Question 1

The first economist to point out the importance of specialization of labor was

Accepted Answer

A) Leonardo da Vinci. 
B) Adam Smith. 
C) David Ricardo. 
D) John Maynard Keynes. 
E) Enrico Caruso. 
A) Leonardo da Vinci. 
B) Adam Smith. 
C) David Ricardo. 
D) John Maynard Keynes. 
E) Enrico Caruso.

Question 2

What mechanism assures that producers use inputs efficiently?

Accepted Answer

A) Governmental regulations determining the allocation of resources 
B) Altruism 
C) The desire for profit 
D) An innate desire to be efficient 
E) All of the responses are correct. 
A) Governmental regulations determining the allocation of resources 
B) Altruism 
C) The desire for profit 
D) An innate desire to be efficient 
E) All of the responses are correct.

Question 3

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 4

Figure 3-7  
-In Figure 3-7, if we compare a move from point B to C with a move from point A to point B, we can see that

Accepted Answer

A) the opportunity cost of the move from B to C is higher than the opportunity cost of a move from A to B. 
B) the opportunity cost of the move from B to C is lower than the opportunity cost of a move from A to B. 
C) the opportunity cost of the move from B to C is equal to the opportunity cost of a move from A to B. 
D) the production possibilities frontier has a positive slope. 
A) the opportunity cost of the move from B to C is higher than the opportunity cost of a move from A to B. 
B) the opportunity cost of the move from B to C is lower than the opportunity cost of a move from A to B. 
C) the opportunity cost of the move from B to C is equal to the opportunity cost of a move from A to B. 
D) the production possibilities frontier has a positive slope.

Question 5

Table 3-2   ​
-The concept of opportunity cost can be represented graphically by the

Accepted Answer

A) area inside the production possibilities frontier. 
B) slope of the production possibilities frontier. 
C) vertical distance from the horizontal axis to the production possibilities frontier. 
D) horizontal distance from the vertical axis to the production possibilities frontier. 
E) sum of the horizontal and vertical distances to the production possibilities frontier. 
A) area inside the production possibilities frontier. 
B) slope of the production possibilities frontier. 
C) vertical distance from the horizontal axis to the production possibilities frontier. 
D) horizontal distance from the vertical axis to the production possibilities frontier. 
E) sum of the horizontal and vertical distances to the production possibilities frontier.

Question 6

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. 
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 7

Figure 3-7  
-What is the opportunity cost of moving from point B to point A in Figure 3-7?

Accepted Answer

A) 20 units of X 
B) 50 units of X 
C) 25 units of X 
D) 75 units of X 
A) 20 units of X 
B) 50 units of X 
C) 25 units of X 
D) 75 units of X

Question 8

Millionaires do not face the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 9

If production involves decreasing opportunity cost, the production possibilities frontier

Accepted Answer

A) is "bowed inward." 
B) is a straight line. 
C) is "bowed outward." 
D) is a wavy line. 
E) has an unpredictable shape. 
A) is "bowed inward." 
B) is a straight line. 
C) is "bowed outward." 
D) is a wavy line. 
E) has an unpredictable shape.

Question 10

A society that is inside its production possibilities frontier is efficient.

Accepted Answer

A) True 
 B)False

Question 11

An economy that is producing inside its production possibilities frontier can be efficient.

Accepted Answer

A) True 
 B)False

Question 12

"OPEC is exploiting the United States by selling us oil at inflated prices." Agree or disagree.

Accepted Answer

Trade is voluntary and only takes place

Question 13

If a society produces at a point on the production possibilities frontier, this is consistent with the full employment of resources.

Accepted Answer

A) True 
 B)False

Question 14

In terms of efficiency, any point on a production possibilities frontier is as good another.

Accepted Answer

A) True 
 B)False

Question 15

Division of labor has caused output to rise dramatically since the industrial revolution.

Accepted Answer

A) True 
 B)False

Question 16

Voluntary exchange results in mutual gains.

Accepted Answer

A) True 
 B)False

Question 17

The divergence between money costs and opportunity costs is the smallest in which of the following situations?

Accepted Answer

A) China hires millions of otherwise unemployable workers to build roads using picks and shovels. 
B) Wilhelm, a petroleum engineer, is drafted, and his army salary is $1,000 per month. 
C) Colleen quits her job to stay at home and raise her children. 
D) A university employs a private contractor to build a field house on land it purchased at full market value from a local farmer. 
A) China hires millions of otherwise unemployable workers to build roads using picks and shovels. 
B) Wilhelm, a petroleum engineer, is drafted, and his army salary is $1,000 per month. 
C) Colleen quits her job to stay at home and raise her children. 
D) A university employs a private contractor to build a field house on land it purchased at full market value from a local farmer.

Question 18

According to Baumol, Blinder, and Solow, 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. 
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.

Question 19

How are the slope of a production possibilities frontier and the opportunity cost of the goods related?

Accepted Answer

A) The slope is a graphical representation of the cost of expanding production of both goods. 
B) The slope is a graphical measure of the growth rate of the economy. 
C) The slope is a graphical representation of the cost of decreasing unemployment. 
D) The slope is a graphical representation of the rate of trade-off between the goods. 
E) The slope is a graphical representation of the cost of economic growth in the economy. 
A) The slope is a graphical representation of the cost of expanding production of both goods. 
B) The slope is a graphical measure of the growth rate of the economy. 
C) The slope is a graphical representation of the cost of decreasing unemployment. 
D) The slope is a graphical representation of the rate of trade-off between the goods. 
E) The slope is a graphical representation of the cost of economic growth in the economy.

Question 20

Figure 3-5  
-At present, faculty in the Economics Department teach introductory and upper-level courses.Which graph in Figure 3-5 represents the change in the production possibilities of the Economics Department after a policy of using graduate students in addition to faculty to teach introductory sections was implemented?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Exam 3: The Fundamental Economic Problem: Scarcity and Choice

The first economist to point out the importance of specialization of labor was

What mechanism assures that producers use inputs efficiently?

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

Figure 3-7 -In Figure 3-7, if we compare a move from point B to C with a move from point A to point B, we can see that

Table 3-2 ​ -The concept of opportunity cost can be represented graphically by the

The opportunity cost and the money cost of a good

Figure 3-7 -What is the opportunity cost of moving from point B to point A in Figure 3-7?

Millionaires do not face the problem of scarcity.

If production involves decreasing opportunity cost, the production possibilities frontier

A society that is inside its production possibilities frontier is efficient.

An economy that is producing inside its production possibilities frontier can be efficient.

"OPEC is exploiting the United States by selling us oil at inflated prices." Agree or disagree.

If a society produces at a point on the production possibilities frontier, this is consistent with the full employment of resources.

In terms of efficiency, any point on a production possibilities frontier is as good another.

Division of labor has caused output to rise dramatically since the industrial revolution.

Voluntary exchange results in mutual gains.

The divergence between money costs and opportunity costs is the smallest in which of the following situations?

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

How are the slope of a production possibilities frontier and the opportunity cost of the goods related?

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

Table 3-2 -The concept of opportunity cost can be represented graphically by the