1. If the budget deficit was eliminated, the federal government would have more money than it could spend.
a.
True
b.
False
2. Scarcity is the fundamental problem of the economy.
a.
True
b.
False
3. Millionaires do not face the problem of scarcity.
a.
True
b.
False
4. Resources are used to create goods and services.
a.
True
b.
False
5. Inputs in production processes are called resources.
a.
True
b.
False
6. Money is scarce, but resources are not.
a.
True
b.
False
7. An optimal decision is one that chooses the most desirable from among all possibilities that are available.
a.
True
b.
False
8. Economics studies the logic of choices made from among available possibilities.
a.
True
b.
False
9. Economics examines the options open to households, business firms, governments, and entire societies by the limited
resources at their command.
a.
True
b.
False
10. Economics examines the options open to households and business firms, but ignores the options of governments and
entire societies.
a.
True
b.
False
11. Scarcity of resources implies that people must make decisions consistent with the means they have available to them.
a.
True
b.
False
12. Given its size, the United States does not have to worry about limitations on resources.
a.
True
b.
False
13. All actions and purchases, even those of wealthy people, involve a sacrifice.
a.
True
b.
False
14. Rational decision making must always be based on the concept of opportunity cost.
a.
True
b.
False
15. The scarcity of physical resources is far more fundamental to the study of economics than the scarcity of funds.
a.
True
b.
False
16. Goods that are actually produced by firms are not really limited in supply, because the firms can always produce more
of them.
a.
True
b.
False
17. Centrally planned economies are not constrained by the problem of scarcity.
a.
True
b.
False
18. Market economies are not constrained by scarcity; only planned economies have that problem.
a.
True
b.
False
19. The opportunity cost of any decision is the forgone value of the next best alternative that is not chosen.
a.
True
b.
False
20. Opportunity cost is the value of the next best alternative that is given up.
a.
True
b.
False
21. Waiting in line to get a free ticket does not involve any opportunity cost.
a.
True
b.
False
22. The opportunity cost of a college education includes wages lost while enrolled in school.
a.
True
b.
False
23. Opportunity cost is the combined value of all other alternatives that go unchosen.
a.
True
b.
False
24. Opportunity cost always arises when a trade-off decision is made.
a.
True
b.
False
25. Although finished goods are scarce, the inputs to produce them are not scarce.
a.
True
b.
False
26. The term “satisficing” indicates an optimal choice.
a.
True
b.
False
27. Since it is a centrally planned economy, China does not face opportunity costs when economic decisions are made.
a.
True
b.
False
28. Opportunity cost cannot be measured in money terms, only in conceptual terms.
a.
True
b.
False
29. Opportunity cost can always be measured in money terms.
a.
True
b.
False
30. In a properly functioning economy, money costs approximate opportunity costs.
a.
True
b.
False
31. Individuals face scarcity; whole societies do not.
a.
True
b.
False
32. High opportunity costs go hand in hand with high money costs in a properly functioning economy.
a.
True
b.
False
33. A well-functioning market will have high monetary costs applied to high opportunity costs.
a.
True
b.
False
34. Monetary costs and opportunity costs are always identical.
a.
True
b.
False
35. The production possibilities frontier can be used to show a manufacturer’s possible combinations of output of two
goods.
a.
True
b.
False
36. Any point on or outside the PPF is attainable.
a.
True
b.
False
37. Being on the PPF implies that increasing the production of one good or service can only be accomplished by
decreasing the quantity produced of another good or service.
a.
True
b.
False
38. A production possibilities frontier shows the combinations of various goods that should be produced.
a.
True
b.
False
39. The production possibilities frontier slopes downward and to the right because of limited resources.
a.
True
b.
False
40. The production possibilities frontier has a tendency to bow outward from the origin.
a.
True
b.
False
41. If the PPF for guns and butter is bowed outward from the origin, this indicates constant opportunity cost between the
two goods.
a.
True
b.
False
42. The negative slope of a production possibilities frontier is a graphic representation of opportunity cost.
a.
True
b.
False
43. According to the principle of increasing costs, as the production of one good expands, the opportunity cost of
producing another unit of the good tends to increase.
a.
True
b.
False
44. If the quantity of one good that must be forgone increases as successive units of another good are produced, then there
is said to be increasing opportunity cost between the two goods.
a.
True
b.
False
45. As more of a good is produced, its opportunity cost tends to increase because resources are not equally efficient at
producing all goods.
a.
True
b.
False
46. A society’s decision to produce more tanks may require it to forgo production of some cars.
a.
True
b.
False
47. If society produces at a point inside the production possibilities frontier, it is characterized by full employment of
resources.
a.
True
b.
False
48. Society can produce at a point outside the production possibilities frontier, but only if it is using all of its resources
efficiently.
a.
True
b.
False
49. From a society’s viewpoint, when all resources are fully employed, a decision to have more of one thing means we
must give up some of another thing.
a.
True
b.
False
50. The political party that is in power determines the position and shape of the production possibilities frontier that
constrains the choices of the economy.
a.
True
b.
False
51. The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.
a.
True
b.
False
52. A market economy allocates resources primarily in accordance with orders from government bureaucrats.
a.
True
b.
False
53. If the U.S. government decides to increase military spending, one opportunity cost will be lower spending on
education.
a.
True
b.
False
54. If a farmer’s opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans, then her
opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.
a.
True
b.
False
55. Economists use the term capital to describe that factor of production that includes human-made resources such as
factories, buildings, machinery and tools.
a.
True
b.
False
56. If a farmer’s opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then her
opportunity cost of producing 50,000 bushels of soybeans must also be 20,000 fewer bushels of wheat.
a.
True
b.
False
57. Economic growth solves the problem of scarcity.
a.
True
b.
False
58. Since it spent over $3.6 trillion in 2010, opportunity cost was not an issue for the U.S. government.
a.
True
b.
False
59. A large government faces a production possibilities frontier much like a business firm does.
a.
True
b.
False
60. The U.S. government spent over $3.6 trillion in budget year 2010.
a.
True
b.
False
61. Economists define “efficiency” as the absence of waste.
a.
True
b.
False
62. Efficiency is defined as minimizing waste.
a.
True
b.
False
63. The definition of efficiency implies that production is carried out on the production possibilities frontier.
a.
True
b.
False
64. Efficient production can be carried out anywhere on or below the production possibilities frontier.
a.
True
b.
False
65. Although all points on the PPF are efficient, that alone does not tell us which point is “best” for the society.
a.
True
b.
False
66. A decrease in the unemployment rate will shift the PPF outward from the origin.
a.
True
b.
False
67. In terms of efficiency, any point on a production possibilities frontier is as good another.
a.
True
b.
False
68. A society which is inside its production possibilities frontier is efficient.
a.
True
b.
False
69. In a market economy, government decides the answers to the three economic decisions.
a.
True
b.
False