Q: If Japan can produce 240 computers or 1200 tons of wheat with 30,000 hours of labour, what is the opportunity cost of producing one computer in Japan?

$$\frac{125}{25} = 5$$\text{ tons of wheat}$

Question 1

Suppose Canada can produce either 500 computers or 5000 tons of wheat with its available resources. If Canada decides to produce 100 more computers, how many tons of wheat must it give up? What is the opportunity cost of producing one computer?

Accepted Answer

$$10$$	ext{ tons of wheat}$

Question 2

Which of the following points on a production possibilities frontier (PPF) represents an unattainable combination of goods with current resources and technology?

Accepted Answer

A point outside the PPF curve

Question 3

If Japan can produce 240 computers or 1200 tons of wheat with 30,000 hours of labour, what is the opportunity cost of producing one computer in Japan?

Accepted Answer

$$\frac{125}{25} = 5$$	ext{ tons of wheat}$

Question 4

Which of the following best describes the concept of increasing marginal opportunity costs?

Accepted Answer

As more resources are devoted to producing one good, the opportunity cost of producing additional units increases.

Question 5

If Tesla is operating at a point inside its PPF, what does this indicate about its use of resources?

Accepted Answer

Tesla is not using all its resources efficiently.

Question 6

Suppose Canada and Japan specialize according to their comparative advantage and then trade. Which of the following statements is true?

Accepted Answer

Both countries can consume more of both goods than they could without trade.

Question 7

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 8

According to Adam Smith’s concept of the 'invisible hand,' what is the primary mechanism by which markets coordinate economic activity?

Accepted Answer

Individuals pursuing their own self-interest

Question 9

If the government increases spending on health care during a pandemic, what is the most likely economic trade-off?

Accepted Answer

Less funding is available for other public goods such as education or infrastructure.

Question 10

Which of the following best explains why the PPF is typically bowed outward (concave to the origin)?

Accepted Answer

Resources are not equally suited to producing all goods.

Question 11

Suppose Canada offers to trade 4 tons of wheat for 1 computer, but Japan wants 11 tons of wheat for 1 computer. According to the theory of comparative advantage, will trade occur?

Accepted Answer

No, because the terms of trade must fall between the opportunity costs of both countries.

Question 12

Which of the following is a role of government in a market economy?

Accepted Answer

Enforcing property rights and contracts

Question 13

If a technological improvement reduces the labour required to produce computers from 100 hours to 80 hours in Canada, what happens to the PPF?

Accepted Answer

The PPF shifts outward for computers, allowing more computers to be produced with the same resources.

Question 14

Which of the following best describes the circular-flow diagram?

Accepted Answer

It shows how households and firms interact in product and factor markets.

Question 15

A country has an absolute advantage in producing a good if:

Accepted Answer

It can produce more of the good with the same resources than another country.

Question 16

Which of the following is an example of opportunity cost?

Accepted Answer

A student gives up working at a part-time job to attend class.

Question 17

Why can no single person or company make an entire iPad from start to finish?

Accepted Answer

The production of an iPad requires specialized knowledge and global supply chains coordinated by the market.

Question 18

Which of the following statements about free markets is correct?

Accepted Answer

Free markets tend to raise living standards but require government to enforce property rights.

Question 19

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

Accepted Answer

The country is using all its resources efficiently.

Question 20

Which of the following best explains why specialization and trade can make everyone better off?

Accepted Answer

Each country can consume beyond its own PPF by specializing in goods where it has a comparative advantage and trading.

Trade-offs, Comparative Advantage, and the Market System: Microeconomics Study Notes

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