Question 1

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

Accepted Answer

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

Question 2

According to the law of demand, what happens when the price of a good increases, ceteris paribus?

Accepted Answer

The quantity demanded decreases.

Question 3

Which of the following is NOT a factor of production?

Accepted Answer

Technology

Question 4

If a country is producing at a point inside its production possibilities frontier (PPF), what does this indicate?

Accepted Answer

The country is not using all its resources efficiently.

Question 5

Suppose the opportunity cost of producing one more pizza increases as more pizzas are produced. What does this imply about the shape of the PPF?

Accepted Answer

The PPF is bowed outward (concave to the origin).

Question 6

Which of the following equations correctly represents the expenditure approach to calculating GDP?

Accepted Answer

$$Y = C + I + G + NX$$

Question 7

If the price level in year $$t is$$ $$P_t = 100$$ and in year $$t+1 is$$ $$P_{t+1} = 110$$, what is the inflation rate between these years?

Accepted Answer

$$\pi_{t+1} = \frac{110-100}{100} = 0.10 or 10$$%

Question 8

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods.

Question 9

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 10

If both the supply and demand for a good increase, what can we say about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases; equilibrium price is ambiguous.

Question 11

Which of the following best describes Pareto efficiency?

Accepted Answer

A situation where it is impossible to make one person better off without making someone else worse off.

Question 12

Which of the following is a shortcoming of GDP as a measure of economic well-being?

Accepted Answer

GDP does not account for pollution or resource depletion.

Question 13

If the Gini index of a country is close to 1, what does this indicate?

Accepted Answer

There is high income inequality.

Question 14

Suppose the price of soybeans rises. What is the likely effect on the supply of corn, assuming farmers can grow either crop?

Accepted Answer

The supply of corn decreases.

Question 15

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

Accepted Answer

"Raising the minimum wage will increase unemployment among teenagers."

Question 16

Country A can produce either 10 tons of wheat or 5 tons of rice with its resources. Country B can produce either 8 tons of wheat or 8 tons of rice. Which country has a comparative advantage in rice?

Accepted Answer

Country B

Question 17

If the marginal benefit of consuming an additional unit of a good is less than its marginal cost, what should a rational consumer do?

Accepted Answer

Consume less of the good.

Question 18

Which of the following would NOT be included in the calculation of this year's U.S. GDP?

Accepted Answer

A used car sold by a private owner.

Question 19

If the price of a complement good increases, what happens to the demand for the original good?

Accepted Answer

Demand decreases.

Question 20

Which of the following best explains why water is cheaper than caviar, even though water is essential for life?

Accepted Answer

Water is more abundant than caviar.

Macroeconomics: Core Concepts and Models (Chapters 1–4)

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