Topic 1 Quiz

What is scarcity?

• The unlimited availability of resources

• The limited nature of society’s resources

• The ability to produce everything at once

• The lack of wants and needs

What does opportunity cost refer to?

• The financial price of a good or service

• The value of the next best alternative given up

• The amount of money spent on production

• The total cost of all alternatives

The Mendez family has saved money for a family vacation. They also would like to buy a swimming pool. They decide to go on vacation. What is the opportunity cost of their vacation?

• $1,000

• the vacation

• swimming pool

• going to the park

A trade-off occurs when

• A society has unlimited resources

• Goods are exchanged in a market

• A business makes a profit

• One choice is made at the expense of another

Which of the following best illustrates the concept of a production possibilities frontier (PPF)

• A graph showing maximum possible output combinations

• A supply and demand chart

• A company hires more workers to increase production

• The government setting price controls

When an economy is operating inside the PPF, it means

• Resources are fully utilized

• There is inefficiency or unemployment

• The economy is growing at full potential

• Scarcity does not exist

What does a point outside the PPF represent?

• A perfectly balanced economy

• A situation with no opportunity cost

• Efficient use of resources

• An unattainable production level given current resources

Which of the following is an example of opportunity cost?

• Buying a meal at a restaurant and enjoying the food

• Choosing to work in stead of going to college, losing the potential salary increase from a degree

• Investing in a new technology and making a profit

• Taking a vacation and getting a tan

If an economy improves its technology, what happens to its PPF

• It stays the same

• It shifts inward

• If shifts outward

• It disappears

How can an economy push its PPF outward?

• Reducing the number of workers in the labor force

• Improving technology and increasing resources

• Eliminating all trade-offs

• Operating inside the PPF