Chapter 01 Testbank

Student: ___________________________________________________________________________

1. The economising problem is essentially one of deciding how to make the best use of: 
 

A. virtually unlimited resources, to satisfy virtually

unlimited wants.
B. limited resources, to satisfy virtually
unlimited wants.
C. unlimited resources, to satisfy limited
wants.
D. limited resources, to satisfy limited
wants.
 
2. The concept of economic efficiency is primarily concerned with: 
 

A. the limited wants and unlimited resources

dilemma.
B. considerations of equity in the distribution of
wealth.
C. obtaining the maximum output from available
resources.
D. the conservation of irreplaceable natural
resources.
 
3. The fundamental problem of economics is: 
 

A. to establish an equitable system of personal and business

taxation.
B. to establish a democratic political framework for the provision of social goods
and services.
C. the establishment of prices that accurately reflect the relative scarcities of products
and resources.
D. the scarcity of productive resources relative to
material wants.
 
4. The scarcity problem: 
 

A. persists only because countries have failed to achieve continuous full

employment.
B. persists because material wants exceed available productive
resources.
C. has been solved in all industrialised
nations.
D. has been eliminated in affluent societies such as
Australia.
 
5. An ‘increase in efficiency' suggests that an economy:  
 

A. is using more costly production

techniques.
B. has decided to produce more consumer goods and fewer
capital goods.
C. is able to obtain fewer goods and services from a given amount of
resources.
D. is able to obtain more goods and services from a given amount of
resources.
 
6. Economic resources are also called:  
 

A. free gifts of
nature.
B. consumption
goods.
C. units of money
capital.
D. factors of
production.
 
7. The idea of ‘allocative efficiency' refers to:  
 

A. the use of the least-cost method of

production.
B. the production of the product-mix most wanted by
society.
C. the full employment of all available
resources.
D. production, at some point, inside of the production
possibilities curve.
 
8. ‘Productive efficiency' refers to:  
 

A. the use of the least-cost method of

production.
B. the production of the product-mix most wanted by
society.
C. the full employment of all available
resources.
D. production, at some point, inside of the production
possibilities curve.
 
9. The production possibilities curve illustrates the basic principle that:  
 

A. the larger production of a particular good, in time, will require smaller and smaller sacrifices
from other goods.
B. an economy will automatically seek a level of output so that all of its resources
are employed.
C. if all the resources of an economy are in use, more of one good can be produced if less of another
good is produced.
D. an economy has the capacity to produce increases in proportion to its
population size.
 
10. Which of the following will not entail an outward shift of the production possibilities curve? 
 

A. an upgrading of the quality of a nation's human

resources.
B. the reduction of
unemployment.
C. an increase in the quantity of a society's
labour force.
D. the improvement of a society's technological
knowledge.
 
11. The production possibilities curve is bowed out from the origin because: 
 

A. of increasing opportunity

cost.
B. economic resources are perfectly substitutable in the production of the
two products.
C. of
underemployment
.
D. equal quantities of both products are produced at each possible point on
the curve.
 
12. Refer to the data in the table. If the economy is producing at production option C, the opportunity cost
of the tenth unit of consumer goods will be:

 
 

A. 4 units of capital

goods.
B. 2 units of capital
goods.
C. 3 units of capital
goods.
D. 
 of a unit of capital
goods.
 
13. Refer to the data in the table. When compared with production option D, the choice of option C would:

 
 

A. tend to generate a more rapid

growth rate.
B. be
unattainable.
C. entail
unemployment.
D. tend to generate a slower growth
rate.
 
14. Refer to the data in the table. In this illustration, the law of increasing opportunity costs is reflected in
the fact that:

 
 

A. human wants in the aggregate are insatiable and all the combinations of consumer goods and
capital goods the economy can produce are finite amounts.
B. the amount of consumer goods that must be sacrificed to get more capital goods diminishes
beyond a point.
C. larger and larger amounts of capital goods must be sacrificed to get additional units of
consumer goods.
D. the production possibilities data would graph as a straight, down-
sloping line.
 
15. Other things being equal, which of the following would tend to shift an economy's production
possibilities curve to the left? 
 

A. The discovery of a low-cost means of generating and storing

solar energy.
B. The entrance of more women into the
labour force.
C. A law requiring mandatory retirement from the labour force
at age 55.
D. An increase in the proportion of total output consisting of capital or
investment goods.
 
16. The production possibilities curve is bowed outward if: 
 

A. resources are not perfectly adaptable to different

alternative uses.
B. the amount of resources
increases.
C. the level of technology
increases.
D. both B and C are
correct.
 
17. The difference between production possibilities curves that are bowed out and those that are linear is
that: 
 

A. bowed out production possibilities curves illustrate trade-offs where linear production possibilities
frontiers do not.
B. bowed out production possibilities curves show increasing opportunity cost where linear ones show
constant opportunity cost.
C. bowed out production possibilities curves are the result of perfectly shiftable resources where linear
production possibilities frontiers are not.
D. linear production possibilities curves illustrate real-world conditions more than bowed out
production possibilities frontiers.
 
18. When constructing a production possibilities curve, all of the following are assumptions, except: 
 

A. the economy produces only two

goods.
B. all the economy's factors of production are
being used.
C. the economy has a fixed level of
technology.
D. the economy may increase its available factors of
production.
 
19. Any point inside the production possibilities curve indicates that: 
 

A. the resources of an economy are fully employed, and productive efficiency

is achieved.
B. as the production of one good increases, larger and larger sacrifices of other goods will
be required.
C. least-cost production has been
realised.
D. more output could be produced with available
resources.
 
20. The production possibilities curve illustrates the basic principle that: 
 

A. as the production of one good increases, smaller and smaller sacrifices of other goods will
be required.
B. an economy will automatically achieve that level of output at which all its resources are
fully employed.
C. if all the resources of an economy are employed, and productive efficiency is achieved, more of one
good can be produced only if less of another good is produced.
D. combinations of goods and services indicated by points outside the frontier will never be
achieved over time.
 
21. When a production possibilities curve shifts outward, it is demonstrating the concept of: 
 

A. tradeoff
s.
B. efficienc
y.
C. economic
growth.
D. opportunity
cost.
 
22. Production possibilities curves can shift outward if: 
 

A. governments increase the amount of money in the

economy.
B. there is an increase in
technology.
C. resources can be moved from the production of one good to
another.
D. both B and C are
correct.
 
23. An economy will experience underemployment of resources when: 
 

A. allocative efficiency has not been

achieved.
B. productive efficiency has not been
achieved.
C. full employment has not been
achieved.
D. increasing opportunity cost
exists.
 
24. The concept of opportunity cost is best represented by the: 
 

A. shift of a production possibilities curve

outwards.
B. shift of a production possibilities curve
inwards.
C. movement along a production possibilities curve from one point
to another.
D. movement from point on a production possibilities curve to a point inside the
same curve.
 
25. Which of the following is not one of the Five Fundamental Questions? 
 

A. Which products should be in short supply and which in excess

supply?
B. For whom should the total output be
produced?
C. How should production be
organised?
D. What goods and services should be
produced?
 
26. Which of the following statements is true? 
 

A. The production possibilities curve cannot

shift out.
B. The production possibilities curve cannot
shift in.
C. The production possibilities curve is
moveable.
D. The concept of concept of economic growth cannot be shown using production
possibilities curves.
 
27. If available resources are being used efficiently (i.e. they are not being wasted during the production
process): 
 

A. scarcity is no longer a
problem.
B. resources are no longer
limited.
C. a society can increase the production of one good or service only by decreasing the production of
some other good or service.
D. decision-makers need no longer worry about
tradeoffs.
 
28. When an economy is operating on its production possibilities curve, more production of one good
means less production of another because: 
 

A. resources are
limited.
B. resources are not perfectly adaptable to
alternative uses.
C. wants are
limited.
D. wants are
unlimited.
 
29. The opportunity cost of a choice is 
 

A. the amount paid to purchases what is

chosen.
B. everything that was not
chosen.
C. the best option that was not
chosen.
D. the market price of whatever is
chosen.
 
30. The ‘fallacy of composition' states that:  
 

A. because economic systems are comprised of so many diverse economic units, economic laws are
necessarily inexact.
B. the anticipation of a particular event can affect the nature or composition of the event,
when it occurs.
C. what is true for the individual must necessarily be true for
the group.
D. because event A precedes event B, A is necessarily the
cause of B.
 
31. Given a typical production possibilities curve, a shift of the curve outwards implies an increase in the
quantity and/or quality of society's productive resources.  
 
True    False
 
32. An economy will always operate at some point on its production possibilities curve.  
 
True    False
 
33. The opportunity cost of producing a unit of good X is the amount of resources that must be devoted to
its production.  
 
True    False
 
34. An opportunity cost occurs every time there is a choice between alternatives.  
 
True    False
 
35. Production possibilities represent the best choice of goods for the economy to produce.  
 
True    False
 
 Chapter 01 Testbank Key
 
1. The economising problem is essentially one of deciding how to make the best use of: 
 

A.  virtually unlimited resources, to satisfy virtually

unlimited wants.
B. limited resources, to satisfy virtually
unlimited wants.
C.  unlimited resources, to satisfy limited
wants.
D.  limited resources, to satisfy limited
wants.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-01 Describe the nature and methodology of economics, including the two fundamental facts that comprise the
economising problem
 
2. The concept of economic efficiency is primarily concerned with: 
 

A.  the limited wants and unlimited resources

dilemma.
B.  considerations of equity in the distribution of
wealth.
C.  obtaining the maximum output from available
resources.
D.  the conservation of irreplaceable natural
resources.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-03 Discuss the meaning of economic efficiency
 
3. The fundamental problem of economics is: 
 

A.  to establish an equitable system of personal and business

taxation.
B.  to establish a democratic political framework for the provision of social goods
and services.
C.  the establishment of prices that accurately reflect the relative scarcities of products
and resources.
D. the scarcity of productive resources relative to
material wants.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-01 Describe the nature and methodology of economics, including the two fundamental facts that comprise the
economising problem
 
4. The scarcity problem: 
 

A.  persists only because countries have failed to achieve continuous full
employment.
B. persists because material wants exceed available productive
resources.
C.  has been solved in all industrialised
nations.
D.  has been eliminated in affluent societies such as
Australia.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-01 Describe the nature and methodology of economics, including the two fundamental facts that comprise the
economising problem
 
5. An ‘increase in efficiency' suggests that an economy:  
 

A.  is using more costly production

techniques.
B.  has decided to produce more consumer goods and fewer
capital goods.
C.  is able to obtain fewer goods and services from a given amount of
resources.
D. is able to obtain more goods and services from a given amount of
resources.
 
AACSB: Communication
Difficulty: Medium
EQUIS: Communicate
Est Time: 3 mins
Graduate Attributes: Communication
Learning Objective: 01-03 Discuss the meaning of economic efficiency
  
6. Economic resources are also called:  
 

A.  free gifts of

nature.
B.  consumption
goods.
C.  units of money
capital.
D. factors of
production.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-01 Describe the nature and methodology of economics, including the two fundamental facts that comprise the
economising problem
 
7. The idea of ‘allocative efficiency' refers to:  
 

A.  the use of the least-cost method of

production.
B. the production of the product-mix most wanted by
society.
C.  the full employment of all available
resources.
D.  production, at some point, inside of the production
possibilities curve.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-03 Discuss the meaning of economic efficiency
 
8. ‘Productive efficiency' refers to:  
 

A. the use of the least-cost method of

production.
B.  the production of the product-mix most wanted by
society.
C.  the full employment of all available
resources.
D.  production, at some point, inside of the production
possibilities curve.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-03 Discuss the meaning of economic efficiency
 
9. The production possibilities curve illustrates the basic principle that:  
 

A.  the larger production of a particular good, in time, will require smaller and smaller sacrifices
from other goods.
B.  an economy will automatically seek a level of output so that all of its resources
are employed.
C.  if all the resources of an economy are in use, more of one good can be produced if less of
another good is produced.
D.  an economy has the capacity to produce increases in proportion to its
population size.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
10. Which of the following will not entail an outward shift of the production possibilities curve? 
 

A.  an upgrading of the quality of a nation's human

resources.
B. the reduction of
unemployment.
C.  an increase in the quantity of a society's
labour force.
D.  the improvement of a society's technological
knowledge.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
11. The production possibilities curve is bowed out from the origin because: 
 

A. of increasing opportunity

cost.
B.  economic resources are perfectly substitutable in the production of the
two products.
C.  of
underemployment
.
D.  equal quantities of both products are produced at each possible point on
the curve.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
 Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
12. Refer to the data in the table. If the economy is producing at production option C, the opportunity
cost of the tenth unit of consumer goods will be:

 
 

A.  4 units of capital

goods.
B.  2 units of capital
goods.
C.  3 units of capital
goods.
D. 
 of a unit of capital
goods.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
13. Refer to the data in the table. When compared with production option D, the choice of option C
would:

 
 

A. tend to generate a more rapid

growth rate.
B.  be
unattainable.
C.  entail
unemployment.
D.  tend to generate a slower growth
rate.
 
AACSB: Analyse
Difficulty: Hard
EQUIS: Analytic
Est Time: 5 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
14. Refer to the data in the table. In this illustration, the law of increasing opportunity costs is reflected
in the fact that:

 
 

A.  human wants in the aggregate are insatiable and all the combinations of consumer goods and
capital goods the economy can produce are finite amounts.
B.  the amount of consumer goods that must be sacrificed to get more capital goods diminishes
beyond a point.
C.  larger and larger amounts of capital goods must be sacrificed to get additional units of
consumer goods.
D.  the production possibilities data would graph as a straight, down-
sloping line.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
15. Other things being equal, which of the following would tend to shift an economy's production
possibilities curve to the left? 
 

A.  The discovery of a low-cost means of generating and storing

solar energy.
B.  The entrance of more women into the
labour force.
C.  A law requiring mandatory retirement from the labour force
at age 55.
D.  An increase in the proportion of total output consisting of capital or
investment goods.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
16. The production possibilities curve is bowed outward if: 
 

A. resources are not perfectly adaptable to different

alternative uses.
B.  the amount of resources
increases.
C.  the level of technology
increases.
D.  both B and C are
correct.
 
AACSB: Analyse
Difficulty: Easy
EQUIS: Analytic
Est Time: 2 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
17. The difference between production possibilities curves that are bowed out and those that are linear
is that: 
 

A.  bowed out production possibilities curves illustrate trade-offs where linear production
possibilities frontiers do not.
B. bowed out production possibilities curves show increasing opportunity cost where linear ones
show constant opportunity cost.
C.  bowed out production possibilities curves are the result of perfectly shiftable resources where
linear production possibilities frontiers are not.
D.  linear production possibilities curves illustrate real-world conditions more than bowed out
production possibilities frontiers.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
18. When constructing a production possibilities curve, all of the following are assumptions, except: 
 

A.  the economy produces only two

goods.
B.  all the economy's factors of production are
being used.
C.  the economy has a fixed level of
technology.
D. the economy may increase its available factors of
production.
 
AACSB: Analyse
Difficulty: Easy
EQUIS: Analytic
Est Time: 2 mins
Graduate Attributes: Apply Knowledge
 Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
19. Any point inside the production possibilities curve indicates that: 
 

A.  the resources of an economy are fully employed, and productive efficiency
is achieved.
B.  as the production of one good increases, larger and larger sacrifices of other goods will
be required.
C.  least-cost production has been
realised.
D. more output could be produced with available
resources.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
20. The production possibilities curve illustrates the basic principle that: 
 

A.  as the production of one good increases, smaller and smaller sacrifices of other goods will
be required.
B.  an economy will automatically achieve that level of output at which all its resources are
fully employed.
C.  if all the resources of an economy are employed, and productive efficiency is achieved, more of
one good can be produced only if less of another good is produced.
D.  combinations of goods and services indicated by points outside the frontier will never be
achieved over time.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
21. When a production possibilities curve shifts outward, it is demonstrating the concept of: 
 

A.  tradeoff
s.
B.  efficienc
y.
C.  economic
growth.
D.  opportunity
cost.
 
AACSB: Analyse
Difficulty: Easy
EQUIS: Analytic
Est Time: 2 mins
 Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
22. Production possibilities curves can shift outward if: 
 

A.  governments increase the amount of money in the

economy.
B. there is an increase in
technology.
C.  resources can be moved from the production of one good to
another.
D.  both B and C are
correct.
 
AACSB: Analyse
Difficulty: Easy
EQUIS: Analytic
Est Time: 2 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
23. An economy will experience underemployment of resources when: 
 

A.  allocative efficiency has not been

achieved.
B. productive efficiency has not been
achieved.
C.  full employment has not been
achieved.
D.  increasing opportunity cost
exists.
 
AACSB: Analyse
Difficulty: Medium
EQUIS: Analytic
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
24. The concept of opportunity cost is best represented by the: 
 

A.  shift of a production possibilities curve

outwards.
B.  shift of a production possibilities curve
inwards.
C.  movement along a production possibilities curve from one point
to another.
D.  movement from point on a production possibilities curve to a point inside the
same curve.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
 Graduate Attributes: Communication
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
25. Which of the following is not one of the Five Fundamental Questions? 
 

A. Which products should be in short supply and which in excess

supply?
B.  For whom should the total output be
produced?
C.  How should production be
organised?
D.  What goods and services should be
produced?
 
AACSB: Analyse
Difficulty: Easy
EQUIS: Analytic
Est Time: 2 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-01 Describe the nature and methodology of economics, including the two fundamental facts that comprise the
economising problem
 
26. Which of the following statements is true? 
 

A.  The production possibilities curve cannot

shift out.
B.  The production possibilities curve cannot
shift in.
C.  The production possibilities curve is
moveable.
D.  The concept of concept of economic growth cannot be shown using production
possibilities curves.
 
AACSB: Analytic
Difficulty: Easy
EQUIS: Analyse
Est Time: 2 mins
Graduate Attributes: Problem solving
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
27. If available resources are being used efficiently (i.e. they are not being wasted during the
production process): 
 

A.  scarcity is no longer a

problem.
B.  resources are no longer
limited.
C.  a society can increase the production of one good or service only by decreasing the production
of some other good or service.
D.  decision-makers need no longer worry about
tradeoffs.
 
AACSB: Analytic
Difficulty: Medium
EQUIS: Analyse
 Est Time: 3 mins
Graduate Attributes: Problem solving
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
28. When an economy is operating on its production possibilities curve, more production of one good
means less production of another because: 
 

A. resources are
limited.
B.  resources are not perfectly adaptable to
alternative uses.
C.  wants are
limited.
D.  wants are
unlimited.
 
AACSB: Analytic
Difficulty: Easy
EQUIS: Analyse
Est Time: 2 mins
Graduate Attributes: Problem solving
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
29. The opportunity cost of a choice is 
 

A.  the amount paid to purchases what is

chosen.
B.  everything that was not
chosen.
C.  the best option that was not
chosen.
D.  the market price of whatever is
chosen.
 
AACSB: Communication
Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-02 explain the specific problems, limitations and pitfalls encountered in studying economics
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
30. The ‘fallacy of composition' states that:  
 

A.  because economic systems are comprised of so many diverse economic units, economic laws
are necessarily inexact.
B.  the anticipation of a particular event can affect the nature or composition of the event,
when it occurs.
C.  what is true for the individual must necessarily be true for
the group.
D.  because event A precedes event B, A is necessarily the
cause of B.
 
AACSB: Communication
 Difficulty: Easy
EQUIS: Communicate
Est Time: 2 mins
Graduate Attributes: Communication
Learning Objective: 01-02 explain the specific problems, limitations and pitfalls encountered in studying economics
 
31. Given a typical production possibilities curve, a shift of the curve outwards implies an increase in
the quantity and/or quality of society's productive resources.  
 
TRUE
 
AACSB: Analytic
Difficulty: Medium
EQUIS: Analyse
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
32. An economy will always operate at some point on its production possibilities curve.  
 
FALSE
 
AACSB: Analytic
Difficulty: Easy
EQUIS: Analyse
Est Time: 2 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
33. The opportunity cost of producing a unit of good X is the amount of resources that must be devoted
to its production.  
 
FALSE
 
AACSB: Analytic
Difficulty: Medium
EQUIS: Analyse
Est Time: 3 mins
Graduate Attributes: Apply Knowledge
Learning Objective: 01-06 Use the production possibilities curve model to examine the trade-off between current and future
consumption.
 
34. An opportunity cost occurs every time there is a choice between alternatives.  
 
TRUE
 
AACSB: Analytic
Difficulty: Easy
EQUIS: Analyse
Est Time: 2 mins
Graduate Attributes: Problem solving
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity cost
 
35. Production possibilities represent the best choice of goods for the economy to produce.  
 
FALSE
 
AACSB: Analytic
Difficulty: Easy
EQUIS: Analyse
Est Time: 2 mins
Graduate Attributes: Problem solving
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of production possibilities tables
and curves
 
 Chapter 01 Testbank Summary
 
Category #  of  Questi
ons
AACSB: Analyse 15
AACSB: Analytic 8
AACSB: Communication 12
Difficulty: Easy 21
Difficulty: Hard 1
Difficulty: Medium 13
EQUIS: Analyse 8
EQUIS: Analytic 15
EQUIS: Communicate 12
Est Time: 2 mins 21
Est Time: 3 mins 13
Est Time: 5 mins 1
Graduate Attributes: Apply Knowledge 18
Graduate Attributes: Communication 12
Graduate Attributes: Problem solving 5
Learning Objective: 01-01 Describe the nature and methodology of economics, including the two fundame 5
ntal facts that comprise the economising problem
Learning Objective: 01-02 explain the specific problems, limitations and pitfalls encountered in studying e 2
conomics
Learning Objective: 01-03 Discuss the meaning of economic efficiency 4
Learning Objective: 01-04 introduce the concept of opportunity cost and the law of increasing opportunity  9
cost
Learning Objective: 01-05 illustrate, extend and modify the definition of economics through the use of pro 15
duction possibilities tables and curves
Learning Objective: 01-06 Use the production possibilities curve model to examine the trade-off between c 1
urrent and future consumption.