BEC Homework 1 - Chapter 1 and 2

The law of increasing opportunity costs states that: A. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so. B. the sum of the costs of producing a particular good cannot rise above the current market price of that good. C. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D. if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.

A. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

The coordination problem in the centrally planned economies refers to the idea that: A. planners had to direct required inputs to each enterprise. B. the price level and the level of employment were inversely related. C. the immediate effect of more investment was less consumption. D. exports had to be equal to imports for a central plan to work.

A. planners had to direct required inputs to each enterprise.

A nation's production possibilities curve is bowed out from the origin because: A. resources are not generally equally efficient in producing every good. B. the originator of the idea drew it this way and modern economists follow this convention. C. resources are scarce. D. wants are virtually unlimited.

A. resources are not generally equally efficient in producing every good.

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of: A. scarcity and opportunity costs. B. money and real capital. C. complementary economic goals. D. full production.

A. scarcity and opportunity costs

In a market economy firms select the least-cost production technique because: A. such choices will result in full employment of available resources. B. to do so will maximize the firms' profits. C. this will prevent new firms from entering the industry. D. "dollar voting" by consumers mandates such a choice.

B. to do so will maximize the firms' profits.

"Consumer sovereignty" refers to the: A. fact that resource prices are higher than product prices in capitalistic economies. B. idea that the pursuit of self-interest is in the public interest. C. idea that the decisions of producers must ultimately conform to consumer demands. D. fact that a Federal agency exists to protect consumers from harmful and defective products.

C. idea that the decisions of producers must ultimately conform to consumer demands.

The production possibilities curve: A. shows all of those levels of production that are consistent with a stable price level. B. indicates that any combination of goods lying outside the curve is economically inefficient. C. is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. D. shows all of those combinations of two goods that are most preferred by society.

C. is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

Which of the following is a land resource? A. a farmer B. an oil drilling rig C. a machine for detecting earthquakes D. natural gas

D. natural gas

Which of the following is a labor resource? A. a computer programmer B. a computer C. silicon (sand) used to make computer chips D. a piece of software used by a firm

A. a computer programmer

The basic purpose of the other-things-equal assumption is to: A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. B. allow one to focus upon micro variables by ignoring macro variables. C. allow one to focus upon macro variables by ignoring micro variables. D. determine whether X causes Y or vice versa.

A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially: A. "Through government leadership and direction." B. "Through the guiding function of prices and the incentive function of profits." C. "Through training and retraining programs." D. "Through trial and error."

B. "Through the guiding function of prices and the incentive function of profits."

The French term "laissez-faire" means: A. "there is no free lunch." B. "let it be." C. "circular flow." D. "public ownership."

B. "let it be."

Which of the following is a distinguishing feature of a command system? A. private ownership of all capital. B. central planning. C. heavy reliance on markets. D. wide-spread dispersion of economic power.

B. central planning.

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially: A. "With as much machinery as possible." B. "Using the latest technology." C. "By exploiting labor." D. "Using the least-cost production techniques."

D. "Using the least-cost production techniques."

Refer to the above diagram. This economy will experience unemployment if it produces at point: A. A. B. B. C. C. D. D.

D. D

Which of the following is one of the Five Fundamental Questions? A. Which products will be in scarce supply and which in excess supply? B. Who should appoint the head of the central bank? C. How much should society save? D. What goods and services will be produced?

D. What goods and services will be produced?

Suppose that an individual sees a tremendous opportunity to produce and sell a new product, but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the: A. coordination problem under communist central planning. B. self-sufficiency dilemma under communism. C. asymmetric information problem under communism. D. incentive problem under communist central planning.

D. incentive problem under communist central planning.

A normative statement is one that: A. is based on the law of averages. B. applies only to microeconomics. C. applies only to macroeconomics. D. is based on value judgments.

D. is based on value judgments.

Unemployment: A. causes the production possibilities curve to shift outward. B. can exist at any point on a production possibilities curve. C. is illustrated by a point outside the production possibilities curve. D. is illustrated by a point inside the production possibilities curve.

D. is illustrated by a point inside the production possibilities curve.

Economists contend that most economic decisions are: A. random B. chaotic C. spontaneous D. rational

D. rational