Q: Suppose a country can produce either 100 units of wheat or 200 units of corn. If the country decides to produce 50 units of wheat, what is the opportunity cost in terms of corn?

$$ \frac{200}{100} \times 50 = 100 $$ units of corn

Q: Which formula correctly calculates consumer surplus in a market?

$$ \text{Consumer Surplus} = \frac{1}{2} \times (Q) \times (P_{max} - P_{eq}) $$

Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

Scarcity refers to the limited nature of resources, which forces individuals and societies to make choices about how to allocate them.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn. If the country decides to produce 50 units of wheat, what is the opportunity cost in terms of corn?

Accepted Answer

$$ \frac{200}{100} 	imes 50 = 100 $$ units of corn

Question 3

Which of the following is a positive statement in economics?

Accepted Answer

Higher taxes will reduce consumer spending.

Question 4

A Production Possibilities Curve (PPC) is bowed outward from the origin. What does this shape indicate?

Accepted Answer

There is increasing opportunity cost as more of one good is produced.

Question 5

If a market is in equilibrium, what happens when the government imposes a price ceiling below the equilibrium price?

Accepted Answer

A shortage will occur because quantity demanded exceeds quantity supplied.

Question 6

Which of the following best explains the difference between a free market economy and a centrally planned economy?

Accepted Answer

In a free market, resources are allocated by individual decisions and market prices, while in a centrally planned economy, allocation is determined by government.

Question 7

Suppose the demand for a product increases while the supply remains constant. What will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 8

Which formula correctly calculates consumer surplus in a market?

Accepted Answer

$$ 	ext{Consumer Surplus} = \frac{1}{2} 	imes (Q) 	imes (P_{max} - P_{eq}) $$

Question 9

If the government imposes a tax on producers, which area on a supply and demand graph represents the deadweight loss?

Accepted Answer

The area between the new supply curve and the demand curve, from the new quantity to the old equilibrium quantity.

Question 10

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology

Question 11

A country can produce 10 cars or 20 trucks. Another country can produce 5 cars or 15 trucks. Which country has the comparative advantage in producing trucks?

Accepted Answer

The second country, because it has a lower opportunity cost for trucks.

Question 12

If the supply curve shifts to the right, what happens to equilibrium price and quantity, assuming demand remains constant?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 13

Which of the following best describes Adam Smith's 'invisible hand'?

Accepted Answer

The self-regulating nature of the marketplace where individuals pursuing their own interests unintentionally benefit society.

Question 14

If a price floor is set above the equilibrium price, what is the likely result in the market?

Accepted Answer

A surplus will occur.

Question 15

Which equation represents the deadweight loss caused by a tax in a competitive market?

Accepted Answer

$$ 	ext{Deadweight Loss} = \frac{1}{2} 	imes (Q_{eq} - Q_{tax}) 	imes (P_{tax} - P_{eq}) $$

Question 16

Which of the following would cause a movement along the supply curve rather than a shift of the supply curve?

Accepted Answer

A change in the price of the good itself.

Question 17

If a tax is imposed on a good and the demand is perfectly inelastic, who bears the entire burden of the tax?

Accepted Answer

Consumers

Question 18

Which of the following is an example of allocative efficiency?

Accepted Answer

Producing the combination of goods most desired by society.

Question 19

Suppose the government imposes a $$2 per unit tax on a good. If the pre-tax equilibrium price is 10 $$and the post-tax equilibrium price paid by consumers is $11, how much of the tax is paid by producers?

Accepted Answer

$$ 1 $$

Question 20

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Core Principles and Applications in Macroeconomics: Scarcity, Opportunity Cost, Markets, and Surplus

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