Question 1

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

Accepted Answer

Scarcity means that resources are insufficient to satisfy all human wants.

Question 2

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

Accepted Answer

Money

Question 3

A student decides to spend an hour studying economics instead of going to the gym. What is the opportunity cost of this decision?

Accepted Answer

The next-best alternative, which is the benefit from going to the gym

Question 4

Which of the following statements about the production possibilities curve (PPC) is correct?

Accepted Answer

Points on the PPC represent maximum possible output combinations given current resources and technology.

Question 5

If an economy is operating at a point inside its production possibilities curve, what does this indicate?

Accepted Answer

Resources are not being used efficiently.

Question 6

According to the law of increasing opportunity cost, as an economy produces more of one good, what happens?

Accepted Answer

The opportunity cost of producing additional units of that good increases.

Question 7

Suppose a country decides to invest more in capital goods rather than consumer goods. According to the PPC model, what is the likely long-term effect?

Accepted Answer

The PPC will shift outward, indicating economic growth.

Question 8

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 9

If Canada has a comparative advantage in producing wheat and Japan has a comparative advantage in producing electronics, what should each country do to maximize total output?

Accepted Answer

Canada should specialize in wheat and Japan in electronics, then trade.

Question 10

Which of the following is an example of human capital?

Accepted Answer

A worker's accumulated education and training

Question 11

A nation is currently producing at a point on its PPC. What must happen for it to produce at a point outside its current PPC?

Accepted Answer

It must experience economic growth, such as through technological advancement or increased resources.

Question 12

Which of the following is a direct result of specialization and division of labour?

Accepted Answer

Greater productivity and efficiency

Question 13

Suppose a country is currently producing only consumer goods and no capital goods. What is the likely long-term consequence according to the PPC model?

Accepted Answer

The country’s future production possibilities will be limited.

Question 14

Which of the following equations represents the opportunity cost of producing one more unit of Good X in terms of Good Y, given a PPC?

Accepted Answer

$$OC_{X} = \frac{\Delta Y}{\Delta X}$$

Question 15

If a country is producing at a point on its PPC and decides to produce more of Good A, what must happen to the production of Good B?

Accepted Answer

Production of Good B must decrease.

Question 16

Which of the following best explains why the PPC is typically bowed outward?

Accepted Answer

Resources are specialized, so the opportunity cost increases as more of one good is produced.

Question 17

Which of the following is an example of a service in economic terms?

Accepted Answer

A plumber repairing a leak in your home

Question 18

If a nation increases its investment in education and worker training, what is the most likely effect on its PPC?

Accepted Answer

The PPC will shift outward.

Question 19

Why do nations benefit from trading based on comparative advantage rather than absolute advantage?

Accepted Answer

Because comparative advantage allows countries to specialize in goods with the lowest opportunity cost, increasing total output and consumption.

Question 20

Which of the following is NOT a characteristic of entrepreneurship as a factor of production?

Accepted Answer

Accumulating education and training

Scarcity and the World of Trade-Offs: Foundations of Macroeconomics

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