Exam 3: The Fundamental Economic Problem: Scarcity and Choice

The law of comparative advantage implies that a doctor who is also a talented auto mechanic should

The problem of scarcity

Inputs in production processes are called resources.

If two persons trade, one must gain at the expense of the other.

In an economy, unemployment exists only at points that are on the interior of the production possibilities frontier.

Efficiency is defined as minimizing waste.

Those from across the spectrum of political views tend to approve of markets because

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?

Which type of economy must answer the questions of what goods to produce, how to produce them, and for whom to produce them?

Money is scarce, but resources are not.

Economics examines the options open to households, business firms, governments, and entire societies by the limited resources at their command.

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

The production possibilities frontier for a country is usually drawn

A society that relies on a market-based economy will always protect the natural environment.

All of the points inside a production possibilities frontier are ____; all of the points on the production possibilities frontier are ____.

If an economy wants to experience economic growth, what decision must it make and carry out? Explain.

The principle of comparative advantage was first explained by David Ricardo in the early 1800s.

Figure 3-4 Which of the following would make point Q in Figure 3-4 attainable?

The workers in Adam Smith's famous pin factory, who were proficient in pin production, faced the problem of

Centrally planned economies are not constrained by the problem of scarcity.