The Ideal Quiz On The Economizing Problem

Explanation
The statement is false because the conflict between scarce economic wants and limited resources does not give rise to the economizing problem. The economizing problem is actually caused by the unlimited wants of individuals and the limited resources available to satisfy those wants. This conflict leads to the need for individuals and societies to make choices and prioritize their wants in order to allocate resources efficiently.

Explanation
Economics is concerned with wants that can be satisfied by goods and services because it focuses on the allocation of scarce resources to fulfill these wants. The study of economics revolves around analyzing how individuals, businesses, and governments make choices to satisfy their needs and desires through the production, distribution, and consumption of goods and services. Therefore, the statement that economics is concerned with wants that can be satisfied by goods and services is true.

Explanation
Money is not a resource called capital. While money can be used as a form of capital, capital refers to a broader range of resources such as machinery, equipment, and buildings that are used in the production of goods and services. Money is simply a medium of exchange that facilitates transactions. Therefore, the statement is false.

Explanation
From an economist's perspective, investment refers to the production and purchase of capital goods. This means that when individuals or businesses invest, they are using their resources to produce or acquire assets such as machinery, equipment, or buildings that are used to generate income or increase productivity. This definition aligns with the understanding that investment is a key driver of economic growth and development, as it leads to increased production capacity and potential for future returns.

Explanation
The given statement is false. The payment to entrepreneurial ability is not interest income. Entrepreneurs are typically rewarded with profits, which are the returns they receive for taking risks and successfully managing their business ventures. Interest income, on the other hand, refers to the earnings generated from lending money or investing in financial instruments. So, the correct answer is false.

Explanation
Resources are considered scarce because society's material wants are unlimited, meaning that people always desire more goods and services than can be produced. At the same time, productive resources, such as land, labor, and capital, are limited in quantity. This creates a situation where demand for resources exceeds their availability, leading to scarcity. Therefore, the statement that resources are scarce because society's material wants are unlimited and productive resources are limited is true.

Explanation
Economic efficiency is achieved when resources are utilized to their maximum potential and when production is at its highest level. Full employment of resources means that all available resources, such as labor, capital, and natural resources, are being utilized effectively. Full production means that the economy is operating at its maximum capacity and producing the highest possible output. Therefore, the statement that economic efficiency requires both full employment of resources and full production is true.

Explanation
Allocative efficiency means that goods and services are being produced in a way that maximizes society's welfare or satisfaction. It is not necessarily about producing them in the least costly way. Therefore, the statement is false.

Explanation
Allocative efficiency refers to the optimal allocation of resources in order to produce the right combination of goods and services that maximizes societal welfare. While allocative efficiency is important for full production, it is not the only factor necessary. In addition to allocative efficiency, productive efficiency is also required for full production, which means producing goods and services at the lowest possible cost. Therefore, the statement that only allocative efficiency is necessary for full production is false.

Explanation
The statement is true because the opportunity cost refers to the value of the next best alternative that is forgone when making a decision. In this case, by choosing to produce antipollution devices, the economy is giving up the production of other goods and services. This means that resources such as labor, capital, and materials are being allocated towards the production of antipollution devices instead of being used for other purposes. Therefore, the opportunity cost of producing antipollution devices is indeed the other goods and services that the economy is unable to produce.

Explanation
As more of a good is produced, resources that are less suitable for its production have to be utilized, resulting in a higher opportunity cost. This means that the production of additional units of the good comes at the expense of producing other goods that could have been produced using those resources. Therefore, the opportunity cost of producing a good tends to increase as more of it is produced.

Explanation
Drawing a production possibilities curve concave to the origin means that as more of one good is produced, the opportunity cost of producing additional units of that good increases. This is because resources are not equally suited for producing both goods, and as more resources are allocated to one good, the resources that are best suited for producing the other good are being used less efficiently. Therefore, the curve being concave to the origin is a graphical representation of the law of increasing opportunity costs, making the statement true.

Explanation
The economic rationale for the law of increasing opportunity costs is that economic resources are NOT fully adaptable to alternative uses. This means that as more resources are allocated to the production of a particular good, the opportunity cost of producing additional units of that good increases. This is because resources are not equally suited for all uses and have varying levels of productivity in different industries. As resources are shifted from one industry to another, their productivity may decrease, leading to higher opportunity costs. Therefore, the statement is false.

Explanation
Allocative efficiency refers to the optimal allocation of resources in order to produce the maximum output. It is determined by comparing the marginal costs (the additional cost of producing one more unit) and the marginal benefits (the additional benefit gained from producing one more unit). If the marginal benefits outweigh the marginal costs, then the allocation of resources is considered allocatively efficient. Therefore, the given statement is true as it accurately describes how allocative efficiency is determined.

Explanation
The marginal-cost curve for a product does not rise because of increasing satisfaction from the consumption of the product. The marginal-cost curve represents the additional cost incurred for producing one more unit of a product. It typically rises due to factors such as diminishing returns, where the cost of additional inputs increases as production levels increase. Therefore, the statement is false.

Explanation
In an economy with full employment and full production, resources are already fully utilized to produce the maximum output of goods. Therefore, it is not possible to increase the production of both goods simultaneously without additional resources or technological advancements. This is because any increase in the production of one good would require diverting resources away from the production of the other good, resulting in a decrease in its production. Hence, the statement is true.

Explanation
Economic growth refers to an expansion in the output of goods and services within an economy. This is typically represented by a shift of the production possibilities curve (PPC) outward and to the right. As the economy becomes more productive and efficient, it can produce more goods and services, leading to economic growth. Therefore, the statement that economic growth is shown by a movement of the PPC outward and to the right is true.

Explanation
This statement is based on the concept of investment and capital accumulation. By producing more capital goods today, such as machinery and equipment, an economy can increase its productive capacity in the future. This is because capital goods are used to produce other goods and services, so having more of them allows for higher levels of production. Therefore, if all other factors remain constant, producing more capital goods today will result in a greater total output of all goods in the future.

Explanation
International specialization and trade allow an economy to access resources and goods that may not be available domestically. By engaging in trade, countries can focus on producing goods and services that they have a comparative advantage in, and then import goods and services that they are less efficient at producing. This leads to increased efficiency and productivity, as well as a wider variety of goods and services available to consumers. Overall, international specialization and trade can help an economy overcome the limitations of domestic production possibilities and have a similar effect as having more or better resources.

Explanation
The elimination of widespread discrimination based on race, ethnicity, or religion in an economy would lead to a more inclusive and diverse workforce. This would result in increased productivity and efficiency, as people would be hired and promoted based on their skills and qualifications rather than their race, ethnicity, or religion. As a result, the economy would be able to produce more goods and services, moving it from a point inside the production possibilities curve (PPC) to a point on the curve. Therefore, the statement is true.

Explanation
Laissez-faire capitalism refers to a system where the government does not interfere in economic activities, allowing individuals and businesses to operate freely without regulations or restrictions. Pure capitalism, which is synonymous with laissez-faire capitalism, follows this principle of minimal government intervention. Therefore, the given statement is true.

Explanation
A command economy is actually characterized by the government or a central authority owning and controlling most, if not all, resources and making decisions about production, distribution, and pricing. In a command economy, markets and prices are not used to coordinate economic activity as they are in a market economy. Instead, the government dictates what goods and services are produced, how much is produced, and how they are distributed. Therefore, the statement that a command economy is characterized by private ownership of resources and the use of markets and prices is false.

Explanation
The statement is true because after the collapse of the Soviet Union, Russia and many Eastern European nations shifted their economies from a command system, where the government controlled production and distribution, to a market system, where supply and demand determine economic activities. This transition involved privatizing state-owned enterprises, liberalizing trade and investment policies, and implementing market-oriented reforms to encourage competition and entrepreneurship.

Explanation
In the circular flow model, households function on the selling side of the resource and product markets. This means that households provide resources, such as labor, land, and capital, to businesses in exchange for income. They then use this income to buy goods and services from businesses in the product market. Therefore, the statement that households function on the buying side of the resource and product markets is incorrect.

Explanation
The circular flow model is a representation of how money, goods, and services flow through the economy. It shows that there is a real flow of economic resources and finished goods and services, meaning that resources are used to produce goods and services which are then consumed by households. Additionally, there is a money flow of income and consumption expenditures, indicating that households receive income from selling their resources and use that income to purchase goods and services. Therefore, the given statement is true.