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 city has a budget of $$12 million to spend on either road repairs or new bicycle paths. If the cost of repairing 1 km of road is 1 $$million and the cost of building 1 km of bicycle path is $0.5 million, what is the opportunity cost of repairing 1 km of road?

Accepted Answer

2 km of new bicycle paths.

Question 3

Which of the following statements about scarcity is correct?

Accepted Answer

Scarcity means there are not enough resources to satisfy all human wants.

Question 4

A production possibilities boundary (PPB) illustrates all of the following EXCEPT:

Accepted Answer

The exact amount of money in the economy

Question 5

If an economy is operating inside its production possibilities boundary, what does this indicate?

Accepted Answer

Some resources are idle or being used inefficiently.

Question 6

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 7

According to Adam Smith, what motivates the butcher, brewer, and baker to provide goods in a market economy?

Accepted Answer

Their own self-interest.

Question 8

Which of the following best explains why money facilitates trade in a modern economy?

Accepted Answer

Money eliminates the need for a double coincidence of wants required in barter.

Question 9

A country that combines elements of free markets, government intervention, and tradition in its economic system is best described as:

Accepted Answer

A mixed economy.

Question 10

Which of the following is an example of a real-world opportunity cost?

Accepted Answer

The income you could have earned by working instead of attending university.

Question 11

If economic growth causes the production possibilities boundary to shift outward, what does this mean for the economy?

Accepted Answer

The economy can now produce more of all goods and services.

Question 12

Which of the following is a key difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics focuses on individual markets and resource allocation, while macroeconomics studies economic aggregates such as total output and employment.

Question 13

Which of the following is NOT a reason for government intervention in a market economy?

Accepted Answer

To maximize profits for private firms.

Question 14

Suppose a country can produce either 100 units of good X or 200 units of good Y with its available resources. What is the opportunity cost of producing 1 unit of good X?

Accepted Answer

2 units of good Y

Question 15

Which of the following best describes the role of incentives in a market economy?

Accepted Answer

Incentives influence individuals to act in their own self-interest, affecting supply and demand.

Question 16

If a country specializes in producing a good in which it has a comparative advantage and trades for other goods, what is the likely result?

Accepted Answer

Both countries involved in trade can consume beyond their individual production possibilities boundaries.

Question 17

Which of the following is an example of a public good that governments typically provide?

Accepted Answer

National defense

Question 18

Which of the following is a plausible effect of globalization, as discussed in the study materials?

Accepted Answer

An increase in the importance of international trade due to lower transportation costs and advances in information technology.

Question 19

Which of the following is a characteristic of a command economy?

Accepted Answer

Resource allocation is determined by central government planning.

Question 20

Suppose a government wants to address growing income inequality. Which of the following tools is it most likely to use?

Accepted Answer

Implementing progressive taxation and social welfare programs.

Economic Issues and Concepts: Foundations of Microeconomics

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