Economics 2301

Which of the following best describes scarcity?

• Markets cannot properly allocate resources

• Wants cannot be fulfilled and thus all goods must be rationed

• Prices of goods are very high

• Unlimited wants exceed the limited resources available

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn ​$800,000 next year playing for a minor league baseball​ team, ​$300,000 next year playing for a European professional football​ team, or​ $0 returning to college for another year.

The opportunity cost of the​ student-athlete returning to college next year is

• $0

• $800000

• $300000

• $500000

Productive efficiency means that

• a good or service is produced at the lowest possible cost

• every good or service is produced up to the point where marginal benefit is equal to marginal cost

• a good or service is produced as quickly as possible

• every good or service is distributed fairly

Scarcity is central to the study of economics because it implies that

• economic agents are rational

• society must make decisions at the margin

• wants are unlimited

• every choice involves an opportunity cost

Allocative efficiency means that

• every good or service is distributed fairly

• a good or service is produced as quickly as possible

• every good or service is produced up to the point where marginal benefit is equal to marginal cost

• a good or service is produced at the lowest possible cost

Opportunity cost is

• the highest valued alternative that must be given up to engage in an activity

• when unlimited wants exceed the limited resources available to fulfill those wants

• when consumers and firms use all available information as they act to achieve their goals

• the idea that because of​ scarcity, producing more of one good or service means producing less of another good or service.

A production possibilities frontier:

• shows the act of buying and selling

• shows the market for a good or service.

• shows how unlimited wants exceed the limited resources available to fulfill those wants

• shows the maximum attainable combinations of two goods that may be produced with available resources.

We can show economic efficiency:

• with points outside the production possibilities frontier.

• with points on the production possibilities frontier.

• with points inside and on the production possibilities frontier.

• with points on and outside the production possibilities frontier.

We can show economic inefficiency:

• with points inside the production possibilities frontier.

• with points inside and on the production possibilities frontier

• with points outside the production possibilities frontier.

• with points on the production possibilities frontier

The production possibilities frontier will shift outward

• if resources are not used in production.

• if resources are not used to produce capital goods

• if technological advances occur

• if production occurs outside the production possibilities frontier