Q: What is the formula for calculating the opportunity cost of producing one unit of good A in terms of good B (output problem)?

$$\text{Opportunity cost of 1A} = \frac{B}{A}$$

Question 1

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

Accepted Answer

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

Question 2

Suppose a student chooses to attend college full-time. Which of the following is an implicit cost of this decision?

Accepted Answer

Wages the student could have earned from working instead.

Question 3

If the production possibilities curve (PPC) is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 4

Which of the following would cause the PPC to shift outward?

Accepted Answer

A technological improvement in production.

Question 5

Given the following data for producing lawns and memos: AJ can mow a lawn in 3 hours or type a memo in 2 hours. Nicole can mow a lawn in 2 hours or type a memo in 1 hour. Who has the comparative advantage in mowing lawns?

Accepted Answer

AJ, because AJ has the lowest opportunity cost for mowing lawns.

Question 6

What is the formula for calculating the opportunity cost of producing one unit of good A in terms of good B (output problem)?

Accepted Answer

$$	ext{Opportunity cost of 1A} = \frac{B}{A}$$

Question 7

A country is currently producing at a point inside its PPC. What does this indicate?

Accepted Answer

The country is experiencing unemployment or inefficiency.

Question 8

Which of the following is NOT a characteristic of a market economy?

Accepted Answer

Central planning by the government.

Question 9

If the marginal utility per dollar spent on shoes is greater than the marginal utility per dollar spent on movies, what should a rational consumer do?

Accepted Answer

Buy more shoes and fewer movies.

Question 10

Which of the following is an example of physical capital?

Accepted Answer

A tractor used in farming.

Question 11

According to the law of diminishing marginal utility, which of the following is true?

Accepted Answer

Marginal utility decreases as more units of a good are consumed.

Question 12

If a country can produce more of both goods than another country, it has:

Accepted Answer

An absolute advantage in both goods.

Question 13

Which of the following best explains why scarcity exists?

Accepted Answer

Resources are limited and wants are unlimited.

Question 14

If the opportunity cost of producing one more unit of good X increases as more of good X is produced, the PPC is:

Accepted Answer

Bowed outward.

Question 15

Which of the following is NOT included in the opportunity cost of attending college?

Accepted Answer

Money spent on entertainment during college.

Question 16

If a country moves from a point inside its PPC to a point on the curve, what does this represent?

Accepted Answer

An improvement in resource utilization.

Question 17

Which of the following is a defining characteristic of a capitalist economy?

Accepted Answer

Price ownership and protection of property rights.

Question 18

If the marginal benefit of an activity exceeds the marginal cost, what should a rational decision-maker do?

Accepted Answer

Increase the activity.

Question 19

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 20

If a country is producing at a point on its PPC, what does this indicate?

Accepted Answer

The country is producing efficiently.

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