ECO FINAL EXAM COMPLETE SOLUTION 100%

What do economists mean by scarcity?
A. Economists mean that trade is not possible.
B. Economists mean that the economy is unable to produce increasing quantities of goods and services.
C. Economists mean that people are not employed.
D. Economists mean that production is inefficient.
E. Economists mean that unlimited wants exceed limited resources.

A production possibilities frontier:
A. shows the act of buying and selling.
B. shows the maximum attainable combinations of two goods that may be produced with available resources.
C. shows how participants in the market are linked.
D. shows the market for a good or service.
E. shows how unlimited wants exceed the limited resources available to fulfill those wants.

Economic efficiency: with points on the production possibilities frontier

What does increasing marginal opportunity costs mean?
A.
Production is not occurring on the production possibilities frontier.
B.
The economy is unable to produce increasing quantities of goods and services.
C.
Increasing the production of a good requires smaller and smaller decreases in the production of another good.
D.
Increasing the production of a good requires larger and larger decreases in the production of another good.
E.
Increasing the production of a good requires decreases in the production of another good.

What are the implications of this idea for the shape of the production possibilities frontier?
A.
The production possibilities frontier will be bowed outward.
B.
The production possibilities frontier will be bowed inward.
C.
The production possibilities frontier will be a straight line.
D.
The production possibilities frontier will have a positive slope.
E.
The production possibilities frontier will have a negative slope.

It is important for Tesla Motors to address the issue of long-distance travel because
A.
its competition is already ahead of them and has a network of supercharger stations.
B.
people are less likely to buy a car that does not allow them the freedom to take longer trips.
C.
its all-electric car sales have been lower than expected.
D.
most people drive long distances every day.
(All-electric cars have struggled to succeed in the marketplace for two key reasons: (1) The lithium batteries that power electric cars are costly, forcing up the prices of the cars, and (2) available batteries need to be recharged every 300 miles or so, making all-electric cars difficult to use on long trips.

Tesla Motors, like any other firm, faces many strategic decisions and trade-offs.  
If Tesla Motors expends resources to expand its supercharger network, then an opportunity cost would be
A.
fewer resources that could be devoted to car production.
B.
the same level of resources to be dedicated to car production.
C.
more resources for car production but less revenue from gas stations.
D.
more resources that could be devoted to car production.

Suppose you win free tickets to a movie plus all you can eat at the snack bar for free. Would there be a cost to you to attend this movie? 
No, because the movie ticket is free.
Yes, because attending movies is not on the production possibilities frontier.
No, because movies are not scarce.
Yes, because the movie's opportunity cost is equal to the highest-valued alternative that must be given up to attend the movie.
No, because the movie ticket and snacks at the bar are free.

Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are good used to produce other goods. Is it likely that the production possibilites frontier in this situation would be a straight line

the production possibilities frontier would likely be bowed out because not all resources are likely equally well suited to produce both consumption and capital goods.
(If the production possibilities frontier is bowed out, then increases in one product require successively larger decreases in the other product, which is likely between consumption goods and capital goods, because resources are likely not equally well suited to produce both types of goods.)

Suppose the president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. 
What is the opportunity cost of spending more money to find a cure for heart disease?
A.
The total explicit cost of the research to cure heart disease.
B.
The reduction in future health-related costs of heart disease.
C.
The reduction in funding for research to cure other diseases.
D.
The cost of the Medicare/Medicaid program.
E.
The monetary value of a human life.

How should policymakers determine the amount of money that should be allocated for research curing heart disease? They should base their decision on 
A.
the number of people who have heart disease compared to the number of people who have other diseases.
B.
whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases.
C.
the number of people who die from heart disease compared to the number of people who die from other diseases.
D.
the value of the total benefit of the research on heart disease.
E.
the value of the total benefit of research on curing other diseases.

Suppose that the federal government is deciding which of two cancer treatment therapies it will allow Medicare funds to be used to pay for (assume that only one treatment therapy will be funded): Therapy A, which will prolong the average lifespan of patients receiving the treatment by 
3636 
months and will cost 
$400 comma 000400,000 
per patient treated; and Therapy B, which will prolong the average lifespan of patients receiving the treatment by 
3030 
months and will cost 
$200 comma 000200,000 
per patient treated. 
What factors should the federal government take into account in making its decision of which therapy it will allow Medicare funds to be used to pay for?
A.
The number of months the average lifespan is prolonged comma compared to the costThe number of months the average lifespan is prolonged, compared to the cost.
B.
The average lifespan for all Medicare patients.
C.
The age of the patient.
D.
The funds available for Medicare.
Which therapy would you recommend? Therapy 
B.

Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach.
"There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs."
Source: David Wessel, "Precepts from Professor Summers," Wall Street 
Journal, 
October 17, 2002.
It would be more moral to reduce pollution,
A.
taking the cost into account because money spent on pollution reduction is not available for other worthy activities.
B.
not taking the cost into account because pollution reduction is typically associated with large benefits.
C.
not taking the cost into account because pollution is potentially harmful to our health.
D.
taking the cost into account because reducing pollution often reduces economic growth.
E.
taking the cost into account because the total cost of reducing pollution is likely enormous.

Do you agree with Baum that the economic system in Oz wouldn't work in the contemporary United States? 
A.
The system in Oz would work. There is no scarcity in Oz or in the United States.
B.
The system in Oz wouldn't work. People in the United States are less willing to give freely to their neighbors. 
C.
The system in Oz would work. The United States has more resources than Oz to fulfill the people's wants.
D.
The system in Oz wouldn't work. Even without modest wants, goods are not scarce in the United States.
E.
The system in Oz wouldn't work. The wants of people in the United States exceed the resources available to fulfill those wants.

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the economy?
A.
The country is operating on its production possibilities frontier.
B.
The country has eliminated scarcity.
C.
The country is maximizing its opportunity cost.
D.
All of the above occur if a country uses all available resources.

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity.
A.
more proportional
B.
more instant
C.
greater
D.
Smaller

Which of the following events would create economic growth, that is, shift the production possibilities frontier outward?
A.
An increase in the available labor.
B.
An increase in the available natural resources.
C.
An increase in technology that affects the production of both goods.
D.
All of the above.

 
What is the basis for trade?
A.
Available resources.
B.
Comparative advantage.
C.
Efficiency.
D.
Absolute advantage.
E.
Economic growth.

How can a country gain from specialization and trade?
A.
A country can specialize in producing that which is most scarce and then trade for other needed goods and services.
B.
A country can specialize in producing that for which it has an absolute advantage and then trade for other needed goods and services.
C.
A country can specialize by using all available resources to invest in capital goods to promote economic growth.
D.
A country can specialize by using all available resources to produce goods and services to avoid trading with other countries.
E.
A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.