Deck 3: The Fundamental Economic Problem: Scarcity and Choice

Question 1

Scarcity can be measured only through the use of monetary costs.

Answer 1

False

Question 2

If the budget deficit was eliminated, the federal government would have more money than it could spend.

Answer 2

False

Question 3

The scarcity of physical resources is far more fundamental to the study of economics than the scarcity of funds.

Answer 3

True

Question 4

The opportunity cost of any decision is the forgone value of the next best alternative that is not chosen.

Question 5

Resources are used to create goods and services.

Question 6

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

Question 7

Goods that are actually produced by firms are not really limited in supply, because the firms can always produce more of them.

Question 8

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

Question 9

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

Question 10

Optimal decisions are made based upon the concept of opportunity cost.

Question 11

Market economies are not constrained by scarcity; only planned economies have that problem.

Question 12

Money is scarce, but resources are not.

Question 13

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

Question 14

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

Question 15

Scarcity of resources implies that people must make decisions consistent with the means they have available to them.

Question 16

Millionaires do not face the problem of scarcity.

Question 17

Given its size, the United States does not have to worry about limitations on resources.

Question 18

Economics examines the options open to households and business firms, but ignores the options of governments and entire societies.

Question 19

Inputs in production processes are called resources.

Question 20

Scarcity is the fundamental problem of the economy.

Question 21

Opportunity cost is the value of the next best alternative that is given up.

Question 22

Opportunity cost cannot be measured in money terms, only in conceptual terms.

Question 23

Trade-offs can always be considered in terms of opportunity costs.

Question 24

Opportunity cost can always be measured in money terms.

Question 25

Although finished goods are scarce, the inputs to produce them are not scarce.

Question 26

The production possibilities frontier can show a manufacturer's possible combinations of output resulting from the combination of two goods.

Question 27

The term "satisficing" indicates an optimal choice.

Question 28

In a well-functioning market, high opportunity costs will be reflected in high monetary costs.

Question 29

Opportunity cost always arises when a trade-off decision is made.

Question 30

Since it is a centrally planned economy, China does not face opportunity costs when economic decisions are made.

Question 31

In a market economy, opportunity costs are always synonymous with explicit monetary costs.

Question 32

In a properly functioning economy, money costs approximate opportunity costs.

Question 33

High opportunity costs go hand in hand with high money costs in a properly functioning economy.

Question 34

The opportunity cost of a college education includes wages lost while enrolled in school.

Question 35

Waiting in line for a free ticket involves no opportunity cost.

Question 36

Opportunity cost is the combined value of all of the other alternatives that go unselected.

Question 37

Individuals face scarcity; whole societies do not.

Question 38

The opportunity cost of a college education does not include any income that is foregone while enrolled in school, since this is not measured using monetary costs.

Question 39

Monetary costs and opportunity costs are always identical.

Question 40

An optimal choice can be characterized as a decision made by someone who is satisficing.

Question 41

The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.

Question 42

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

Question 43

From a society's viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up something else.

Question 44

A production possibilities frontier shows the combinations of various goods that should be produced.

Question 45

A society can occasionally produce at a point beyond its production possibilities frontier if there is an economic crisis.

Question 46

The production possibilities frontier slopes downward and to the right because of limited resources.

Question 47

As more of a good is produced, its opportunity cost tends to increase because resources are not equally efficient at producing all goods.

Question 48

The negative slope of a production possibilities frontier is a graphic representation of opportunity cost.

Question 49

The political party that is in power determines the position and shape of the production possibilities frontier that constrains the choices of the economy.

Question 50

The production possibilities frontier has a tendency to bow outward from the origin.

Question 51

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.

Question 52

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.

Question 53

Some economies have production possibilities frontiers that are bowed inward toward the origin.

Question 54

If society produces at a point inside the production possibilities frontier, it is characterized by full employment of resources.

Question 55

A government, based upon its policy decisions, can determine the position and shape of the production possibilities frontier that the economy faces.

Question 56

A society's decision to produce more tanks may require it to reduce the production of some cars.

Question 57

If the production possibilities frontier for guns and butter is bowed outward from the origin, this indicates constant opportunity cost between the two goods.

Question 58

Any point on or outside the production possibilities frontier is attainable.

Question 59

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

Question 60

Being on the production possibilities frontier implies that increasing the production of one good or service can only be accomplished by decreasing the quantity produced of another good or service.

Question 61

The concept of opportunity cost only applies to societies that operate in a market-based economy.

Question 62

Efficient production can be carried out anywhere on or below the production possibilities frontier.

Question 63

The U.S. federal government spent more than $4 trillion in 2018, which implies that there were no opportunity costs faced by the United States.

Question 64

Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery, and tools.

Question 65

A large government encounters a production possibilities frontier essentially the same as one faced by a business firm.

Question 66

Economic growth solves the problem of scarcity.

Question 67

The definition of efficiency implies that production is carried out on the production possibilities frontier.

Question 68

The U.S. government spent over $4 trillion in budget year 2018.

Question 69

Efficient production can be carried out anywhere on or beyond the production possibilities frontier.

Question 70

In a centrally planned economy, resources are allocated primarily in accordance with directives from government agencies.

Question 71

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

Question 72

Scarcity is only a temporary problem that a society can solve by promoting economic growth.

Question 73

A market economy allocates resources primarily in accordance with orders from government bureaucrats.

Question 74

If the U.S. government decides to increase military spending, a possible opportunity cost could be lower spending on education.

Question 75

If a farmer's opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans, then his or her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.

Question 76

If a farmer's opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then his or her opportunity cost of producing 50,000 bushels of soybeans must also be 20,000 fewer bushels of wheat.

Question 77

Efficiency is defined as minimizing waste.

Question 78

A decrease in the unemployment rate will shift the production possibilities frontier outward from the origin.

Question 79

Although all points on the production possibilities frontier are efficient, that alone does not determine which point is "best" for the society.

Question 80

Economists define "efficiency" as the absence of waste.