Test Bank For The Exploration of Economics International Edition 6th Edition by Robert L. Sexton

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ISBN-10: 1111970386 ISBN-13: 978-1111970383

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Test Bank For The Exploration of Economics International Edition 6th Edition by Robert L. Sexton

Chapter 3—Scarcity, Trade-Offs, and Production Possibilities

TRUE/FALSE

1.In a market economy, government officials make most production decisions in a centralized manner.

ANS:FPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

2.Consumer sovereignty means that consumers vote with their dollars in a market economy, which helps determine what is produced.

ANS:TPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

3.In a market economy, prices help determine the distribution of goods and services but not the allocation of resources.

ANS:FPTS:1REF:p. 76

TOP: 3.1 The Three Economic Questions Every Society Faces | How Will the Goods and Services Be Produced?

4.An increase in production of one good will have zero opportunity cost only if the economy initially existed at a point inside the production possibilities curve.

ANS:TPTS:1REF:p. 82

TOP: 3.3 The Production Possibilities Curve | The Production Possibilities Curve

5.Capital-intensive production techniques tend to be utilized most commonly in countries where labor is relatively cheap.

ANS:FPTS:1REF:p. 76

TOP: 3.1 The Three Economic Questions Every Society Faces | How Will the Goods and Services Be Produced?

6.High wage countries like the United States tend to use less labor-intensive production methods than low wage countries like Mexico.

ANS:TPTS:1REF:p. 76

TOP: 3.1 The Three Economic Questions Every Society Faces | How Will the Goods and Services Be Produced?

7.An economy that has many unemployed workers and idle factories is not operating efficiently.

ANS:TPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | Inefficiency and Efficiency

8.The production possibilities curve marks the boundary between attainable and unattainable combinations of output.

ANS:TPTS:1REF:p. 81

TOP: 3.3 The Production Possibilities Curve | The Production Possibilities Curve

9.Any output combination outside the production possibilities curve is attainable in the current period only if prices decrease.

ANS:FPTS:1REF:p. 81

TOP: 3.3 The Production Possibilities Curve | The Production Possibilities Curve

10.A decrease in the unemployment rate will shift an economy’s production possibilities curve outward.

ANS:FPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | Inefficiency and Efficiency

11.An increase in available resources will tend to cause a society’s production possibilities curve to shift inward.

ANS:FPTS:1REF:p. 87

TOP: 3.4 Economic Growth and the Production Possibilities Curve | Generating Economic Growth

12.An improvement in technology will tend to cause a society’s production possibilities curve to shift outward.

ANS:TPTS:1REF:p. 87

TOP: 3.4 Economic Growth and the Production Possibilities Curve | Generating Economic Growth

13.The opportunity cost of a particular good tends to increase with its rate of output because some resources cannot be easily adapted from the production of one good or service to another.

ANS:TPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | The Law of Increasing Opportunity Cost

14.The production possibilities curve for an economy that experiences a constant opportunity cost of production is linear (a straight line).

ANS:TPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | The Production Possibilities Curve

15.The law of increasing opportunity costs implies that a society’s production possibilities curve will be a straight line.

ANS:FPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | The Law of Increasing Opportunity Cost

16.Movement from one point on the production possibilities curve to another leads to more of both goods being produced.

ANS:FPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | The Law of Increasing Opportunity Cost

17.An increase in an economy’s capital stock increases its future productive capacity.

ANS:TPTS:1REF:p. 87-88

TOP: 3.4 Economic Growth and the Production Possibilities Curve | Growth Does Not Eliminate Scarcity

18.Other things being constant, an economy must give up some consumer goods and services today to produce more capital goods in order to grow.

ANS:TPTS:1REF:p. 87-88

TOP: 3.4 Economic Growth and the Production Possibilities Curve | Growth Does Not Eliminate Scarcity

19.Capital accumulation causes the production possibilities curve to shift inward over time.

ANS:FPTS:1REF:p. 87-88

TOP: 3.4 Economic Growth and the Production Possibilities Curve | Growth Does Not Eliminate Scarcity

20.A straight line production possibilities curve implies increasing opportunity costs.

ANS:FPTS:1REF:p. 84

TOP: 3.3 The Production Possibilities Curve | The Law of Increasing Opportunity Cost

MULTIPLE CHOICE

1.A market economy answers the question “what” goods will be produced by focusing on

a.

dollar votes.

b.

least-cost method of production.

c.

who can afford these goods.

d.

none of the above

ANS:APTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

2.A market economy answers the question “how” will goods be produced by focusing on

a.

dollar votes.

b.

consumer sovereignty.

c.

least-cost method of production.

d.

who can afford these goods.

ANS:CPTS:1REF:p. 76

TOP: 3.1 The Three Economic Questions Every Society Faces | How Will the Goods and Services Be Produced?

3.Which of the following is not a question that scarcity forces all societies to answer?

a.

Which goods and services are to be produced?

b.

How are goods and services to be produced?

c.

Who will get the goods and services produced?

d.

How can scarcity be eliminated?

ANS:DPTS:1REF:p. 74

TOP: 3.1 The Three Economic Questions Every Society Faces | The Three Economic Questions

4.Three economic questions must be determined in all societies. What are they?

a.

How much will be produced? When will it be produced? How much will it cost?

b.

What will the price of each good be? Who will produce each good? Who will consume each good?

c.

What is the opportunity cost of production? Does the society have a comparative advantage in production? Will consumers desire the goods being produced?

d.

What goods will be produced? How will goods be produced? Who will get the goods produced?

ANS:DPTS:1REF:p. 74

TOP: 3.1 The Three Economic Questions Every Society Faces | The Three Economic Questions

5.A market system:

a.

produces answers to a society’s “what” and “who” questions, but not the “for whom” question.

b.

produces answers to a society’s “what” and “for whom” questions, but not the “how” question.

c.

produces answers to a society’s “how” and “for whom” questions, but not the “what” question.

d.

produces answers to a society’s “what,” “how,” and “for whom” questions.

ANS:DPTS:1REF:p. 74

TOP: 3.1 The Three Economic Questions Every Society Faces | The Three Economic Questions

6.Which concept explains how individual consumers in market economies determine what is to be produced?

a.

competition

b.

consumer sovereignty

c.

decentralized decision-making

d.

free enterprise

ANS:BPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

7.A market economy depends on market mechanisms to:

a.

determine the most efficient way of using resources.

b.

determine how large the government’s budget deficit should be.

c.

decide how much government regulation there should be.

d.

provide everyone with a minimum level of income.

ANS:APTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

8.In a market economy, the goods produced go to those who(m):

a.

have sufficient income and are willing to pay the price asked for those goods.

b.

the government views as best suited for consumption.

c.

business firms choose to favor.

d.

desire the goods the least.

ANS:APTS:1REF:p. 76-77

TOP: 3.1 The Three Economic Questions Every Society Faces | Who Will Get the Goods and Services Produced?

9.When collective decision making is utilized to resolve economic questions regarding the allocation of resources, then:

a.

everyone will receive an equal share of the output produced.

b.

the preferences of individuals are of no importance.

c.

economic efficiency will be assured.

d.

the role of markets will be replaced by political decision making.

ANS:DPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

10.A system of economic organization in which the ownership and control of productive capital assets rests with the state and resources are allocated through central planning and political decision making is called:

a.

a market economy.

b.

a command economy.

c.

a corporate economy.

d.

capitalism.

ANS:BPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

11.In a command economy, decisions about how to allocate resources are made:

a.

based upon tradition.

b.

by a central planning board.

c.

by individuals and firms interacting in markets coordinated by a price system.

d.

by a lottery system.

ANS:BPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

12.The economic system of which of the following countries can be treated as an example of a command economy?

a.

United States

b.

Canada

c.

United Kingdom

d.

Cuba

ANS:DPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

13.Which of the following best distinguishes a “command economy” from a “market economy?”

a.

A command economy is more efficient than a market economy because decision making is centralized.

b.

There is scarcity in command economies, but not in market economies.

c.

Command economies are less prone to inflation than are market economies.

d.

Production and distribution decisions are made by central planners in a command economy, but not in a market economy.

ANS:DPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

14.In a market economy, resources are allocated:

a.

by central planners using a price system.

b.

by decentralized planners at the local level.

c.

by individual decision makers responding to market prices.

d.

by government bureaucracies because of the absence of a price system.

ANS:CPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

15.Which of the following is an example of a pure market economy?

a.

United States

b.

Switzerland

c.

Singapore

d.

No nation has a pure market economy

ANS:DPTS:1REF:p. 75

TOP: 3.1 The Three Economic Questions Every Society Faces | What Goods and Services Will Be Produced?

16.The use of large amounts of labor relative to capital in an economy indicates:

a.

labor-intensive production.

b.

capital-intensive production.

c.

that wage rates will be relatively high.

d.

that hand-made goods are of better quality than machine-made goods.

ANS:APTS:1REF:p. 76

TOP: 3.1 The Three Economic Questions Every Society Faces | How Will the Goods and Services Be Produced?

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