Chapter 2 Quiz: Choice in a World of Scarcity

Why is there scarcity?

Because our unlimited wants exceed our limited resources

Which of the following would most likely shift the production possibilities curve inward?

a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

The opportunity cost of an action:

is a subjective valuation that can be determined only by the individual who chooses the action.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

15 points on the history exam.

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is:

7 points on the economics exam

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy:

is not using its resources efficiently.

Scarcity implies that:

it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

In many cases, it is reasonable to refer to the ________________ as the price.

opportunity cost

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.

sunk costs

The opportunity cost of attending university is likely to include all except which of the following?

the cost of haircuts received during the school term

Scarcity exists because of:

unlimited wants and limited resources.

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

utility

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above:

All of the above occur. A. the economy begins using its resources efficiently to produce both food and clothing B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food.

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is:

All points on the production possibilities frontier are equally efficient.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

Allocative efficiency

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

Marginal analysis

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

Normative statements

Refer to Figure 2-1. The most inefficient point depicted is:

Point G

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

Positive statements

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

The law of _______________ explains why people and societies rarely make all-or-nothing choices.

diminishing marginal utility

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

either b) or c) occurs, but not as a result of a). B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology.

Economists refer to this pattern, the _______________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

law of diminishing marginal utility

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

As a person receives more of a good, the _______________ from each additional unit of the good declines.

marginal utility

The marginal benefit of a slice of pizza is the:

maximum amount that a consumer is willing to pay for the slice.