DEU - Faculty of Business
ECON 1001 Homework for Week 2 - The Economic Problem: Scarcity and Choice
Name:
Number:
Each question is worth 5 points. Please mark your answers in the box below.
1) a
2) a
3) a
4) a
b
b
b
b
c
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c
c
d
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a
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e
9)
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a
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13)
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a
a
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T
b c d
b c d
b c d
/ F
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17)
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20)
T
T
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T
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MULTIPLE CHOICE QUESTIONS
1.
All of the following are resources EXCEPT
a) land, wildlife and minerals
b) buildings, tables and desks
c) labor
d) skills and knowledge
e) all of the above are resources
2.
Which of the following is an example of production?
a) Big Tater Company buys potatoes and manufactures frozen French fries
b) A household owns and lives in its own house
c) A ballet company performs “Swan Lake”
d) Your local government prvides fire protection.
e) All of the above
3.
Society answers the question “For whom?” when it chooses
a) the mix of outputs
b) the mix of inputs
c) the distribution of output
d) the level of output
e) its resources
4.
In an economist’s view, investment involves the process of
a) using resources to produce new capital
b) using capital to produce new resources
c) using capital to replace labor
d) buying ownership of a company
e) undertaking any activity that incurs an opportunity cost
5.
The production possibility frontier graph
a) shows all the combination of goods and services that can be produced if all of society’s resources
are used, even if they are used inefficiently.
b) illustrates the concept of opportunity cost
c) shows the combinations of two goods that are possible given the resources available and possible
future technology
d) shows that a society can have more of one product without choosing to have less of the other
6.
The slope of a production possibility frontier is negative because
a) of economic growth
b) society faces trade-offs
c) the law of increasing opportunity costs
d) society chooses it to be
e) of technology
7.
Because of the law of increasing opportunity costs, the production possibility frontier
a) shifts to the left
b) shifts to the right
c) intersects both the vertical and the horizontal axes
d) becomes steeper when moving left to right
e) is negatively sloped
F
F
F
F
8.
The law of increasing opportunity cost states that
a) when a society acquires new resources or its technology improves, the total output of the economy
will increase
b) when an economy is operating with full employment, the boundaries of its production possibility
frontier are increasing
c) to produce more and more of one product, increasing quantities of the other product must be
sacrificed
d) all of the above
e) none of the above
9.
Sarah has 3 hours that she can choose to spend either studying for a test or baby-sitting. If she spends
all of her time studying, she can score an 85 on the test. If she baby-sits for 1 hour, her test grade falls
3 points. If she baby-sits for a second hour, her test grade will fall by another 5 points. If she baby-sits
for a third hour, her test grade falls by another 7 points. The opportunity cost of the third hour of
baby-sitting is
a) 15 points
b) 7 points
c) 0 points
d) 30 points
e) dependent on how much she is paid for baby-sitting
10.
In a command economy, the basic economic questions are answered by
a) the government
b) the markets
c) the markets with government intervention
d) consumer sovereignty
e) World Bank
11.
The concept of profit as a motivating force behind decisions is associated with
a) the price system
b) free enterprise
c) the free-market economy
d) laissez-faire economies
e) all of the above
12.
Which of the following statements is FALSE?
a) Market systems do not always produce what peope want at lowest cost - there are inefficiencies
b) Rewards may be unfairly distributed and some groups may be left out
c) Periods of inflation and unemployment recur with some regularity
d) Planned economies have fared well over the last decade
e) Even staunch defenders of the free enterprise system recognize that market systems are not perfect
13.
The central institution through which a laissez-faire system answers the basic economic questions is
the
a) government
b) market
c) central planning body
d) practice of consumer sovereignty
e) tribal council
14.
Economic growth is difficult for poor countries because
a) resources must be taken away from consumer goods to pay for technology
b) resources must be taken away from consumer goods to pay for capital goods
c) those wealthy enough to invest in domestic industries may choose to invest abroad instead
d) governments must fund capital production and research out of tax revenues
e) all of the above
15.
Economic growth occurs when
a) a society acquires additional resources or when its technology advances
b) a society sacrifices an amount of one good for more of another along its PPF
c) there is unemployment of labor but other resources are used efficiently
d) the combinations of goods and services that can be produced decreases
e) a large part of a country’s population is poor
TRUE / FALSE QUESTIONS
16.
Rain is a resource.
17.
Command economies and laissez-faire economies in their pure forms do exist in the real world.
18.
One important characteristic of laissez-faire economies is that their markets are complex.
19.
Over the years the two most important sources of economic growth have been the accumulation of
capital and technological advances.
20.
Capital by definition must be tangible.