Ross-Kerr and Wood's Canadian Nursing Issues & Perspectives 6th Edition By Lynn McCleary (Test Bank)

Microeconomics, 8e (Hubbard/O'Brien)
Chapter 2 Trade-offs, Comparative Advantage, and the Market System
2.1 Production Possibilities Frontiers and Opportunity Costs
1) Scarcity
A) stems from the incompatibility between limited resources and unlimited wants.
B) can be overcome by discovering new resources.
C) can be eliminated by rationing products.
D) is a bigger problem in market economies than in socialist economies.
Answer: A
Diff: 2 Page Ref: 42
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist
AACSB: Analytical thinking
2) In 2017, Tesla Motors introduced the Model 3, its first low cost model which it had hoped to sell for
$35,000 but realized that it would lose several thousand dollars per car at that price. Prior to the
introduction of the Model 3, Tesla's two existing models (the Model S sedan and the Model X SUV) had
starting prices of over $70,000 and at those prices, the company was earning a profit on each car sold.
Tesla CEO Elon Musk said that "Higher volume and manufacturing design improvements are crucial for
Tesla [to sell the Model 3 at a price of $35,000]...." In deciding to increase volume and improve
manufacturing design for the Model 3, Tesla
A) faced no trade-offs because it was already making a profit selling its Model S and Model X vehicles.
B) faced a trade-off between devoting additional resources to the production of the Model 3 and devoting
additional resources to producing its other models.
C) was guaranteed to be able to reduce costs on its Model 3 to a point where it could sell the Model 3 at a
price of $35,000 and earn a profit.
D) had no choice but to increase the selling prices of its Model S sedan and Model X SUV.
Answer: B
Diff: 2 Page Ref: 40
Topic: Opportunity Cost
Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade
AACSB: Analytical thinking
Special Feature: Chapter Opener: Elon Musk and Tesla Motors Face a Trade-Off
3) The concept of opportunity cost is that
A) in a market economy, taking advantage of profitable opportunities involves some money cost.
B) the economic cost of using a factor of production is the alternative use of that factor that is given up.
C) taking advantage of investment opportunities involves costs.
D) the cost of production varies depending on the opportunity for technological application.
Answer: B
Diff: 2 Page Ref: 43
Topic: Opportunity Cost
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist
AACSB: Analytical thinking

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