Practice First Exam Spring 2010 Student: ___________________________________________________________________________ 1. In economics, scarcity means that: A. A shortage of a particular good will cause the price to fall. B. A production-possibilities curve cannot accurately represent the tradeoff between two goods. C. Society's desires exceed the want-satisfying capability of the resources available to satisfy those desires. D. The market mechanism has failed. 2. Given that resources are scarce: A. A "free lunch" is possible but only for a limited number of people. B. Opportunity costs are experienced whenever choices are made. C. Poor countries must make choices but rich countries with abundant resources do not have to make choices. D. Some choices involve opportunity costs while other choices do not. 3. Opportunity cost is: A. Only measured in dollars and cents. B. The dollar cost to society of producing the goods. C. The difficulty associated with using one good in place of another. D. The alternative that must be given up in order to get something else. 4. Which of the following is an assumption under which the production-possibilities curve is drawn? A. There is significant unemployment. B. The supply of resources is fixed. C. The price level is changing. D. Technology is changing. 5. A point on a nation's production-possibilities curve represents: A. An undesirable combination of goods and services. B. Combinations of production that are unattainable, given current technology and resources. C. Levels of production that will cause both unemployment and inflation. D. The full employment of resources to achieve a particular combination of goods and services.
6. The production-possibilities curve illustrates: A. The limitations that exist because of scarce resources. B. That there is no limit to what an economy can produce. C. That there is no limit to the level of output. D. The existence of unlimited wants and resources. 7. When an economy is producing efficiently it is: A. Producing a combination of goods and services beyond the production-possibilities curve. B. Getting the most goods and services from the available resources. C. Experiencing decreasing opportunity costs. D. Producing equal amounts of all goods. 8. In terms of the production-possibilities curve, inefficiency is represented by: A. All points on the curve. B. All points outside the curve. C. All points inside the curve. D. A rightward shift of the curve. 9. Which of the following events would allow the production-possibilities curve to shift outward? A. The economy's capital stock declines B. More teenagers enter the labor force C. Technology is lost D. People begin to retire at earlier ages 10. Which of the following will cause the production-possibilities curve to shift inward? A. An increase in population
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