Test Bank For The Exploration of Economics International Edition 5th Edition by Robert L. Sexton

Test Bank For The Exploration of Economics International Edition 5th 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: F PTS: 1

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

ANS: T PTS: 1

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

ANS: F PTS: 1

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: T PTS: 1

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

ANS: F PTS: 1

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

ANS: T PTS: 1

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

ANS: T PTS: 1

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

ANS: T PTS: 1

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

ANS: F PTS: 1

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

ANS: F PTS: 1

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

ANS: F PTS: 1

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

ANS: T PTS: 1

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: T PTS: 1

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

ANS: T PTS: 1

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

ANS: F PTS: 1

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

ANS: F PTS: 1

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

ANS: T PTS: 1

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: T PTS: 1

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

ANS: F PTS: 1

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

ANS: F PTS: 1