Question 1

What does a circular-flow diagram illustrate in microeconomics?

Accepted Answer

It shows how goods and money flow between households and firms in an economy.

Question 2

In the circular-flow model, which of the following is true?

Accepted Answer

Households are sellers in the resource market and buyers in the product market.

Question 3

In the goods and services market, how do households and firms interact?

Accepted Answer

Households are buyers and firms are sellers.

Question 4

What does a point on a country's production possibilities frontier (PPF) represent?

Accepted Answer

A combination of two goods that an economy can produce using all available resources and technology.

Question 5

Why are production possibilities frontiers (PPFs) usually bowed outward?

Accepted Answer

Because resources are not equally efficient in producing every good, leading to increasing opportunity costs.

Question 6

Suppose an economy produces only two goods: food and machines. If the economy is operating on its PPF, what does this imply?

Accepted Answer

The economy is using all its resources efficiently.

Question 7

Which of the following would cause the production possibilities frontier to shift outward?

Accepted Answer

An improvement in technology.

Question 8

In what region of the production possibilities frontier can an economy produce?

Accepted Answer

At any point on or inside the frontier, but not outside the frontier.

Question 9

What does it mean if an economy is producing efficiently?

Accepted Answer

It is not possible to produce more of one good without producing less of another.

Question 10

How can the production possibilities frontier shift outward?

Accepted Answer

If there is an increase in technology.

Question 11

Maria can read 20 pages of economics or 50 pages of sociology in an hour. What is Maria's opportunity cost of reading 100 pages of sociology?

Accepted Answer

$$\displaystyle 40$$ pages of economics

Question 12

If Canada can produce 10 cars or 100 tons of grain per worker per year, what is the opportunity cost of producing 1 car in Canada?

Accepted Answer

$$\displaystyle 10$$ tons of grain

Question 13

Which of the following best describes comparative advantage?

Accepted Answer

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

Question 14

If Japan can produce 10 cars or 100 tons of grain per worker per year, what is the opportunity cost of producing 1 ton of grain in Japan?

Accepted Answer

$$\displaystyle 0.1$$ cars

Question 15

Which of the following is an example of a microeconomic issue?

Accepted Answer

The impact of a change in consumer income on the purchase of luxury automobiles.

Question 16

If a country has an absolute advantage in producing both cars and grain, what should it do according to the theory of comparative advantage?

Accepted Answer

Specialize in the good for which it has the lowest opportunity cost and trade for the other good.

Question 17

If the opportunity cost of producing a car in Canada is 10 tons of grain, and in Japan it is 10 tons of grain, which country has a comparative advantage in cars?

Accepted Answer

Neither country has a comparative advantage in cars.

Question 18

If a country is producing inside its production possibilities frontier, what does this indicate?

Accepted Answer

Some resources are unemployed or underutilized.

Question 19

Which of the following would NOT cause the production possibilities frontier to shift outward?

Accepted Answer

A decrease in the labor force.

Question 20

If the opportunity cost of producing 1 unit of good X is 2 units of good Y, what is the opportunity cost of producing 1 unit of good Y?

Accepted Answer

$$\displaystyle 0.5$$ units of good X

Weekly Assignment 1 Fundamental Concepts in Microeconomics: Circular Flow, Production Possibilities, and Opportunity Cost

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