1-31 Which of the following is not scarce?

 

 

 

 

 

 

 

A. Incorrect. More people want A's in microeconomics than get them. That makes them scarce.

 

 

 

 

 

 

 

B. Incorrect. People have to give up something to obtain tender Porterhouse steaks. That makes them scarce.

 

 

 

 

 

 

 

C. Incorrect. People have to give up something to get workout tapes, even though every person with a body who weighs less than 250 lbs. has come out with one.

 

 

 

 

 

 

 

D. Correct. We have more trash than we want.

 

 

 

 

 

 

 

E. Incorrect. People have to give up something to obtain economics text books. That's what makes them scarce.

 

 

 

 

 

 

 

1-32 The opportunity cost of an action is

 

 

 

 

 

 

 

A. Incorrect. The opportunity cost is just the highest-valued thing that has to be given up, not all of the things which could have been done instead.

 

 

 

 

 

 

 

B. Correct. The best thing(s) which you can't do because you do something is the opportunity cost.

 

 

 

 

 

 

 

C. Incorrect. The best thing that could have been done with the money instead may be part of the opportunity cost, but time and other resources may also be involved.

 

 

 

 

 

 

 

D. Incorrect. The best thing that could have been done with the time instead may be part of the opportunity cost, but money and other resources may also be involved.

 

 

 

 

 

 

 

E. Incorrect. The best thing(s) which you can't do because you do something is the opportunity cost.

 

 

 

 

 

 

 

1-33 We face costs when we haveIf the interest rate at which the owner can borrow (or invest) funds is 12%

 

 

 

 

 

 

 

A. Incorrect. While costs result when we have more than one option to choose between, there are also other correct answers.

 

 

 

 

 

 

 

B. Incorrect. While costs result when we have scarcity, there are also other correct answers.

 

 

 

 

 

 

 

C. Incorrect. While costs result when we have decisions to make, there are also other correct answers.

 

 

 

 

 

 

 

D. Correct.

 

 

 

 

 

 

 

E. Incorrect.

 

 

 

 

 

 

 

1-34 As one tries to produce more of a good or perform more of a task, the marginal costIf the interest rate at which the owner can borrow (or invest) funds is 10%

 

 

 

 

 

 

 

A. Correct. Marginal opportunity cost increases as we do more of a particular task.

 

 

 

 

 

 

 

B. Incorrect. As more of a good is produced or as more of a task is performed, the marginal cost increases.

 

 

 

 

 

 

 

C. Incorrect. As more of a good is produced or as more of a task is performed, the marginal cost increases.

 

 

 

 

 

 

 

D. Incorrect. Marginal cost still matters (and actually gets more important).

 

 

 

 

 

 

 

E. Incorrect. As more of a good is produced or as more of a task is performed, the marginal cost increases.

 

 

 

 

 

 

 

1-35 The production possibilities curve

 

 

 

 

 

 

 

A. Incorrect. The production possibilities curve only shows those combinations that are efficient (not all of the possible combinations are efficient).

 

 

 

 

 

 

 

B. Incorrect. This is a sort of scrambled answer.

 

 

 

 

 

 

 

C. Incorrect. This is a sort of scrambled answer.

 

 

 

 

 

 

 

D. Correct.

 

 

 

 

 

 

 

 

E. Incorrect. The production possibilities curve shows how much resources can produce if they are utilized efficiently, given current technology.

 

 

 

 

 

 

 

1-36 Suppose an economy can produce various amounts of two goods, food and shelter, using its available resources. The economy is currently producing a mix of food and shelter, and is on its productions possibilities curve. Which statement is also true?

 

 

 

 

 

 

 

A. Incorrect. It is possible for the economy to produce more food, but only by reducing production of shelter.

 

 

 

 

 

 

 

B. Incorrect. It is possible for the economy to produce more shelter, but only by producing less food.

 

 

 

 

 

 

 

C. Incorrect The economy is using its resources efficiently if it is on the production possibilities curve.

 

 

 

 

 

 

 

D. Correct.

 

 

 

 

 

 

 

E. Incorrect. Efficiency is possible even if a mix of products is produced.

 

 

 

 

 

 

 

1-37 Suppose an economy can produce various amounts of two goods, food and shelter, using its available resources. The economy is currently producing a mix of food and shelter, and is below its productions possibilities curve. Which statement is also true?

 

 

 

 

 

 

 

A. Incorrect. It is possible for the economy to produce more food by moving to the production possibilities curve.

 

 

 

 

 

 

 

B. Incorrect. It is possible for the economy to produce more shelter by moving to the production possibilities curve.

 

 

 

 

 

 

 

C. Correct.

 

 

 

 

 

 

 

D. Incorrect. The economy can simultaneously increase its production of both food and shelter by moving to the production possibilities curve.

 

 

 

 

 

 

 

E. Incorrect. Efficiency is possible even if a mix of products is produced.

 

 

 

 

 

 

 

1-38. The slope of the production possibilities curve tells us

 

 

 

 

 

 

 

A. Incorrect. While the slope of the production possibilities curve does indicate the trade-off possible between two goods, that is not the only correct answer.

 

 

 

 

 

 

 

B. Incorrect. While the slope of the production possibilities curve does indicate the marginal cost of producing one of the goods, that is not the only correct answer.

 

 

 

 

 

 

 

C. Incorrect. While the slope of the production possibilities curve does indicate the opportunity cost of one of the goods, that is not the only correct answer.

 

 

 

 

 

 

 

D. Incorrect. While the slope of the production possibilities curve does indicate the 'rise over the run', or the vertical change over the horizontal change, that is not the only correct answer.

 

 

 

 

 

 

 

E. Correct.

 

 

 

 

 

 

 

1-39. Which of the following might correctly be considered when determining the cost of reading a chapter in your textbook?

 

 

 

 

 

 

 

A. Incorrect. Reading the book is an additional action that occurs after the book is purchased, thus the (marginal opportunity) cost of reading the book does not include the price of the textbook.

 

 

 

 

 

 

 

B. Incorrect. Reading the book is an action in addition to enrolling in school (in fact, you could do it without even paying tuition). Thus, the cost of reading the book does not include tuition for school.

 

 

 

 

 

 

 

C. Correct.

 

 

 

 

 

 

 

D. Incorrect. Reading the book is an additional action that occurs after the book is purchased, thus the (marginal opportunity) cost of reading the book does not include the the expense of driving to school to buy the textbook.

 

 

 

 

 

 

 

E. Incorrect.

 

 

 

 

 

 

 

1-40 Suppose a production possibilities curve is constructed for two goods, bread and circuses. The slope of such a production possibilities curve does not indicate

 

 

 

 

 

 

 

A. Incorrect. The slope of the production possibilities curve indicates circuses given up to produce bread, which is the trade-off possible between bread and circuses.

 

 

 

 

 

 

 

B. Incorrect. The slope of the production possibilities curve indicates circuses given up to produce bread, which is the marginal cost of producing bread, in terms of the circuses given up.

 

 

 

 

 

 

 

C. Incorrect. As the quantities of bread are increased, the slope will change to indicate that the marginal cost of bread is rising as we move to higher quantities of bread.

 

 

 

 

 

 

 

D. Correct.

 

 

 

 

 

 

 

E. Incorrect. The slope of the production possibilities curve indicates circuses given up to produce bread. This means that choices must be made and costs must be borne to produce bread.