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
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