Q: A student is deciding whether to attend a 2-hour class or work a part-time job that pays $15 per hour. The student has already paid tuition and bought textbooks. What is the opportunity cost of attending the class?

$$2 \times 15 = 30$$ dollars in forgone wages$

Question 1

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies the allocation of scarce resources among individuals and firms, while macroeconomics studies the overall performance and aggregates of the economy.

Question 2

Which of the following is an example of an implicit cost when calculating the opportunity cost of attending university?

Accepted Answer

The wages you could have earned by working instead of attending classes.

Question 3

Suppose a country can produce either 400,000 electric vehicles (EVs) or 800,000 bicycles with its available resources. What is the opportunity cost of producing one EV?

Accepted Answer

$$\frac{800,000}{400,000} = 2$$ bicycles$

Question 4

Which of the following statements about the Production Possibilities Boundary (PPB) is correct?

Accepted Answer

Any point outside the PPB is unattainable given current resources and technology.

Question 5

A student is deciding whether to attend a 2-hour class or work a part-time job that pays $15 per hour. The student has already paid tuition and bought textbooks. What is the opportunity cost of attending the class?

Accepted Answer

$$2 	imes 15 = 30$$ dollars in forgone wages$

Question 6

Which of the following best describes the law of increasing opportunity cost as illustrated by a concave PPB?

Accepted Answer

As more of one good is produced, the opportunity cost of producing additional units increases.

Question 7

If a child has $$2.00 to spend, bubble gum costs 0.10$$, and lollipops cost $0.40, what is the opportunity cost of buying one lollipop in terms of bubble gum?

Accepted Answer

$$\frac{0.40}{0.10} = 4$$ bubble gums$

Question 8

Which of the following is NOT a direct implication of scarcity?

Accepted Answer

All resources have unlimited uses.

Question 9

Which of the following best defines opportunity cost?

Accepted Answer

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

Question 10

A manufacturer can use its resources to produce either 100 extra doors or 200 extra windows. What is the opportunity cost of producing one door?

Accepted Answer

$$\frac{200}{100} = 2$$ windows$

Question 11

Which of the following is an example of a positive incentive?

Accepted Answer

A bonus paid to employees for meeting sales targets.

Question 12

If productivity increases in both industries in an economy, what happens to the Production Possibilities Boundary (PPB)?

Accepted Answer

The PPB shifts outward, indicating economic growth.

Question 13

Which of the following is NOT typically considered when calculating the opportunity cost of taking an additional university course?

Accepted Answer

The cost of food and rent during the semester.

Question 14

Suppose the opportunity cost of moving from point B to point C on a PPB is 20 units of butter, and from point C to D is 30 units of butter. What does this illustrate?

Accepted Answer

The law of increasing opportunity cost.

Question 15

Which of the following best describes a market in microeconomic terms?

Accepted Answer

A place where buyers and sellers interact to determine what is produced, how it is produced, and for whom.

Question 16

Which of the following is an example of a trade-off resulting from scarcity?

Accepted Answer

A recreation company must choose between purchasing all-terrain vehicles or snowmobiles.

Question 17

Which of the following is a key feature of decentralized decision making in markets?

Accepted Answer

Outcomes are determined by the actions of buyers and sellers.

Question 18

If the opportunity cost of producing one more unit of a good increases as more is produced, what does this imply about the shape of the PPB?

Accepted Answer

The PPB is concave to the origin.

Question 19

Which of the following would most likely cause economic growth as shown by an outward shift of the PPB?

Accepted Answer

An increase in the availability of resources such as land, labor, or capital.

Question 20

Which of the following best describes self-interest in economic decision making?

Accepted Answer

Individuals act based on their perceived benefits versus costs.

Fundamental Concepts in Microeconomics: Scarcity, Opportunity Cost, and Production Possibilities

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