The Economizing Problem Quiz with answers
1. The economizing problem is one of deciding how to make the best use of: A) virtually unlimited resources to satisfy virtually unlimited wants. B) limited resources to satisfy virtually unlimited wants. C) unlimited resources to satisfy limited wants. D) limited resources to satisfy limited wants. 2. The concept of economic efficiency is primarily concerned with: A) the limited wants-unlimited resources dilemma. B) considerations of equity in the distribution of wealth. C) obtaining the maximum output from available resources. D) the conservation of irreplaceable natural resources. 3. When the economist says that economic wants are insatiable, this means that: A) economic resources are valuable only because they can be used to produce consumer goods. B) economic resources--land, labor, capital, and entrepreneurial ability--are scarce. C) these wants are virtually unlimited and therefore incapable of complete satisfaction. D) the structure of consumer demand varies from time to time and from country to country. 4. The fundamental problem of economics is: A) to establish a democratic political framework for the provision of social goods and services. B) the establishment of prices that accurately reflect the relative scarcities of products and resources. C) the scarcity of productive resources relative to economic wants. D) to achieve a more equitable distribution of money income in order to mitigate poverty. 5. Because of their scarcity, the efficient use of resources is: A) an important issue in all economies. B) an important issue only in centrally planned economies. C) an important issue only in market economies. D) not an important issue.
6. An increase in efficiency suggests that an economy: A) has moved from a point outside of, to a point on, its production possibilities curve. B) has decided to produce more consumer goods and fewer capital goods. C) has moved from a point on, to a point inside, its production possibilities curve. D) is able to get more output from a given amount of inputs.
7. The four factors of production are: A) land, labor, capital, and money B) land, labor, capital, and entrepreneurial ability C) labor, capital, technology, and entrepreneurial ability D) labor, capital, entrepreneurial ability, and money 8. Money is not an economic resource because: A) money, as such, is not productive. B) idle money balances do not earn interest income. C) the terms of trade can be determined in nonmonetary terms. D) money is not a free gift of nature. 9. Economic resources are also called: A) free gifts of nature. B) consumption goods. C) units of money capital. D) factors of production. 10. Which of the following is real capital? A) a pair of stockings B) a construction crane C) a savings account D) a share of IBM stock 11. The main function of the entrepreneur is to: A) make routine pricing decisions. B) innovate. C) purchase capital. D) create market demand.
Efficiency; full employment and full production 12. Assuming an economy has fixed quantities of resources, that economy: A) is more efficient, the larger the amount of goods and services it produces. B) is able to satisfy all consumer wants. C) will produce the same output whether or not resources are used efficiently. D) is able to produce the same amount of output regardless of the production technologies it chooses. 13. Productive efficiency refers to: A) the use of the least-cost method of production. B) the production of the product-mix most wanted by society. C) the full employment of all available resources. D) production at some point inside of the production possibilities curve. 14. If an economy produces its most wanted goods but uses outdated production methods, it is: A) achieving productive efficiency, but not allocative efficiency. B) not achieving productive efficiency. C) achieving both productive and allocative efficiency. D) engaged in roundabout production. 15. To realize full production a society must achieve: A) income inequality. B) productive efficiency only. C) both allocative and productive efficiency. D) any output lying inside of its production possibilities curve. Production possibilities analysis 16. The production possibilities curve illustrates the basic principle that: A) the production of more of any one good will in time require smaller and smaller sacrifices of other goods. B) an economy will automatically obtain full employment of its resources. C) 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. D) an economy's capacity to produce increases in proportion to its population size.
17. Unemployment and/or productive inefficiencies: A) cause the production possibilities curve to shift outward. B) can exist at any point on a production possibilities curve. C) are both illustrated by a point outside the production possibilities curve. D) are both illustrated by a point inside the production possibilities curve. 18. A production possibilities curve shows: A) that resources are unlimited. B) that people prefer one of the goods more than the other. C) the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources. D) combinations of capital and labor necessary to produce specific levels of output. 19. Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods: A) will remain unchanged. B) may be either increased or decreased. C) must be decreased. D) must also be increased. Opportunity costs Opportunity costs 20. In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of: A) scarcity and opportunity costs. B) money and real capital. C) complementary economic goals. D) full production. 21. Which one of the following expressions best states the idea of opportunity cost? A) "A penny saved is a penny earned." B) "He who hesitates is lost." C) "There is no such thing as a free lunch." D) "All that glitters is not gold."
22. The idea of opportunity cost: A) applies to consumers, but not to businesses. B) applies to businesses, but not to consumers. C) is relevant to economies of all ideological persuasions. D) would disappear if we were able to eliminate poverty. 23. The law of increasing opportunity costs states that: A) if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so. B) the sum of the costs of producing a particular good cannot rise above the current market price of that good. C) if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D) if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate. 24. The law of increasing opportunity costs exists because: A) resources are not equally efficient in producing various goods. B) the value of the dollar has diminished historically because of persistent inflation. C) wage rates invariably rise as the economy approaches full employment. D) consumers tend to value any good more highly when they have little of it. Allocative efficiency 25. Allocative efficiency is concerned with: A) producing the combination of goods most desired by society. B) achieving the full employment of all available resources. C) producing every good with the least-cost combination of inputs. D) reducing the concavity of the production possibilities curve. 26. Allocative efficiency involves determining: A) which output-mix will result in the most rapid rate of economic growth. B) which production possibilities curve reflects the lowest opportunity costs. C) the point on the production possibilities curve that will maximize society's satisfaction. D) the optimal rate of technological progress.
27. Allocative efficiency refers to: A) the use of the least-cost method of production. B) the production of the product-mix most wanted by society. C) the full employment of all available resources. D) production at some point inside of the production possibilities curve. 28. The optimal or allocatively efficient point on a production possibilities curve is achieved where: A) the smallest physical amounts of inputs are used to produce each good. B) each good is produced at a level where marginal benefits equal marginal costs. C) large amounts of capital goods are produced relative to consumer goods. D) large amounts of consumer goods are produced relative to capital goods. 29. The marginal benefit curve is: A) upsloping because of increasing marginal opportunity costs. B) upsloping because successive units of a specific product yield less and less extra utility. C) downsloping because of increasing marginal opportunity costs. D) downsloping because successive units of a specific product yield less and less extra utility. 30. The marginal cost curve is: A) upsloping because of increasing marginal opportunity costs. B) upsloping because successive units of a specific product yield less and less extra utility. C) downsloping because of increasing marginal opportunity costs. D) downsloping because successive units of a specific product yield less and less extra utility. Economic growth and decline 31. The basic difference between consumer goods and capital goods is that A) consumer goods are produced in the private sector and capital goods are produced in the public sector. B) an economy that commits a relatively large proportion of its resources to capital goods must accept a lower growth rate. C) the production of capital goods is not subject to the law of increasing opportunity costs. D) consumer goods satisfy wants directly while capital goods satisfy wants indirectly.
32. Which of the following would be most likely to shift the production possibilities curve to the right? A) a sudden and substantial expansion of consumer wants B) an improvement in the literacy level and general level of education C) a decline in the size of the population and labor force D) shifting resources from the production of capital goods to the production of consumer goods. 33. Other things equal, which of the following would shift an economy's production possibilities curve to the left? A) the discovery of a low-cost means of generating and storing solar energy B) the entrance of more women into the labor force C) a law requiring mandatory retirement from the labor force at age 55 D) an increase in the proportion of total output that consists of capital or investment goods
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. B C C C A D B A D B B A A B C C D C C A C C A A A C B B D A D B C