1.1 & 1.2 - Scarcity and PPC

Which of the following is the most fundamental issue that economics addresses?

• Choice of appropriate technology

• Reduction of unemployment

• Reduction of budget deficit

• Promotion of privatization

• Use of scarce resources

Which of the following best describes human capital?

• The number of workers in the labor force

• The physical capital used by workers

• The financial assets owned by workers

• The training and education of workers

• The spending by business for worker recruitment

Unlike a market economy, a command economy uses

• more centralized planning in economic decision making

• consumer sovereignty to make production decisions

• its resources more efficiently

• price signals in economic decision making

• the popular vote in making resource allocation decisions

All societies face a trade-off for every decision for which of the following reasons?

• A decision entails zero opportunity cost.

• Resources are scarce.

• Some resources are always unemployed.

• Resources have no alternative uses.

• Resources are not allocated efficiently.

The concept of opportunity cost would no longer be relevant if

• poverty in an economy no longer existed

• the supply of all resources were unlimited

• resources were allocated efficiently

• real wages were flexible

• all current incomes were invested in technological research

Which of the following would shift a country’s production possibilities curve inward?

• A reduction in the country’s inflation rate

• A reduction in the country’s real interest rate

• A reduction in the size of the country’s labor force

• An increase in the typical retirement age in the country

• An increase in the country’s cyclical unemployment rate

Which of the following would cause the production possibilities curve shown above to shift outward?

• Reopening steel plants that had been closed

• Rehiring laid-off steelworkers

• Using machinery for missile production instead of steel production

• Using machinery for steel production instead of missile production

• Developing a more efficient steelmaking process

Which of the following is always true of an economy operating on its production possibilities frontier?

• Its resources are fully employed.

• It is allocatively efficient.

• It cannot trade with other nations because it is the most efficient producer of tradeable goods.

• It will necessarily operate on the same frontier the following year.

• It must be a command economy.

Which of the following concepts can be illustrated using the production possibilities curve?

I. Choice

II. Scarcity

III. Price level

IV. Opportunity cost

• II only

• I and III only

• III and IV only

• I, II, and IV only

• II, III, and IV only

When an economy producing two goods is operating efficiently and at full employment, increasing the production of one good will result in

• an inward shift of the production possibilities curve

• an outward shift of the production possibilities curve

• a decrease in the amount of the other good that can be produced

• an increase in the costs of both goods

• an increase in the amount of resources available