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29 Cards in this Set

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  • Back

Economics is concerned primarily with:

a. money.


b. determining corporate profits and losses.


c. the allocation of scarce resources.


d. balancing your checkbook.


e. all of the above

When Samuelson and Nordhaus write that “goods are limited while wants seem limitless,” they meanthat:

a. people are basically greedy and not willing to share.


b. the government needs to redistribute output.


c. current methods of production are inefficient.


d. there is no simple solution to the basic economic problems of scarcity and unlimited human wants.


e. none of the above.

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.

The post hoc fallacy occurs when:

a. one problem follows another.


b. you think something that is true for one unit is true for all.


c. many variables may change at the same time and you fail to adjust for the changes.


d. you assume one event was caused by another simple because the other event occurred first.


e. economists from different schools of thought approach the same economic problem.

The fallacy of composition occurs when:

a. one problem follows another.


b. you think something that is true for one unit is true for all.


c. many variables may change at the same time and you fail to adjust for the changes.


d. you assume one event was caused by another simply because the other event occurred first.


e. economists from different schools of thought approach the same economic problem.

The problem of failing to hold other things constant occurs when:

a. one problem follows another.


b. you think something that is true for one unit is true for all.


c. many variables may change at the same time and you fail to adjust for the changes.


d. you assume one event was caused by another simple because the other event occurred first.


e. economists from different schools of thought approach the same economic problem.

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.

The economic problem of what goods to produce:

a. may be a problem for any individual firm seeking to make a profit but is not in any sense a problem for society as a whole.


b. can be illustrated as the problem of choosing a point on the production-possibility curve.


c. arises only when the stock of productive resources is very small.


d. arises only when all productive inputs are so specialized that each can be used only in the production of one good and no other.


e. none of the above.

The economic problem of how to produce goods would not exist:

a. if the required proportions of inputs were fixed for all commodities, so substitution of one input for another input in production would be impossible.


b. if production had not been carried to the point where there was full employment of all the economy’s resources.


c. if the economy’s stock of capital were small relative to its labor force.


d. in a technically advanced society, since proper technology would have established the best possible method of producing each good.


e. in any circumstance, because the problem of how to produce goods is an engineering problem throughout and not an economic problem.

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.

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

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.

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.

Which of the statements below is a reason why an economy might produce a level of output that isbeneath 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

Which of the following statements is false when an economy is on its PPF?

a. More of one product cannot be produced without sacrificing some of the other.


b. Resources are fully employed.


c. The economy is producing with productive efficiency.


d. Consumers will have all that they need.


e. A strike by workers will move the economy beneath the PPF.

Which of the following statements could be used to explain an outward shift in the production possibilityfrontier?

a. There is an increase in technology.


b. The population of the country increases.


c. The country decides to postpone current consumption in favor of capital investment.


d. New natural resources are discovered under the ocean.


e. All of the above apply.

Which of the following are measured along the axes of a PPF graph?

a. quantities of productive inputs or resources.


b. quantities of finished commodities.


c. values of finished commodities.


d. all of the above.


e. none of the above.

Each and every point in a production-possibility diagram (whether on the curve or off it) stands forsome combination of the two goods produced. With a given input stock, some of these points areattainable, while others are not. Specifically, with respect to production, the economy could operate:

a. anywhere on the curve and only on the curve.


b. anywhere on the curve or anywhere inside it (below and to the left).


c. anywhere on the curve, inside it, or outside it.


d. all of the above.


e. none of the above.

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.

If an economy did somehow add to its input stock, or if it did discover new production techniques, thenthe production-possibility curve would:

a. remain unchanged.


b. move appropriately inward and to the left.


c. move appropriately outward and to the right.


d. all of the above.


e. none of the above.

On the dark production frontier labeled ABCD, which point corresponds to the economy’s valuing foodmost heavily?

a. A.


b. B.


c. C.


d. D.


e. E.

A shift in the dark PPF curve to the position indicated by the line marked “1” would be appropriate toillustrate:

a. a change in the tastes of the population whereby its members want more food produced and less clothing.


b. the appearance of some new resources useful only in the clothing industry.


c. an improvement in technology applicable to both industries.


d. a change in the production mix involving an increase in clothing output and a decrease in food output.


e. the development of a better technology in the food industry alone

Which alternative in question 22 would have applied if the dark PPF had shifted to position 2?

a. a change in the tastes of the population whereby its members want more food produced and less clothing.


b. the appearance of some new resources useful only in the clothing industry.


c. an improvement in technology applicable to both industries.


d. a change in the production mix involving an increase in clothing output and a decrease in food output.


e. the development of a better technology in the food industry alone.

Which alternative in question 22 would have applied if the dark PPF had shifted to position 3?

a. a change in the tastes of the population whereby its members want more food produced and less clothing.


b. the appearance of some new resources useful only in the clothing industry. 5


c. an improvement in technology applicable to both industries.


d. a change in the production mix involving an increase in clothing output and a decrease in food output.


e. the development of a better technology in the food industry alone.

As the economy moves from point A to point B:

a. it gives up 8 units of housing and gains 40 units of food.


b. it gives up 8 units of food and gains 40 units of housing.


c. idle resources become fully employed.


d. the economy becomes more efficient.


e. there is a breakthrough in technology.

As the economy moves from point B to point C:

a. it gives up 20 units of food and gains about 17 units of housing.


b. it gives up 20 units of housing and gains about 17 units of food.


c. idle resources become fully employed.


d. the economy becomes more efficient.


e. there is a breakthrough in technology.

Assume that an advance in technology is responsible for the shift from PPF I to PPF II. It appears thattechnology:

a. affected both industries equally.


b. had a relatively greater influence on the food industry.


c. had a relatively greater influence on the housing industry.


d. was actually destroyed.


e. none of the above

The concept of opportunity cost is:

a. useful only when discussing the production possibility frontier.


b. used to measure costs in terms of the next-best alternative.


c. measured in dollars and cents.


d. used only by professional economists.


e. none of the above.

The opportunity cost of repairing the roads in town could be:

a. putting an addition on the school.


b. purchasing new snow removal equipment.


c. changing from a volunteer to a full-time fire department.


d. any of the above, depending upon which is the next-best alternative.


e. none of the above.