Question 1

Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts.According to Table 3-1,the opportunity cost of 10 more bushels of peanuts is

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The answer of Suppose a farmer produces 50 bushels of...

Question 2

If a market system is functioning well,we can conclude that goods with

Accepted Answer

In a well-functioning market system, goods with high opportunity costs tend to have high money costs because consumers are willing to pay more for goods that require more resources and sacrifice to produce. On the other hand, goods with low opportunity costs tend to have low money costs as they are relatively easy and cheap to produce. Therefore, choice A is the best option.

Question 3

For a given production possibilities frontier,which points are attainable?

Accepted Answer

Points on or inside the frontier represent possible combinations of production given the available resources and technology. Points outside the frontier are unattainable given the current constraints. Points on the frontier represent efficient use of resources, but not all possible combinations are efficient. Therefore, the attainable points are the ones on or inside the frontier.

Question 4

The production possibilities curve illustrates the basic principle that

Accepted Answer

The production possibilities curve shows the maximum amount of two goods that can be produced using all available resources. It illustrates the concept of opportunity cost, which means that producing more of one good comes at the expense of producing less of another good. Therefore, if a country wants to produce more of one good, it has to give up some of the production of the other good.

Question 5

Figure 3-1 
-According to Figure 3-1,the opportunity cost of one more bushel of wheat is

Accepted Answer

According to the slope of the production possibility frontier, the opportunity cost of one more bushel of wheat is lower at point B than at point D. This means that fewer guns must be given up in order to produce an additional bushel of wheat at point B compared to point D.

Question 6

Do all valuable items have price tags?

Accepted Answer

Some valuable items may not have explicit price tags on them. For example, family heirlooms or sentimental items that hold personal value may not have a monetary price attached to them.

Question 7

In an attempt to boost enrollment,in January,1996,a private college in Iowa offered free tuition for graduating high school seniors from the county where it is located.For students who accepted the offer,how did this offer affect the opportunity cost of attending college?

Accepted Answer

The offer of free tuition would lower the opportunity cost of attending college because tuition costs are a significant factor in determining the opportunity cost. However, even with free tuition, there are still other costs associated with attending college such as room and board, textbooks, and lost earnings from not being able to work full-time. Therefore, the opportunity cost is lower than if tuition were charged, but there is still a cost associated with attending college.

Question 8

Why would it be a mistake to treat opportunity costs and explicit monetary costs as identical?

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The answer of Why would it be a mistake to...

Question 9

Generally,the opportunity cost and the money cost of a good

Accepted Answer

The opportunity cost of a good refers to the value of the next best alternative foregone in order to obtain that good, while the money cost of a good refers to the price paid for it. These two costs can be different, as the next best alternative may have a different price, or may not have a price at all (such as the opportunity cost of time). Therefore, the best answer is B.

Question 10

A recent study found that it was cheaper to buy a chicken dinner from Kentucky Fried Chicken than it was to prepare it at home.The researcher included all costs including the imputed value of time involved to prepare the meal at home.This study illustrates the

Accepted Answer

The study highlights the difference between real costs (which include the imputed value of time and other non-monetary factors) and money costs (the actual cash spent to purchase goods or services). By accounting for the value of time, it demonstrates how the real cost of preparing a meal at home can exceed the money cost of buying it ready-made.

Question 11

Which of the following is an example of opportunity cost not measured by money cost?

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The answer of Which of the following is an example...

Question 12

A production possibilities curve always slopes downward to the right because resources

Accepted Answer

A production possibilities curve shows the maximum combination of two goods that can be produced with the given resources and technology. Resources are limited, so a choice to produce more of one good will require sacrificing some production of the other good. Therefore, the production possibilities curve always slopes downward to the right to represent the opportunity cost of producing one good over another.

Question 13

How are money cost and opportunity cost related to each other?

Accepted Answer

If markets function well, the money cost of a good or service reflects its opportunity cost. This means that the price paid for a good or service represents the value of the next best alternative that must be forgone in order to obtain it. In other words, opportunity cost is reflected in the money cost of goods and services in a well-functioning market economy.

Question 14

Figure 3-1 
-The shape of the production possibilities frontier in Figure 3-1 implies that

Accepted Answer

The answer of Figure 3-1 
-The shape of the production...

Question 15

Rational production decisions require an understanding of

Accepted Answer

Rational production decisions require an understanding of trade-offs, opportunity costs, and the scarcity of resources. All of these factors must be taken into account to make informed decisions about how to best allocate scarce resources and produce goods and services in the most efficient and effective manner. Therefore, all the above options are correct.

Question 16

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

Accepted Answer

The opportunity cost of moving from point B to point A is the amount of X that must be given up to gain more of Y. In this scenario, moving from B to A results in a loss of 50 units of X, assuming a linear trade-off between X and Y on the production possibility frontier depicted in Figure 3-7.

Question 17

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

Accepted Answer

The slope of a production possibilities frontier represents the rate of trade-off between the production of two goods. As we move along the curve, we must give up more and more of one good to produce more units of the other. This increasing rate of trade-off represents the opportunity cost of producing one good in terms of the other. Therefore, the slope of a production possibilities frontier and the opportunity cost of the goods are related.

Question 18

In a market economy,the decision regarding allocation of resources is made by

Accepted Answer

In a market economy, resources are allocated based on the automatic forces of supply and demand. This means that individuals and businesses make decisions about what to produce, how much to produce, and what price to charge based on what they believe will be most profitable. The market then responds to these decisions by adjusting prices and quantities supplied until a balance is reached. Governments in a market economy may play a role in setting regulations or taxes, but they do not make decisions about the allocation of resources.

Question 19

A ticket to an Eric Clapton concert costs $45.If you have a ticket,you can "scalp" it (sell it illegally)for $75.To a ticket holder,the opportunity cost of actually attending the concert is

Accepted Answer

The opportunity cost of attending the concert is the value of the next best alternative foregone, which in this case is the $75 that could have been earned by scalping the ticket.

Question 20

Money costs and opportunity costs are concepts that are

Accepted Answer

Money costs and opportunity costs are related through the concept of relative prices of goods and services. Money costs refer to the actual monetary expenses incurred in acquiring a good or service, whereas opportunity costs refer to the value of the next best alternative foregone in choosing that good or service. The opportunity cost of a good or service is influenced by the relative prices of other goods and services that could have been chosen instead. Thus, understanding the relationship between money costs and opportunity costs is important in making efficient economic decisions.

Quiz 3: The Fundamental Economic Problem Scarcity and Choice