Chapter 1- True False

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The production possibilities frontier (PPF) is downward sloping because of scarcity.

T

If an economy is experiencing high unemployment its level of output is inside its PPF

T

"no free lunch" means that we must pay money for everything we get

F

If we say that two variables are directly related, this means that an increase in one variable is associated with an increase in the other variable.

T

Resources are being efficiently allocated to a product when the marginal benefit (MB) of the product equals its marginal cost (MC)

T

The PPF bows outward form the origin because opportunity costs increase as the production of a good increases.

T

If the marginal benefit (MB) of an activity exceeds its marginal cost (MC), then society is under-allocating resources to this activity or producing too little.

T

According to marginal analysis a decision maker takes an action if the marginal benefit of the action is positive

F

An economic model is unrealistic and therefore of no practical significance

F

Economic growth is represented by a movement from a point inside the PPF to a point on the curve.

F

Economic models are limited to variables that are directly related to one another

F

Economics is primarily concerned with determining the most equitable distribution of society's income

F

For an economy to reach its maximum output, an economy must eliminate scarcity.

F

Form an economic perspective, then a student decides to attend another year of college the student has concluded that the marginal benefits of attending college has increased that year.

F

Given a substantial expansion of society's wants the economy can produce at a point outside its production possibilities frontier.

F

If an economy is operating efficiently, it is not possible to increase production of any good.

F

Scarcity arises when people find themselves living in poverty

F

Scarcity arises when there is never enough of anything

F

The effect of reducing high unemployment will be to shift the economy's PPF outward

F

The process of accumulating common stocks and bonds is known as investment

F

To realize an efficient allocation of resources an economy must achieve an equitable distribution of income.

F

An economic explanation for why most college-aged movies stars do not attend college is ___________________.

Opportunity cost too high

Allocative efficiency arises when the optimal amount of those goods and services most highly valued by society are produced.

T

An unemployed worker is a factor of production

T

Costs exist because resources are limited and have alternative uses.

T

Economic efficiency means that an economy is producing the maximum output from its available resources.

T

The opportunity cost of economic growth is the current _________________ that must be forgone.

consumption

When the marginal cost (MC) of an activity exceeds its marginal benefit (MB), then society is ____________ resources to this activity or producing too much, "there is too much of a good thing."

over-allocating

When the government chooses to old more roads these resources are no longer available for public education. This dilemma illustrates that concept of _______________.

tradeoffs, opportunity cost


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