Deck 1: Economics: the Study of Opportunity Cost

Question 1

The fact that the production possibilities frontier is bowed out indicates there is

A)scarcity.
B)constant opportunity cost.
C)unemployment.
D)increasing opportunity cost.

Answer 1

D

Question 2

A production possibilities frontier is a simple model of

A)scarcity and allocation.
B)prices and output.
C)production and costs.
D)inputs and outputs.

Answer 2

A

Question 3

The underlying reason production possibilities frontiers are likely to be bowed out (rather than linear)is

A)choices have consequences.
B)there is always opportunity costs.
C)some resources and people can be better used producing one good rather than another.
D)there is always some level of unemployment.

Answer 3

C

Question 4

Points outside the Production Possibilities Frontier are

A)attainable.
B)unattainable.
C)associated with some unemployment.
D)both attainable and unattainable.

Question 5

The optimization assumption suggests that people make

A)irrational decisions.
B)unpredictable decisions.
C)decisions to make themselves as well off as possible.
D)decisions without thinking very hard.

Question 6

The one word in the definition of economics that focuses on the fact that we have to make choices about who gets what and how much is

A)scarcity.
B)resources.
C)study.
D)allocation.

Question 7

Scarcity implies that the allocation scheme chosen by society can

A)not make more of any one good.
B)typically make more of a good but at the expense of making less of another.
C)always make more of all goods simultaneously.

Question 8

The underlying reason that there are unattainable points on a production possibilities frontier diagram is that there

A)is government.
B)are always choices that have to be made.
C)is a scarcity of resources within a fixed level of technology.
D)is unemployment of resources.

Question 9

A resource

A)must come from the earth.
B)only includes physical things.
C)is anything that we consume directly or use to make things we will ultimately consume.
D)A)and C)

Question 10

Something is scarce as long as

A)there is a price that the market puts on the item.
B)there is no freely available infinite source of the item.
C)the government provides it.
D)the market provides it.

Question 11

Points on the Production Possibilities Frontier are

A)attainable.
B)unattainable.
C)associated with some unemployment
D)both attainable and unattainable.

Question 12

If the production possibilities frontier is not bowed out but is a line, indicates there is

A)scarcity.
B)constant opportunity cost.
C)unemployment.
D)increasing opportunity cost.

Question 13

The one word in the definition of economics that focuses on the fact that it is impossible to provide all of the goods and services that everyone wants is

A)scarcity.
B)resources.
C)study.
D)allocation.

Question 14

Points inside the Production Possibilities Frontier are

A)attainable.
B)unattainable.
C)associated with some unemployment.
D)both attainable and unattainable.

Question 15

Economists focus on "unlimited human wants" rather than _____ to describe our pursuit of goods and services.

A)needs
B)prices
C)output
D)physical requirements

Question 16

Economics is the study of

A)how much people should buy and the prices they should be willing to pay.
B)how much people should sell and the prices they should be willing to accept.
C)the allocation of the world's freely available resources and who should get them.
D)the allocation and use of scarce resources to satisfy unlimited human wants.

Question 17

Production possibilities frontier models

A)the choices we make in setting prices.
B)the choices we make in setting output alternatives.
C)the choices we make in setting wages.
D)the choices we make in setting incomes.

Question 18

A simplifying assumption is typically made so as to

A)make a point clearer by stripping away excess detail.
B)make a point clearer by adding sufficient detail to get things precise.
C)divert attention from the real problem.
D)make things look better than they really are.

Question 19

The fact that we cannot operate at a point outside a production possibilities frontier indicates there is

A)scarcity.
B)constant opportunity cost.
C)unemployment.
D)increasing opportunity cost.

Question 20

The fact that we are operating at a point inside a bowed out production possibilities frontier, indicates there is

A)scarcity.
B)constant opportunity cost.
C)unemployment.
D)increasing opportunity cost.

Question 21

Using Figure 1.4 we know the production of 9 units of soda and 1 units of pizza is

A)possible, but there would be unemployment.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 22

In Figure 1.2, which labeled point indicates that there are sufficient resources and technology to produce the combination of goods represented by that point?

A)only A
B)only C
C)only D
D)A, B and C

Question 23

In Figure 1.2, which labeled points are attainable?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 24

In Figure 1.1, which labeled points are attainable?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 25

In Figure 1.1, which labeled point indicates that there are sufficient resources and technology to produce the combination of goods represented by that point?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 26

Using Figure 1.4 above we know the production of 9 units of soda and 3 units of pizza is

A)possible, but there would be unemployment.
B)possible, but only if all resources were fully employed.
C)impossible because we either do not have the resources or the technology.
D)undesirable.

Question 27

In Figure 1.1, which labeled points are unattainable?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 28

In Figure 1.2, which labeled points represent the existence of unemployment?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 29

In Figure 1.3 A, B and C, which depicts the existence of opportunity cost?

A)Figure A
B)Figure B
C)Figure C
D)All three figures show the existence of opportunity cost.

Question 30

In Figure 1.1, which labeled points represent the existence of unemployment? a. only A b. only B and C
C) only D
D) A, B and C

Question 31

Using Figure 1.4 you can tell that

A)the technology does not exist to produce 6 units of soda and 2 unit of pizza.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 9 units of soda and 3 unit of pizza.

Question 32

In Figure 1.1, which labeled point indicates that there are insufficient resources or technology to produce the combination of goods represented by that point?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 33

Using Figure 1.4 above we know the production of 4 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 34

In Figure 1.3 A, B and C, which depicts the existence of scarcity?

A)Figure A
B)Figure B
C)Figure C
D)All three figures show the existence of scarcity.

Question 35

Using Figure 1.4 you can tell that

A)there is increasing opportunity cost.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 9 units of soda and 1 unit of pizza.

Question 36

In Figure 1.2, which labeled points are unattainable?

A)only A
B)only B and C
C)only D
D)A, B and C

Question 37

In Figure 1.3 A, B and C, which depicts the existence of increasing opportunity cost?

A)Figure A
B)Figure B
C)Figure C
D)All three figures show the existence of increasing opportunity cost.

Question 38

In Figure 1.3 A, B and C, which depicts the existence of constant opportunity cost?

A)Figure A
B)Figure B
C)Figure C
D)All three figures show the existence of constant opportunity cost.

Question 39

In Figure 1.2, which labeled point indicates that there are insufficient resources or technology to produce the combination of goods represented by that point?

A)only A
B)only C
C)only D
D)A, B and C

Question 40

Using Figure 1.4 we know the production of 6 units of soda and 2 units of pizza is

A)possible, but there would be unemployment.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 41

Referring to Figure 1.4, the opportunity cost of producing the first unit of pizza is

A)one unit of soda.
B)three units of soda.
C)six units of soda.
D)the same as the opportunity cost of producing the second unit of pizza.

Question 42

Using Figure 1.7 you can tell that

A)the technology does not exist to produce 5 units of soda and 3 units of pizza.
B)there is unemployment.
C)there is increasing opportunity cost.
D)the technology does not exist to produce 10 units of soda and 1 units of pizza.

Question 43

Using Figure 1.6 you can tell that

A)there is increasing opportunity cost.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 90 units of soda and 2 units of pizza.

Question 44

Using Figure 1.5 above we know the production of 6 units of soda and 1 unit of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 45

Using Figure 1.7 you can tell that

A)there is increasing opportunity cost.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 10 units of soda and 1 unit of pizza.

Question 46

Using Figure 1.6 we know the production of 130 units of soda and 1 unit of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 47

Using Figure 1.6 we know the production of 90 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 48

Using Figure 1.5 above you can tell that

A)there is increasing opportunity cost.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 6 units of soda and 1 unit of pizza.

Question 49

Referring to Figure 1.4, the opportunity cost of producing the second unit of pizza is

A)one unit of soda.
B)three units of soda.
C)six units of soda.
D)the same as the opportunity cost of producing the first unit of pizza.

Question 50

Referring to Figure 1.5, the opportunity cost of producing the first unit of pizza is

A)one unit of soda.
B)three units of soda.
C)six units of soda.

Question 51

Referring to Figure 1.4, the opportunity cost of producing the third unit of pizza is

A)one unit of soda.
B)three units of soda.
C)six units of soda.
D)the same as the opportunity cost of producing the first unit of pizza.

Question 52

Referring to Figure 1.5, the opportunity cost of producing the third unit of pizza is

A)one unit of soda.
B)three units of soda.
C)six units of soda.

Question 53

Using Figure 1.5 above we know the production of 6 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we either do not have the resources or the technology.
D)undesirable.

Question 54

Using Figure 1.6 you can tell that

A)the technology does not exist to produce 130 units of soda and 1 unit of pizza.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 90 units of soda and 3 units of pizza.

Question 55

Using Figure 1.6 we know the production of 90 units of soda and 4 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we either do not have the resources or the technology.
D)undesirable.

Question 56

Referring to Figure 1.5, the opportunity cost of producing the second unit of pizza is

A)one unit of soda.
B)three units of soda.
C)six units of soda.

Question 57

Using Figure 1.5 above you can tell that

A)the technology does not exist to produce 4 units of soda and 1 unit of pizza.
B)there is unemployment.
C)there is increasing opportunity cost.
D)the technology does not exist to produce 3 units of soda and 3 unit of pizza.

Question 58

Using Figure 1.5 above we know the production of 2 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 59

Using Figure 1.6 we know the production of 90 units of soda and 1 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 60

Using Figure 1.5 above we know the production of 3 units of soda and 2 units of pizza is

A)possible, but there would be unemployed.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 61

Imagine an economist ordering pizza by the slice. When deciding how many slices to order she would pick that number where the enjoyment of the _____ equals the enjoyment she could get from using the money on another good.

A)first slice
B)last slice
C)average slice
D)total number of slices

Question 62

Of course, all individual students are better off if they get better grades. If you were to conclude that all students would be better off if everyone received an "A" you would

A)have fallen victim to the fallacy of scarcity.
B)be right.
C)have fallen victim to the fallacy of composition.
D)be mistaking correlation with causation.

Question 63

The fact that snow cones sales fall when snow accumulated from the sky suggests that snow cones sales and snow on the ground are

A)directly correlated.
B)inversely correlated.
C)neither directly correlated nor inversely correlated.
D)both directly correlated and inversely correlated.

Question 64

Referring to Figure 1.9, if a point represents unemployment it is in

A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.

Question 65

Economic incentives can come from

A)markets.
B)government programs.
C)taxes.
D)all of the options are correct.

Question 66

Logging companies are always more profitable if they are able to harvest more (rather than less)lumber in a month. If you concluded from that fact that the logging industry is more profitable if all of the firms in the industry harvest more, then you would be

A)right.
B)wrong because causation and correlation are not the same.
C)wrong and have fallen victim to the fallacy of composition.
D)wrong because firms operate on jealousy.

Question 67

Using Figure 1.7 we know the production of 5 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 68

Using Figure 1.7 we know the production of 10 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we either do not have the resources or the technology.
D)undesirable.

Question 69

Every worker is better off making more money and having better benefits. If you concluded from that fact that all workers would be better off if a law were passed requiring a 25% increase in wages and benefits, then you would be

A)right.
B)wrong because causation and correlation are not the same.
C)wrong and have fallen victim to the fallacy of composition.
D)wrong because workers operate on jealousy.

Question 70

Using Figure 1.7 we know the production of 10 units of soda and 1 unit of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 71

Referring to Figure 1.8, if a point is attainable it is in

A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.

Question 72

Referring to Figure 1.9, if a point is unattainable it is in

A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.

Question 73

An economist, when analyzing a problem will attempt to

A)maximize the net benefit of an action and this occurs where the marginal benefit equals the marginal cost.
B)maximize the total benefit of an action.
C)minimize the total cost of an action.
D)maximize the net benefit of an action and this occurs where the average benefit equals the average cost.

Question 74

Many forms of seafood (lobster, crab legs etc.)are consumed by dipping the meat in melted garlic butter. If someone suggested that it would therefore be equally appealing to drink melted butter after having eaten garlic and unseasoned seafood, you would know they had fallen victim to which of the following?

A)the fallacy that correlation is the same as causation
B)the fallacy of composition
C)a logical tautology
D)none of the options are correct

Question 75

Using Figure 1.7 we know the production of 4 units of soda and 2 units of pizza is

A)possible, but there would be unemployed resources.
B)possible, but only if all resources were fully employed.
C)impossible because we have the resources but do not have the technology.
D)impossible because we have the technology but do not have the resources.

Question 76

The statement that "since a farmer will make more money if he has a bumper crop means that all farmers would make more money if they all had bumper crops" would be an example of which of the following?

A)the fallacy that correlation is the same as causation
B)the fallacy of composition
C)truth in an obvious form
D)A)and B)

Question 77

An economist, when analyzing a problem will compare the ___ and choose the outcome where they are equal

A)average benefits to the average costs
B)marginal benefits to the marginal costs
C)total benefits to the total costs
D)fixed benefits to the fixed costs

Question 78

Referring to Figure 1.8, if a point represents unemployment it is in

A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.

Question 79

Referring to Figure 1.9, if a point is attainable it is in

A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.

Question 80

Referring to Figure 1.8, if a point is unattainable it is in

A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.