Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

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

Accepted Answer

$$\frac{200}{100} = 2$$ units of corn per unit of wheat, so 50 units of wheat cost $$50 	imes 2 = 100$$ units of corn.

Question 3

Which of the following scenarios illustrates a marginal decision?

Accepted Answer

Deciding whether to study for one more hour for an exam.

Question 4

In a market economy, what is the primary reason individuals and firms specialize in certain tasks?

Accepted Answer

Because specialization allows individuals and firms to exploit their comparative advantage, increasing overall efficiency.

Question 5

If the production possibility frontier (PPF) is a straight line, what does this indicate about opportunity cost?

Accepted Answer

Opportunity cost is constant.

Question 6

Which of the following would cause the supply curve for smartphones to shift to the right?

Accepted Answer

A technological advancement that reduces production costs.

Question 7

Suppose the price of coffee increases. What is likely to happen to the demand for tea, assuming tea is a substitute for coffee?

Accepted Answer

The demand for tea will increase.

Question 8

Which of the following is an example of a market failure due to an externality?

Accepted Answer

A factory pollutes a river, affecting the health of nearby residents.

Question 9

If the equilibrium price in a market is $$10 and the current market price is 15$$, what will happen?

Accepted Answer

There will be a surplus; quantity supplied exceeds quantity demanded.

Question 10

Which of the following best describes comparative advantage?

Accepted Answer

The ability to produce a good at a lower opportunity cost than another country.

Question 11

A country can produce either 40 cars or 80 trucks. What is the opportunity cost of producing one car?

Accepted Answer

$$\frac{80}{40} = 2$$ trucks per car.

Question 12

Which of the following would NOT cause a shift in the demand curve for pizza?

Accepted Answer

A change in the price of pizza.

Question 13

If a technological innovation allows firms to produce more output with the same inputs, what happens to the production possibility frontier (PPF)?

Accepted Answer

The PPF shifts outward.

Question 14

Which of the following is an example of a positive economic statement?

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment among teenagers."

Question 15

If the price of gasoline rises, what is likely to happen to the demand for cars with high fuel efficiency?

Accepted Answer

Demand for high fuel efficiency cars will increase.

Question 16

Which of the following best explains why trade can make both countries better off?

Accepted Answer

Trade allows countries to consume beyond their own production possibilities by specializing according to comparative advantage.

Question 17

If the market price is below the equilibrium price, what will happen in the market?

Accepted Answer

There will be a shortage; quantity demanded exceeds quantity supplied.

Question 18

Which of the following is most likely to shift the supply curve for bread to the left?

Accepted Answer

An increase in the price of flour.

Question 19

Suppose the demand for a good increases due to a rise in consumer income. What type of good is this most likely to be?

Accepted Answer

Normal good.

Question 20

A firm is considering whether to produce one more unit of output. Which analysis should it use?

Accepted Answer

Marginal analysis: compare marginal benefit to marginal cost.

Core Principles of Macroeconomics: Individual Choice, Economic Models, and Market Dynamics

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