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

Suppose Britain can produce either 20 merchant ships or 40 warships. If Britain wants to produce 10 more warships, what is the opportunity cost in terms of merchant ships?

Accepted Answer

$$\frac{20}{40} = 0.5$$ merchant ships per warship, so 10 warships cost 5 merchant ships.

Question 3

According to the law of demand, what happens to the quantity demanded of a good when its price increases, holding everything else constant?

Accepted Answer

Quantity demanded decreases.

Question 4

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

Accepted Answer

An increase in the price of gasoline, a substitute for electric vehicles.

Question 5

If the price of input materials for shoe production increases, what is the most likely effect on the supply curve for shoes?

Accepted Answer

The supply curve will shift to the left.

Question 6

Which of the following best illustrates the concept of comparative advantage?

Accepted Answer

A country produces a good at a lower opportunity cost than another country.

Question 7

A technological improvement in the production of smartphones is likely to have which effect on the supply curve?

Accepted Answer

Shift the supply curve to the right.

Question 8

If a government imposes a price floor above the equilibrium price in the market for wheat, what is the likely outcome?

Accepted Answer

A surplus of wheat.

Question 9

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 10

Suppose the demand for chocolate increases due to a new health study. What happens to the equilibrium price and quantity in the chocolate market?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 11

Which of the following would cause a movement along the demand curve for coffee, rather than a shift of the curve?

Accepted Answer

A decrease in the price of coffee.

Question 12

If the government subsidizes the production of solar panels, what is the most likely effect on the market for solar panels?

Accepted Answer

Supply increases, shifting the supply curve to the right.

Question 13

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good increases, the quantity supplied increases, ceteris paribus.

Question 14

A pandemic causes most people to work from home, increasing demand for computers. What is the likely effect on the computer market?

Accepted Answer

Demand curve shifts to the right, increasing equilibrium price and quantity.

Question 15

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

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment among teenagers."

Question 16

If the price of gasoline is expected to rise tomorrow, what is the likely effect on today's demand for gasoline?

Accepted Answer

Today's demand for gasoline will increase.

Question 17

Which of the following best explains why the production possibilities frontier (PPF) is typically bowed outward?

Accepted Answer

Increasing marginal opportunity costs as more of one good is produced.

Question 18

Suppose a market for apples is in equilibrium. If a disease destroys half the apple crop, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 19

Which of the following is NOT a determinant of market demand?

Accepted Answer

Technological change in production.

Question 20

A firm is willing to sell a product for $$5, but the market price is 8. $$What is the producer surplus for one unit?

Accepted Answer

$$8 - 5$$ = $$3$$

Foundations of Macroeconomics: Key Concepts, Markets, and Economic Decision-Making

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