Question 1

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

Accepted Answer

Scarcity is the condition that arises because wants always exceed what can be produced with limited resources.

Question 2

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 3

Suppose you decide to spend 2 hours working at a part-time job instead of studying for an exam. What is the opportunity cost of your decision?

Accepted Answer

The grade improvement you forgo by not studying for the exam.

Question 4

The production possibilities curve (PPC) is bowed outward because:

Accepted Answer

Resources are specialized, leading to increasing opportunity costs.

Question 5

If a nation is operating inside its PPC, what does this indicate?

Accepted Answer

The nation is experiencing unemployment or inefficiency.

Question 6

Which of the following best illustrates the law of increasing relative cost?

Accepted Answer

As more resources are devoted to producing smartphones, the opportunity cost of producing additional smartphones increases.

Question 7

Which of the following is an example of a capital good?

Accepted Answer

A factory used to produce cars

Question 8

Suppose Canada can produce either 60 units of Good A or 30 units of Good B. What is the opportunity cost of producing 1 unit of Good B in terms of Good A?

Accepted Answer

$$60/30 = 2$$ units of Good A

Question 9

Which of the following statements about absolute and comparative advantage is correct?

Accepted Answer

A country should specialize in the good for which it has the lowest opportunity cost.

Question 10

If a neurosurgeon can change her own oil faster than a mechanic but earns much more per hour performing surgery, what should she do according to the concept of opportunity cost?

Accepted Answer

She should perform surgery and pay the mechanic to change her oil.

Question 11

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

Accepted Answer

A technological improvement in production

Question 12

If a country decides to produce more capital goods and fewer consumption goods today, what is the likely long-term effect?

Accepted Answer

The country will experience faster economic growth in the future.

Question 13

Which of the following is an example of a trade-off faced by a government?

Accepted Answer

Choosing between building more hospitals or more highways.

Question 14

If a point lies outside the PPC, what does this indicate?

Accepted Answer

The point is unattainable given current resources and technology.

Question 15

Which of the following best describes productive efficiency?

Accepted Answer

Producing the maximum output with given resources and technology.

Question 16

Suppose the opportunity cost of producing 1 tablet in Canada is 0.5 smartphones, and in the US it is 1.5 smartphones. Who has the comparative advantage in producing tablets?

Accepted Answer

Canada

Question 17

Which of the following is a real-world example of specialization and division of labour?

Accepted Answer

An assembly line where each worker performs a specific task in car production.

Question 18

If a country is producing at a point on its PPC, which of the following must be true?

Accepted Answer

The country is using all its resources efficiently.

Question 19

Which of the following best explains why even wealthy individuals face scarcity?

Accepted Answer

They must make choices among competing wants due to limited time and resources.

Question 20

If the opportunity cost of producing 1 unit of Good X is higher in Country A than in Country B, which country has the comparative advantage in producing Good X?

Accepted Answer

Country B

Scarcity, Trade-Offs, and Comparative Advantage: Chapter 2 Study Guide

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