expand its production possibilities frontier?

Accepted Answer

A) No, an economy can also expand by invention and innovation. 
B) No, an economy can also grow by investment instead of capital spending. 
C) Yes, more capital is the only way to expand its production possibilities frontier. 
D) Yes, although more capital clearly has a high opportunity cost. 
E) Yes, because capital is the only constraining resource that limits growth. 
A) No, an economy can also expand by invention and innovation. 
B) No, an economy can also grow by investment instead of capital spending. 
C) Yes, more capital is the only way to expand its production possibilities frontier. 
D) Yes, although more capital clearly has a high opportunity cost. 
E) Yes, because capital is the only constraining resource that limits growth.

Question 19

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

Question 20

All actions and purchases, even those of wealthy people, involve a sacrifice.

Accepted Answer

A) True 
 B)False

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

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

An optimal decision is one that chooses the most desirable from among all possibilities that are available.

Adam Smith's discussion of the production in a pin factory illustrates the law of comparative advantage.

During World War II, Hitler would often order his army to hold a particular town or river "at all costs." Was this rational? If so, explain.If not, indicate which economic idea it violated.

Whenever two individuals trade with each other, one will benefit and the other will lose.

Figure 3-3 ​ -In Figure 3-3, a shift from A to B seems most consistent with which of the following scenarios?

If you discover that the opportunity cost of raising your economics grade is zero, you

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

The division of labor can benefit society only if

In early 1996, the upper Midwest suffered record cold, with wind chills of 50° below zero or worse.Yet, grocery stores stocked fresh citrus fruit (which was clearly not grown locally).Why did grocers stock the fruit?

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.

Draw a production possibilities frontier for an economy, with the axes labeled "military goods" and "peace goods." Indicate the region that is attainable and the region that is not.Explain the shape of the curve.What assumptions did you make in drawing it?

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

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

The total amount of consumption of a society can be increased if

In his concept of "the invisible hand," Adam Smith explains that

Is increased capital spending the only way for an economy to expand its production possibilities frontier?

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

All actions and purchases, even those of wealthy people, involve a sacrifice.

What Is Economics

The Economony: Myth and Reality

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

Filters

Figure 3-3 -In Figure 3-3, a shift from A to B seems most consistent with which of the following scenarios?