Economics 251 - Review
Questions Chapter 1
(1) The
economic problem of scarcity exists because:
(a) we are capable of producing more than people actually want.
(b) society’s wants exceed the capability of the resources
available to satisfy those wants.
(c) we are inefficient in producing goods and services.
(d) the government is unable to effectively re-distribute goods
and services among people.
(2) The
concept of opportunity cost would become irrelevant if:
(a) the market mechanism functioned to allocate resources.
(b) the government allocated resources.
(c) the production possibilities curve bowed outward.
(d) resources were no longer scarce.
(3) Which
of the following is the best example of the economic meaning of the word
“capital”?
(a) Stocks
traded on the New York Stock Exchange.
(b) A
manufacturing plant.
(c) Bonds
issued by the U.S. Government.
(d) Money
held in a personal savings account.
(4) If
the economy is operation inside the production-possibilities curve:
(a) some of society’s additional wants could be satisfied
without sacrificing an other goods.
(b) the opportunity cost of producing additional goods is zero.
(c) some resources are either unemployed or underemployed.
(d) All
of the above are true.
(5) Which
of the following events would cause the production-possibilities curve to shift
inward?
(a) The
labor supply grows.
(b) New
factories are built.
(c) A
technological breakthrough occurs that makes production of all goods and
services more efficient.
(d) A
major earthquake destroys several industrial centers.
(6) The
U.S. is capable of producing more goods and services now than in 1900 because
of:
(a) a greater quantity of labor
(b) a greater quantity of capital.
(c) better production technology.
(d) All
of the above are true.
(7) Pollution
is an example of:
(a) the firm being inefficient and not maximizing profits.
(b) market failure.
(c) government failure.
(d) All
of the above are true.
(8) Which
of the following best reflects the concerns of macroeconomics?
(a) unemployment, inflation, and growth of the national economy.
(b) output and pricing practices in the automobile industry.
(c) demand by consumers for new varieties of apples.
(d) layoffs in the steel industry in Northwest Indiana.
(9) The
market mechanism:
(a) is not a very efficient means of communicating consumer
wants to the producers of goods and services.
(b) works through central planning by government.
(c) uses prices as a means of communication between consumers
and producers.
(d) is not very efficient because there is no direct means of
communication between consumers and producers.
(10) In
Figure 1, at which of the following points would the opportunity cost of
producing either more CD’s or more computers be zero?
Figure
1
(a) A
(b) C
(c) D
(d) E