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Scarcity, Opportunity Cost and PPC Practice Set 2
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Which of the following principles underlie the interaction of individual choices?
A. Resources are scarce.
B. Marginal analysis is used for “how much” decisions.
C. Resources should be used as efficiently as possible to achieve society's goals.
D. People usually exploit opportunities to make themselves better off.
E. Government policies can change spending.
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2. Economists believe that resources should be used as efficiently as possible to:
A. achieve society's goals.
B. eliminate scarcity.
C. reduce inequity.
D. maximize profits.
E. increase technological growth.
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3. If an economy has not achieved efficiency, there must exist ways to:
A. increase opportunity costs.
B. eliminate inequity.
C. make some people better off without making others worse off.
D. increase the incentives for its citizens to follow their own self-interest.
E. reduce poverty.
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4. An increase in efficiency means that an economy has:
A. increased its opportunity costs.
B. increased the equity of its distribution of goods and services.
C. made some people better off without making others worse off.
D. increased the incentives for its citizens to follow their own self-interest.
E. reduced the rate of technological progress.
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5. The trade-off between equity and efficiency occurs because:
A. the efficient allocation of resources is bad for business and industry.
B. allocating resources fairly may cause inefficiency.
C. to ensure equity everyone must pay more tax.
D. efficiency is politically unpopular.
E. equity is politically unpopular.
____
6. In most cases, economic efficiency is achieved through:
A. individuals that sacrifice their own self-interest.
B. regulation of the invisible hand.
C. individuals seeking out opportunities that involve no risk.
D. maximizing equity.
E. incentives built into a market economy.
____
7. The incentives built into the market economy ensure that resources are put to good use and that opportunities
to make people better off are not wasted. This means that:
A. people usually exploit opportunities to make themselves better off.
B. markets move toward equilibrium.
C. resources should be used as efficiently as possible to achieve society's goals.
D. markets usually lead to efficiency.
E. markets usually promote equity over efficiency.
____
8. If an economy is efficient, this means:
A. all goods are produced at their maximum quantities.
B. all opportunities to make people better off without making other people worse off have
been taken.
C. more resources have been used to produce specific consumer goods than producer goods.
D. prices are the lowest they can possibly be.
E. there is no role for the government in the marketplace.
Figure 3-1: Guns and Butter
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9. Based on the “Guns and Butter” Figure 3-1, the combination of guns and butter at point H:
A. can be attained, but would cost too much.
B. is unattainable due to excessive government gun regulation.
C. has no meaning since it does not relate to the preferences of consumers.
D. is attainable but would increase unemployment.
E. cannot be attained, given the level of technology and the factors of production available.
____ 10. If an economy is producing a level of output that is on its production possibility curve, the economy has:
A. idle resources.
B. idle resources but is using resources efficiently.
C. no idle resources but is using resources inefficiently.
D. no idle resources and is using resources efficiently.
E. zero opportunity cost for increasing the production of one good.
____ 11. Technological improvements will:
A. leave the production possibility curve unchanged.
B. shift the production possibility curve inward.
C. shift the production possibility curve outward.
D. necessarily lead to increased unemployment.
E. increase the slope of the production possibility curve.
____ 12. In terms of the production possibility curve, inefficient use of available resources is shown by:
A.
B.
C.
D.
E.
an increase in the labor force growth rate.
a movement from one point to another along the production possibility curve.
an inward shift of the production possibility curve.
a point located inside the production possibility curve.
a point located outside the production possibility curve.
Figure 3-5: Tom’s Production Possibilities
____ 13. Use the “Tom's Production Possibilities” Figure 3-5. In the figure, which point or points would represent
(an) efficient combination(s) of wine and wheat that Tom could choose to produce?
A. A
B. B and D
C. B and C
D. D
E. C and D
____ 14. Use the “Tom's Production Possibilities” Figure 3-5. In the figure, which point or points represent a
combination of wine and wheat that is not feasible for Tom to produce at this time?
A. A
B. A and B
C. B and C
D. C
E. C and D
Figure 3-6 Production Possibility Curve
____ 15. Use the “Production Possibility Curve” Figure 3-6. If the economy were operating at point B, producing 16
units of cars and 12 units of computers per period, a decision to move to point E and produce 18 units of
computers:
A. indicates you can have more computers and cars simultaneously.
B. makes it clear that this economy experiences decreasing opportunity costs.
C. involves a loss of 8 units of cars per period.
D. involves a loss of 4 units of cars per period.
E. involves a loss of 2 units of cars per period.
Figure 3-10: Consumer and Capital Goods II
____ 16. Use the “Consumer and Capital Goods II” Figure 3-10. If the economy is operating at point Y and its
relevant PPF is Curve 1, this means that:
A. the economy is at full employment and is efficient.
B. the economy is less than fully employed.
C. the economy is not efficient.
D. economic growth is not possible in the future.
E. the economy is temporarily operating beyond its productive capacity.
____ 17. Use the “Consumer and Capital Goods II” Figure 3-10. The movement from Curve 1 to Curve 2 indicates:
A. a growing ability of the economy to produce capital and consumer goods.
B. going from unemployment to full employment.
C. a decrease in the factors of production.
D. a shift of the PPF towards producing less goods.
E. a macroeconomic recession.
____ 18. Within the context of the production possibility curve framework, if the opportunity cost of producing either
of the two goods in question is constant and does not change, this means the production possibility curve is:
A. a U-shaped curve.
B. concave to the origin.
C. convex to the origin.
D. upward-sloping.
E. linear.
Scarcity, Opportunity Cost and PPC Practice Set 2
Answer Section
MULTIPLE CHOICE
1. ANS:
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18. ANS:
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C
PTS:
Concept-Based
A
PTS:
Fact-Based
C
PTS:
Concept-Based
C
PTS:
Concept-Based
B
PTS:
Concept-Based
E
PTS:
Fact-Based
D
PTS:
Critical Thinking
B
PTS:
Definitional
E
PTS:
Critical Thinking
D
PTS:
Fact-Based
C
PTS:
Fact-Based
D
PTS:
Fact-Based
B
PTS:
Critical Thinking
D
PTS:
Critical Thinking
C
PTS:
Analytical Thinking
A
PTS:
Concept-Based
A
PTS:
Concept-Based
E
PTS:
Concept-Based
1
DIF: M
REF: Module 3
1
DIF: E
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: E
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: E
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3
1
DIF: M
REF: Module 3