ECON 2000 Chapter : Econ Chapter 2

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15 Mar 2019

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Chapter 2: the economic problem: scarcity and choice. This chapter explores the questions of what, how, and for whom to produce. Scarcity and choice in a one-person economy, scarcity and choice in an. Economy of two or more, production possibility frontier, the economic. Problem: economic systems and the role of government. Command economies, laissez-faire economies: the free market, mixed. Systems, markets, and governments: scarcity, choice and opportunity cost, definitions. Capital- things that are produced and then used in the production of other goods and services. Factors of production- the inputs into the process of production. Production- the process that transforms scarce resources into useful goods and services. Resources or factors of production - anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants. Outputs- goods and services of value to households: scarcity and choice in a one-person economy (think cast away)

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Part I. Multiple Choice Questions. Please circle the right answer (one mark each)

1. Which of the following are economic goods?

a. Atlantic Ocean sea water.

b. Iowa farm land.

c. California coast line.

d. All of the above.

e. All of the above, except a.

2. The three fundamental questions of economic organization are:

a. closely related to the concept of scarcity.

b. not nearly as important today as they were at the dawn of civilization.

c. what, how, and why.

d. land, labor, and capital.

e. all of the above.

3. Which of the following statements applies to a mixed economy?

a. There is confusion and a lack of organization.

b. The allocation of resources changes from production period to production period.

c. There are no real examples of truly mixed economies.

d. Mixed economies include aspects of both market and command economies.

e. None of the above statements apply.

4. Capital is:

a. the same as money.

b. the headquarters of economic planning.

c. both an input and an output.

d. all of the above.

e. none of the above.

5. Land, labor, and capital are:

a. available only in finite amounts.

b. used to produce outputs.

c. the primary factors of production.

d. combined with technology in the production process.

e. all of the above.

6. Which of the statements below does not apply to the production-possibility frontier, or PPF?

a. The PPF is closely related to the concept of scarcity.

b. Quantities of inputs are measured along the axes of the PPF.

c. The PPF may shift over time.

d. Movements along the PPF may occur as the allocation of resources changes.

e. Technology may change the shape of the PPF.

7. Which of the statements below is a reason why an economy might produce a level of output that is beneath its production-possibility frontier?

a. The available resources are not equally suited to the production of both outputs.

b. The available body of technological knowledge is not being fully utilized.

c. Society prefers one product over the other.

d. In reality, economies produce thousands of goods not just two.

e. There are no frontiers left anymore.

8. In order to shift the PPF out (above and to the right), an economy would have to:

a. somehow increase its stock of inputs.

b. remove some incompetent bureaucrats from their jobs.

c. eliminate the sources of significant abuse of monopoly power.

d. all of the above.

e. none of the above.

9. Sana notices that no matter how many paper cups she buys, she always pays the same price per cup. This means that the supply curve which confronts her is:

a. perfectly inelastic.

b. perfectly elastic.

c. unit-elastic.

d. elastic, but not necessarily perfectly elastic.

e. none of these things, necessarily

10. A perfectly inelastic supply curve would be shown in the ordinary supply-and-demand graph as a:

a. vertical line.

b. horizontal line.

c. straight line, but neither horizontal nor vertical.

d. curved line.

e. any of the above.

Can you solve them and tell me if youre sure 100% 100% 100%

Question 1 (1 point)

If two variables move together but are otherwise unrelated, we have

Question 1 options:

a fallacy of composition.

an econometric model.

a spurious correlation.

an efficiency problem.

evidence of a weak correlation but strong causation.

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Question 2 (1 point)

The Latin expression "ceteris paribus": is essential in ______.

Question 2 options:

collecting data.

identifying sunk costs.

evaluating theories.

recognizing scarcity.

developing spurious relationships.

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Question 3 (1 point)

Opportunity cost is best defined as

Question 3 options:

marginal cost minus marginal benefit.

the time spent on an economic activity.

the value of the best forgone alternative.

the monetary cost of an economic decision.

marginal cost plus marginal benefit.

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Question 4 (1 point)

A cost that cannot be recovered at the time a decision is being made is termed a(n)

Question 4 options:

marginal cost.

scarcity cost.

sunk cost.

average cost.

opportunity cost.

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Question 5 (1 point)

If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105, then the total costs are

Question 5 options:

$50, $150, and $315.

$50, $41.67, and $115.

$50, 125, and $230.

$50, $175, and $405.

impossible to calculate with information given.

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Question 6 (1 point)

In general, individuals should specialize in producing those goods for which they

Question 6 options:

can produce more quickly than others.

can produce less quickly than others.

have the lowest opportunity cost compared to others.

have the highest opportunity cost compared to others.

have an average opportunity cost.

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Question 7 (1 point)

The extra benefit that comes from an extra unit of activity is called the _________ of the activity.

Question 7 options:

benefit

marginal benefit

marginal cost

average benefit

reservation benefit

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Question 8 (1 point)

The marginal benefit of an activity is the

Question 8 options:

same as the total benefits of the activity.

total benefit divided by the level of the activity.

change in the activity divided by the change in benefits.

extra benefit associated with an extra unit of the activity.

total benefit divided by the change in the level of the activity.

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Question 9 (1 point)

The fundamental problem that is studied in economics is that

Question 9 options:

consumers have limited wants in the face of unlimited resources.

markets should function without government interference.

Canada is too wealthy.

consumers have unlimited wants in the face of limited resources.

there are unlimited resources.

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Question 10 (1 point)

The range of topics, or issues, that fit within the definition of economics is

Question 10 options:

limited to market activities, e.g., buying soap.

limited to individuals and firms.

extremely wide, requiring only the ideas of choice and scarcity.

limited to governments and nations.

very limited.

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Question 11 (1 point)

When economists make predictions using the framework of a given economic model, it is usually based on

Question 11 options:

personal experiences.

important relationships between particular variables.

mathematical abstractions.

political implications.

the profit-maximizing objective.

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Question 12 (1 point)

The cost of spending an evening partying instead of studying economics is

Question 12 options:

the resulting decrease in the test score in Economics.

the time spent at the party.

the score of the test.

the cost of the textbook.

university tuition.

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Question 13 (1 point)

As one progresses from a one-person economy to a large, multi-person economy, the shape of production possibilities curve changes from

Question 13 options:

downward sloping to upwards sloping.

linear to convex (bowed into the origin).

concave (bowed out from the origin) to linear.

convex (bowed into the origin) to concave (bowed out from the origin).

linear to concave (bowed out from the origin).

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Question 14 (1 point)

Which is NOT a sunk cost?

Question 14 options:

Monthly rent of $1,000 contractually specified in a one-year lease.

An insurance premium of $50 per year, paid last month.

An attorney's retainer of $50,000 per year.

A worker's wage of $15 per hour.

A non-refundable deposit for a tender.

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Question 15 (1 point)

"We should support government intervention because the market produces undesirable outcomes" is an example of

Question 15 options:

positive economics.

normative economics.

comparative economics.

negative economics.

formative economics.

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amberchimpanzee966

1. Which of the following cannot be determined using a production possibility table?

What combination of outputs can be produced.
How much less of one output can be produced if more of another output is produced.
What combination of outputs is best.
How much output can be produced from a given level of inputs.

2. Internal government debt is:

debt owed by citizens to their government.
debt owed by one government to another government.
government debt owed to citizens.
government debt owed to foreigners.

3. In general, budget deficits should:

never be run since they slow economic growth over the long run.
never be run since they crowd out investment in the short run.
be run on a temporary basis whenever the economy is below potential output.
be run on a permanent basis since they can always be financed over and over again.

4. If taxes and government outlays were constant and did not vary with income, then:

passive deficits would increase.
passive deficits would not exist.
structural deficits would increase.
structural deficits would not exist.

5. If the debt of the federal government increases by $10 billion in one year, then the budget:

deficit in that year must be $10 billion.
surplus in that year must be $10 billion.
deficit in that year decreased by $10 billion.
surplus in that year increased by $10 billion.

6. Which of the following would make the impending Social Security problem worse?

Raising income taxes when the baby boomers begin to retire.
Reducing the age at which one is eligible to receive payments.
Reducing Social Security retirement benefits.
Introducing means testing.

7. The price mechanism is: (Points : 5)

not affected by social and political forces.
affected by social but not political forces.
affected by political but not social forces.
affected by both political and social forces.

8. Social forces:

affect the price mechanism through cultural norms.
affect the price mechanism, but not the legal system.
affect the price mechanism through scarcity.
do not affect the price mechanism.

9. Opportunity cost is the same as marginal cost.

True
False

10. Which of the following is a characteristic of a market economy?

Private property.
Government ownership of the means of production.
Distribution according to need.
Tradition determines the what, how, and for whom decisions.

11. Mexico has a comparative advantage in producing corn:

if its opportunity cost of producing corn is higher than the opportunity cost in other countries.
if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
if its opportunity cost of producing corn is lower than the opportunity cost in other countries.
regardless of the opportunity cost in other countries.

12. The opportunity cost for a student of attending college for a year is best measured by the:

benefit received by the student.
tuition paid for the year.
value of the next-best activity forgone by attending college.
total money outlays associated with attending college.

13. A passive deficit is the portion of the deficit that exists when:

the economy is at potential income.
the economy is beneath potential income.
inflation is not fully anticipated.
inflation is fully anticipated.

14. An important international lending institution is the:

IMF.
The Group of Eight.
EU.
WTO.

15. Private property rights:

are essential elements of a market economies.
do not need to be enforced in market economies.
must be established before a socialist economy can function properly.
ensure an equitable distribution of income in market economies.

16. If a country has a comparative advantage in the production of a good, then its resources are better suited to the production of that good than the resources of other countries.

True
False

17. As the interest rate rises, debt service:

decreases.
does not change, but debt increases.
increases.
does not change and neither does the debt.

18. Your opportunity cost of taking this course is:

the tuition you paid for the course.
the benefit of the activity you would have chosen if you had not taken the course.
the benefit you get from taking this course.
the cost of the activity you would have chosen if you had not taken the course.

19. One advantage of a corporation over a sole proprietorship is:

greater accountability.
avoidance of double taxation.
ease of formation.
greater ability to obtain funds.

20. Maintaining objectivity is easiest in:

positive economics.
the art of economics.
normative economics.
it is just as easy in all of the above

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ECON 2000 Chapter : Econ Chapter 2

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