ECO2013 - Homework Chapters 1 & 2

Which of the following is one of the Five Fundamental Questions?

What goods and services will be produced?

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

bowed in toward the origin.

Refer to the diagram. The combination of computers and bicycles shown by point G is:

unattainable given currently available resources and technology.

Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

will be 4 units of bicycles.

The economizing problem is essentially one of deciding how to make the best use of:

Limited resources to satisfy unlimited economic wants

The production possibilities curve illustrates the basic principle that:

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

The law of increasing opportunity costs states that:

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

The Latin term "ceteris paribus" means:

other things equal.

Refer to the diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

will cost 1 unit of computers.

Which of the following will shift the production possibilities curve to the right?

A technological advance that allows farmers to produce more output from given inputs.

The market system's answer to the fundamental question "What will be produced?" is essentially:

"Goods and services that are profitable."

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

"In ways that minimize the cost per unit of output."

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

"Those willing and able to pay for them."

Refer to the diagram. This economy will experience unemployment if it produces at point:

D.

The basic truth that underlies the study of economics is the fact that we all face:

Scarcity

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

The invisible hand

Which of the following will not produce an outward shift of the production possibilities curve?

The reduction of unemployment.

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it:

can produce more of both consumer goods and capital goods by using resources that are currently idle.

Refer to the above diagram. Points A, B, C, D, and E show:

combinations of bicycles and computers that society can produce by using its resources efficiently.

The production possibilities curve:

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

Refer to the diagram. The combination of computers and bicycles shown by point F:

is attainable but implies that the economy is not using all its resources.

Economics may best be defined as the:

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

The concept of opportunity cost:

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.

A production possibilities curve shows:

the maximum amounts of two goods that can be produced, assuming the full use of available resources.