Question 1

An increase in an economy's capital stock increases its future productive capacity.

Accepted Answer

A) True 
 B)False

Question 2

When collective decision making is utilized to resolve economic questions regarding the allocation of resources, then:

Accepted Answer

A) ​everyone will receive an equal share of the output produced. 
B) ​the preferences of individuals are of no importance. 
C) ​economic efficiency will be assured. 
D) ​the role of markets will be replaced by political decision making. 
A) ​everyone will receive an equal share of the output produced. 
B) ​the preferences of individuals are of no importance. 
C) ​economic efficiency will be assured. 
D) ​the role of markets will be replaced by political decision making.

Question 3

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

Accepted Answer

A) ​No, an economy can also expand by invention and innovation. 
B) ​No, an economy can also grow by reallocating more resources toward the production of consumption goods. 
C) ​Yes, more capital investment is the only way to expand production possibilities. 
D) ​Yes, although increased production of capital clearly increases the opportunity cost. 
A) ​No, an economy can also expand by invention and innovation. 
B) ​No, an economy can also grow by reallocating more resources toward the production of consumption goods. 
C) ​Yes, more capital investment is the only way to expand production possibilities. 
D) ​Yes, although increased production of capital clearly increases the opportunity cost.

Question 4

Capital accumulation causes the production possibilities curve to shift inward over time.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not an example of a consumption good?

Accepted Answer

A) ​video games. 
B) ​a television 
C) ​a tractor 
D) ​a trip to Hawaii 
A) ​video games. 
B) ​a television 
C) ​a tractor 
D) ​a trip to Hawaii

Question 6

In the simple circular flow model:

Accepted Answer

A) ​firms are suppliers of resources and demanders of products. 
B) ​households are suppliers of products and demanders of resources. 
C) ​households are demanders of products and suppliers of resources. 
D) ​firms are the suppliers of both resources and products. 
A) ​firms are suppliers of resources and demanders of products. 
B) ​households are suppliers of products and demanders of resources. 
C) ​households are demanders of products and suppliers of resources. 
D) ​firms are the suppliers of both resources and products.

Question 7

In a command economy, decisions about how to allocate resources are made:

Accepted Answer

A) ​based upon tradition. 
B) ​by a central planning board. 
C) ​by individuals and firms interacting in markets coordinated by a price system. 
D) ​by a lottery system. 
A) ​based upon tradition. 
B) ​by a central planning board. 
C) ​by individuals and firms interacting in markets coordinated by a price system. 
D) ​by a lottery system.

Question 8

An inefficient allocation of resources or unusually high unemployment:

Accepted Answer

A) ​causes the production possibilities curve to shift inward. 
B) ​causes the production possibilities curve to shift outward. 
C) ​can each be illustrated by a point inside the production possibilities curve. 
D) ​can each be illustrated by a point outside the production possibilities curve. 
A) ​causes the production possibilities curve to shift inward. 
B) ​causes the production possibilities curve to shift outward. 
C) ​can each be illustrated by a point inside the production possibilities curve. 
D) ​can each be illustrated by a point outside the production possibilities curve.

Question 9

​Exhibit 3-3  
-Refer to Exhibit 3-3. A movement from Point C to Point B:

Accepted Answer

A) ​involves sacrificing bread in order to produce a greater quantity of wine. 
B) ​involves sacrificing wine in order to produce a greater quantity of bread. 
C) ​involves no sacrifice of output, as the opportunity cost of production is zero everywhere along the production possibilities curve. 
D) ​will increase the level of unemployment in the economy. 
A) ​involves sacrificing bread in order to produce a greater quantity of wine. 
B) ​involves sacrificing wine in order to produce a greater quantity of bread. 
C) ​involves no sacrifice of output, as the opportunity cost of production is zero everywhere along the production possibilities curve. 
D) ​will increase the level of unemployment in the economy.

Question 10

​Exhibit 3-10  
-Refer to Exhibit 3-10. If Points A and B indicate consumption goods and capital goods for two different economies, other things held constant, which of the economies is likely to grow more rapidly?

Accepted Answer

A) ​Economy A 
B) ​Economy B 
C) ​The two economies will grow at the same rate because they are on the same production possibilities curve. 
D) ​How fast either economy grows is uncertain since growth is not influenced by either consumption or investment. 
A) ​Economy A 
B) ​Economy B 
C) ​The two economies will grow at the same rate because they are on the same production possibilities curve. 
D) ​How fast either economy grows is uncertain since growth is not influenced by either consumption or investment.

Question 11

Assume that, given factors of production and existing knowledge and technology, it is not possible to produce more of one good without foregoing the opportunity to produce some of another good. Economists would characterize this situation as:

Accepted Answer

A) ​inefficient. 
B) ​efficient. 
C) ​due to unemployment. 
D) ​a point outside the production possibilities frontier. 
A) ​inefficient. 
B) ​efficient. 
C) ​due to unemployment. 
D) ​a point outside the production possibilities frontier.

Question 12

Which of the following is not a payment made to households in exchange for the use of factors of production?

Accepted Answer

A) ​rent 
B) ​interest 
C) ​wages 
D) ​taxes 
A) ​rent 
B) ​interest 
C) ​wages 
D) ​taxes

Question 13

The production possibilities curve for an economy that experiences a constant opportunity cost of production is linear (a straight line).

Accepted Answer

A) True 
 B)False

Question 14

The degree of government involvement in the economy is greatest in

Accepted Answer

A) ​a command economy. 
B) ​a mixed economy. 
C) ​a market economy. 
D) ​a traditional economy. 
A) ​a command economy. 
B) ​a mixed economy. 
C) ​a market economy. 
D) ​a traditional economy.

Question 15

​Exhibit 3-3  
-Refer to Exhibit 3-3. A movement from Point B to Point C:

Accepted Answer

A) ​involves sacrificing bread in order to produce a greater quantity of wine. 
B) ​involves sacrificing wine in order to produce a greater quantity of bread. 
C) ​involves no sacrifice, as the opportunity cost of production is zero everywhere along the production possibilities curve. 
D) ​will increase the level of unemployment in the economy. 
A) ​involves sacrificing bread in order to produce a greater quantity of wine. 
B) ​involves sacrificing wine in order to produce a greater quantity of bread. 
C) ​involves no sacrifice, as the opportunity cost of production is zero everywhere along the production possibilities curve. 
D) ​will increase the level of unemployment in the economy.

Question 16

Which of the following would mostly likely shift the production possibilities curve in an outward direction?

Accepted Answer

A) ​a decrease in the current rate of unemployment 
B) ​a movement along the curve sacrificing capital goods for consumption goods 
C) ​an increase in the price of goods and services 
D) ​advances in medicine that reduce the incidence of disease and lengthen productive life spans 
A) ​a decrease in the current rate of unemployment 
B) ​a movement along the curve sacrificing capital goods for consumption goods 
C) ​an increase in the price of goods and services 
D) ​advances in medicine that reduce the incidence of disease and lengthen productive life spans

Question 17

Which of the following would be most likely to shift a country's production possibilities curve outward?

Accepted Answer

A) ​An improvement in the general level of literacy and education. 
B) ​A sudden, substantial expansion of consumer wants. 
C) ​A reduction in the country's labor force or population. 
D) ​Shifting resources from investment to consumption goods production. 
A) ​An improvement in the general level of literacy and education. 
B) ​A sudden, substantial expansion of consumer wants. 
C) ​A reduction in the country's labor force or population. 
D) ​Shifting resources from investment to consumption goods production.

Question 18

​Exhibit 3-15  
-Refer to Exhibit 3-15. Why is the opportunity cost of producing a mountain bike different when moving from Point A to Point B than when moving from Point C to Point D along the production possibilities curve?

Accepted Answer

Some resources are more substitutable ac

Question 19

In the graph of the circular flow model below, area C represents

Accepted Answer

A) ​product markets. 
B) ​firms. 
C) ​factor markets. 
D) ​households. 
A) ​product markets. 
B) ​firms. 
C) ​factor markets. 
D) ​households.

Question 20

How can we measure the opportunity cost of producing a good? Using a bowed outward production possibilities curve between ice cream and hammers, identify graphically the opportunity cost of obtaining an additional hammer.​

Accepted Answer

Diagrams will vary. A correct diagram sh

Exam 3: Scarcity, Trade-Offs, and Production Possibilities

An increase in an economy's capital stock increases its future productive capacity.

When collective decision making is utilized to resolve economic questions regarding the allocation of resources, then:

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

Capital accumulation causes the production possibilities curve to shift inward over time.

Which of the following is not an example of a consumption good?

In the simple circular flow model:

In a command economy, decisions about how to allocate resources are made:

An inefficient allocation of resources or unusually high unemployment:

​Exhibit 3-3 -Refer to Exhibit 3-3. A movement from Point C to Point B:

​Exhibit 3-10 -Refer to Exhibit 3-10. If Points A and B indicate consumption goods and capital goods for two different economies, other things held constant, which of the economies is likely to grow more rapidly?

Assume that, given factors of production and existing knowledge and technology, it is not possible to produce more of one good without foregoing the opportunity to produce some of another good. Economists would characterize this situation as:

Which of the following is not a payment made to households in exchange for the use of factors of production?

The production possibilities curve for an economy that experiences a constant opportunity cost of production is linear (a straight line).

The degree of government involvement in the economy is greatest in

​Exhibit 3-3 -Refer to Exhibit 3-3. A movement from Point B to Point C:

Which of the following would mostly likely shift the production possibilities curve in an outward direction?

Which of the following would be most likely to shift a country's production possibilities curve outward?

​Exhibit 3-15 -Refer to Exhibit 3-15. Why is the opportunity cost of producing a mountain bike different when moving from Point A to Point B than when moving from Point C to Point D along the production possibilities curve?

In the graph of the circular flow model below, area C represents

How can we measure the opportunity cost of producing a good? Using a bowed outward production possibilities curve between ice cream and hammers, identify graphically the opportunity cost of obtaining an additional hammer.​

The Role and Method of Economics

Eight Powerful Ideas

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exhibit 3-3 -Refer to Exhibit 3-3. A movement from Point C to Point B:

Exhibit 3-10 -Refer to Exhibit 3-10. If Points A and B indicate consumption goods and capital goods for two different economies, other things held constant, which of the economies is likely to grow more rapidly?

Exhibit 3-3 -Refer to Exhibit 3-3. A movement from Point B to Point C:

Exhibit 3-15 -Refer to Exhibit 3-15. Why is the opportunity cost of producing a mountain bike different when moving from Point A to Point B than when moving from Point C to Point D along the production possibilities curve?

How can we measure the opportunity cost of producing a good? Using a bowed outward production possibilities curve between ice cream and hammers, identify graphically the opportunity cost of obtaining an additional hammer.