Question 1

Suppose a country can produce either 1000 new houses or 100 new hospital beds. According to the concept of opportunity cost, what is the opportunity cost of producing one additional new house?

Accepted Answer

$$10$$ new hospital beds

Question 2

Which of the following statements best describes the Production Possibility Frontier (PPF)?

Accepted Answer

It is the boundary between the quantities of two goods that can be produced and those that cannot.

Question 3

If the PPF is bowed outward, what does this indicate about opportunity cost?

Accepted Answer

Opportunity cost is increasing.

Question 4

Given the following data for a production possibilities table:

$$\begin{align*} 	ext{Hamburgers} & : 0, 20, 40, 60, 80, 100 \ 	ext{Milkshakes} & : 150, 140, 120, 90, 50, 0 \end{align*}$$

What is the marginal cost of increasing hamburger production from 40 to 60?

Accepted Answer

$$30$$ milkshakes

Question 5

Which of the following best defines 'allocative efficiency'?

Accepted Answer

Producing at a point where marginal cost equals marginal benefit.

Question 6

Suppose Bob can produce either 100 hamburgers or 50 milkshakes, while Sam can produce either 60 hamburgers or 100 milkshakes. Who has the comparative advantage in producing hamburgers?

Accepted Answer

Bob, because his opportunity cost of hamburgers is lower.

Question 7

If the marginal benefit of consuming a good is greater than its marginal cost, what should a rational consumer do?

Accepted Answer

Increase consumption of the good.

Question 8

Which of the following equations represents a line with a negative slope and a vertical intercept of $$20$$?

Accepted Answer

$$y = -x + 20$$

Question 9

A country is producing at a point inside its PPF. What does this imply?

Accepted Answer

The country is not using all its resources efficiently.

Question 10

Suppose the slope of a line is calculated as $$\frac{y_1$ - y_0$}{x_1$ - x_0$}. If$$ $$y_1 = 15$, y_0$ = 10$$, $$x_1 = 20$, and x_0$ = 10$$, what is the slope?

Accepted Answer

$$0.5$$

Question 11

Which of the following is NOT a reason for gains from trade between two individuals?

Accepted Answer

Both individuals having the same absolute advantage.

Question 12

If a person can produce a good using fewer resources than another, they have:

Accepted Answer

An absolute advantage.

Question 13

If the marginal benefit curve is downward sloping, what does this imply about consumer preferences?

Accepted Answer

Consumers value each additional unit less than the previous one.

Question 14

Suppose the opportunity cost of producing 1 robot is 20 hamburgers for Bob and 10 hamburgers for Mary. Who has the comparative advantage in producing robots?

Accepted Answer

Mary, because she gives up fewer hamburgers.

Question 15

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

Accepted Answer

Resources are limited and wants are unlimited.

Question 16

If a country moves from a point inside its PPF to a point on the PPF, what is the most likely result?

Accepted Answer

The country is increasing its efficiency in resource use.

Question 17

If the marginal cost of producing hamburgers increases as more are produced, what does this imply about the shape of the PPF?

Accepted Answer

The PPF is bowed outward.

Question 18

Suppose a student is deciding between spending an hour studying economics or working for $15. The opportunity cost of studying economics for an hour is:

Accepted Answer

$$15$$

Question 19

Which of the following is true about comparative advantage?

Accepted Answer

Comparative advantage is determined by who has the lower opportunity cost.

Question 20

If the marginal benefit of the last unit consumed equals the marginal cost of producing it, what does this indicate?

Accepted Answer

The allocation is allocatively efficient.

The Economic Problem: Production Possibilities, Opportunity Cost, and Gains from Trade

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