Quiz 1

All points on the production possibilities curve:

*Represent the use of all available resources
Are equally desirable
Represent the same mix of output
Represent the same opportunity costs

Which of the following best describes the "invisible hand"?

*Price signals drive the market mechanism
Government regulations influence the allocation of society's scarce resources
The Internal Revenue Service enforces the nation's tax laws
Lobbyists influence which laws are passed by Congress

If a student borrows heavily to pay for college expenses and later finds that the payments on the loans prevents him/her from affording a comfortable life, then economists would say the college loan:

Provides great future benefits
Has a one for one trade-off
Is a scarce resource
*Has a high opportunity cost

Economic growth is represented by:

An inward shift of the production possibilities curve
A point inside the production possibilities curve
*An outward shift of the production possibilities curve
A movement along the production possibilities curve

If the market mechanism causes the economy to arrive at the wrong mix of output, there is:

*Market failure
Mixed economy failure
Government failure
Laissez faire

Societies must address the question of WHAT to produce because:

*We can't produce all the goods and services we want
The amount of money in an economy is limited
We are wasteful and use resources inefficiently
Of market failure

The economy of the United States is best characterized as:

Centrally planned.
A laissez faire model.
*A mixed economy.
A democratic socialist economy.

When economists talk about a tradeoff between "guns and butter", they mean:

Society can produce more military goods without giving up any consumer goods
Military goods are an inefficient use of resources
*The production of more military goods may require fewer consumer goods
Consumer goods are always more costly than military goo

If resources are limited:

People will rush to buy more goods than they would otherwise
Businesses will sell more products than they would otherwise
*Choices must be made which involve tradeoffs
All individuals are deprived of basic necessities

The market mechanism:

Works through central planning by the government
Eliminates market failures created by the government
*Uses prices as a means of communication between consumers and producers
Is very inefficient since consumers cannot communicate directly with producers

Given that resources are scarce:

A "free lunch" is possible but only for a limited number of people
Poor countries must make choices but rich countries do not have to make choices
*Opportunity costs are experienced whenever choices are made
Some choices involve opportunity costs while ot

The central problem of economics is the:

Distribution of goods and services to those in need
*Scarcity of resources relative to human wants
Inefficiency of government operations
Unemployment of certain factors of production

The production possibilities curve can be used to illustrate the concept of:

Laissez faire
Say's Law
*Opportunity cost
Inequity

When society struggles with how to divide up the "economic pie", it is responding to the:

*"FOR WHOM" question
"HOW" question
"WHAT" question
"WHY" question

Economists are often characterized as being "cheapskates", but in fact their training causes them to:

Maximize economic benefits and minimize economic costs.
Be concerned with economic efficiency and thus not inclined to engage in "wasteful" practices such as gambling, gift-giving or charitable donations.
Consider all opportunity costs and thus place a hi