Chapter 3—Scarcity, Trade-Offs and Economic Growth Essay

11794 Words Feb 13th, 2015 48 Pages
Chapter 3—Scarcity, Trade-Offs and Economic Growth

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
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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

MULTIPLE CHOICE

1. A market economy answers the question “what” goods will be produced by focusing on
| |dollar votes. |
| |consumer sovereignty. |
| |least-cost method of production. |
| |who can afford these

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