Chapter 2, Assignment 1
D
As part of their budget tightening process, many states are cutting aid to colleges and universities, with students being asked to pick up a bigger part of the escalating tab of higher education. Which of the following would do the most to enable you to cope with those higher expenses without impairing your progress toward a degree? A) Taking fewer classes per semester or classes with lower associated expenses. B) Obtaining a part-time job. C) Aggressively pursuing loans, grants, and benefactors. D) Reducing your consumption of goods and services not essential to your education. E) Forming a student lobbying group to protest the budget cuts.
A
Prepping for a next-day exam over the course of an evening (and possibly into the wee hours of the test day) poses increasing costs since A) the longer you choose to study will result in an increase in the number and value of foregone activities. B) studying productivity declines sharply as the effort extends through the evening. C) tutors charge higher rates after 7 p.m. D) evenings are a less productive time to study compared to daylight hours.
E
The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource limitations, the extent to which security is enhanced will most likely be determined by A) the public's tolerance of a potentially more intrusive state. B) the availability and expertise of trained anti-terror personnel. C) funding availability. D) the willingness of those in power to restructure the current security apparatus, including the dismissal/reassignment of current security leadership. E) society's willingness to forego other goods and services, both public and private.
D
The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity. A) more proportional B) greater C) more instant D) smaller
B
The production possibilties frontier will shift outward A) if rsources are used to produce consumption goods. B) if resources are used to produce capital goods. C) if technology declines. D) if resources are not used in production. E) if production occurs outside the production possibilities frontier.
D
We can show economic inefficiency: A) with points on the production possibilities frontier. B) with points outside the production possibilities frontier. C) with points on and outside the production possibilities frontier. D) with points inside the production possibilities frontier. E) with points inside and on the production possibilities frontier.
B
A news article described a new prescription drug that costs up to "$94,000 for one 12-week treatment regimen" to treat hepatitis C, which is a liver disease that afflicts as many as 3 million people in the United States. It can result in severe liver damage and even death. It is potentially curable, but the prescription drugs available to treat it are very expensive. State government Medicaid programs provide medical insurance to poor and disabled people. In Louisiana, spending on Medicaid accounts for nearly half of the state government's budget. Rebekah Gee is the secretary of the Louisiana Department of Health. She was quoted as saying that it is unacceptable that many Medicaid patients with hepatitis C are not receiving treatment, "but it's also unacceptable for me to pay over $700 million and have to cut primary education, gut our payments to universities and decimate the health care delivery system for just one disease condition." What trade-offs do state governments face when new prescription drugs are introduced with much higher prices than existing drugs? A) An increase in spending on prescription drugs will decrease the incentive for firms to invent new drugs. B) Increases in spending on prescription drugs will require reductions in other government programs or services. C) Higher prescription drug prices mean that state governments will not be able to balance their budgets. D) Stare governments won't face any trade-offs since prescription drugs are covered by most Medicaid programs.
D
A production possibilities frontier (PPF) is A) a curve that illustrates the demand of two goods for the average consumer. B) a curve showing the generally attainable combinations of two products that may be produced with all planned or potential, yet undeveloped technology. C) a curve that shows the potential productive capabilities of the frontier (defined as the outside of cities) of a developing economy. D) a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
Buying; consuming
An economist remarks that "the cost of consuming a book is the combination of the retail price and the opportunity cost of the time spent reading." The cost of _________ a book is the price you pay to buy the book, but the cost of ________ a book would include the time spent reading the book.
C
How should policymakers determine the amount of money that should be allocated for research curing heart disease? They should base their decision on A) the value of the total benefit of the research on heart disease. B) the value of the total benefit of research on curing other diseases. C) whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases. D) the number of people who have heart disease compared to the number of people who have other diseases. E) the number of people who die from heart disease compared to the number of people who die from other diseases.
B
In The Wonderful Wizard of Oz and his other books about the Land of Oz, L. Frank Baum observed that if people's wants were modest enough, most goods would not be scarce. According to Baum, this was the case in Oz: "There were poor people in the Land of Oz, because there was no such thing as money... Each person was given freely by his neighbors whatever he required for his use, which is as much as anyone may reasonably desire. Some tilled the lands and raised great crops of grain, which was divided equally among the whole population, so that all had enough. There were many tailors and dressmakers and shoemakers and the like, who made things that any who desired them might wear. Likewise there were jewelers who made ornaments for the person, which pleased and beautified the people, and these ornaments also were free to those who asked for them. Each man and woman, no matter what he or she produced for the good of the community, was supplied by the neighbors with food and clothing and a house and furniture and ornaments and games. If by chance the supply ever ran short, more was taken from the great storehouses of the Ruler, which were afterward filled up again when there was more of any article than people needed... You will know, by what I have told you here, that the Land of Oz was a remarkable country. I do not suppose such an arrangement would be practical with us." Do you agree with Baum that the economic system in Oz wouldn't work in the contemporary United States? A) The system in Oz would work. The United States has more resources than Oz to fulfill the people's wants. B) The system in Oz wouldn't work. The wants of people in the United States exceed the resources available to fulfill those wants. C) The stem in Oz wouldn't work. Even without modest wants, goods are not scarce in the United States. D) The system in Oz would work. There is no scarcity in Oz or in the United States. E) The system in Oz wouldn't work. People in the United States are less willing to give freely to their neighbors.
E
Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need of analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." It would be more moral to reduce pollution, A) not taking the cost into account because pollution is potentially harmful to our health. B) not taking the cost into account because pollution reduction is typically associated with large benefits. C) taking the cost into account because reducing pollution often reduces economic growth. D) taking the cost into account because the total cost of reducing pollution is likely enormous. E) taking the cost into account because money spent on pollution reduction is not available for other worthy activities.
D
Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods. Is it likely that the production possibilities frontier in this situation would be a straight line or bowed out? A) The production possibilities frontier would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods. B) The production possibilities frontier would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods. C) The production possibilities frontier would likely be bowed out because resources are likely equally well suited to produce both consumption and capital goods. D) The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods.
C
What are the implications of this idea for the shape of the production possibilities frontier? A) The production possibilities frontier will have a negative slope. B) The production possibilities frontier will be a straight line. C) The production possibilities frontier will be bowed outward. D) The production possibilities frontier will be bowed inward. E) The production possibilities frontier will have a positive slope.
A
What do economists mean by scarcity? A) Economists mean that unlimited wants exceed limited resources. B) Economists mean that the economy is unable to produce increasing quantities of goods and services. C) Economists mean that production is inefficient. D) Economists mean that people are not employed. E) Economists mean that trade is not possible.
C
What does increasing marginal opportunity costs mean? A) Increasing the production of a good small we and smaller decreases in the production of another good. B) The economy is unable to produce increasing quantities of goods and services. C) Increasing the production of a good requires larger and larger decreases in the production of another good. D) Increasing the production of a good requires decreases in the production of another good. E) Production is not occurring on the production possibilities frontier.
D
What factors should state governments take into account when deciding how to allocate the scarce funds in their budgets? A) State government last should not have to worry about allocating any money for prescription drugs because this is the patient's responsibility. B) State governments should always allocate enough funds in their budget for prescription drugs so that patients won't die from a disease. C) Since state governments' budgets do not have to be balanced, money can be spent on education and heath care such that both sectors receive as much money as they need. D) How best to allocate a state government's limited resources is a normative issue and depends on how governors and state legislators evaluate the trade-offs involved.
B
What is the opportunity cost of spending more money to find a cure for heart disease? A) The cost of the Medicare/Medicaid program. B) The reduction in funding for research to cure other diseases. C) The monetary value of a human life. D) The total explicit cost of the research to cure heart disease. E) The reduction in future health-related costs of heart disease.
D
Which of the following events would create economic growth, that is, shift the production possibilities frontier outward? A) An increase in technology that affects the production of both goods. B) An increase in the available labor. C) An increase in the available natural resources. D) All of the above.
E
Which of the following is not scarce according to the economic definition? A) Time. B) Coal. C) Capital. D) Food. E) None of the above.