Question 1

Which of the following is NOT considered one of the five factors of production?

Accepted Answer

Government Regulation

Question 2

Suppose a country can produce either 100 tablets or 50 smart phones using all its resources. What is the opportunity cost of producing one smart phone?

Accepted Answer

$$100/50 = 2$$ tablets

Question 3

If the production possibilities frontier (PPF) for tablets and tacos 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 an outward shift of the entire PPF?

Accepted Answer

A technological improvement in the production of both goods

Question 5

In the circular flow diagram, which of the following best describes the flow of income?

Accepted Answer

Income flows from firms to households in exchange for factors of production.

Question 6

If a point lies inside the PPF, what does this indicate about resource use?

Accepted Answer

Resources are not fully employed or are used inefficiently.

Question 7

Suppose a technological improvement only affects the production of tacos. How will the PPF shift?

Accepted Answer

The PPF will shift outward along the taco (horizontal) axis only.

Question 8

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

Accepted Answer

The value of the next best alternative foregone.

Question 9

According to Adam Smith's concept of the 'invisible hand,' what guides individuals in a market economy?

Accepted Answer

Self-interest

Question 10

If a country moves from a point inside its PPF to a point on the PPF, what is the most likely result?

Accepted Answer

The country is increasing its output by using resources more efficiently.

Question 11

Which of the following is an example of human capital?

Accepted Answer

A worker's education and skills

Question 12

If the opportunity cost of producing one tablet is $$0.5$$ smart phones, how many tablets must be given up to produce $$4$$ smart phones?

Accepted Answer

$$4 \div 0.5 = 8$$ tablets

Question 13

Which of the following is necessary for a successful market economy, according to the study materials?

Accepted Answer

Private property protection and enforcement of contracts

Question 14

A country is currently producing at point E, which is outside its PPF. What does this imply?

Accepted Answer

The country is producing an unattainable combination of goods with current resources and technology.

Question 15

If resources are equally suited to producing both goods, what is the shape of the PPF?

Accepted Answer

A straight line

Question 16

Which of the following best describes the relationship between income, spending, and production in the circular flow model?

Accepted Answer

Income = Spending = Production = Output

Question 17

A firm purchases new machinery to increase its output. In terms of factors of production, this is an example of:

Accepted Answer

Physical Capital

Question 18

If a country increases its stock of human capital, what is the most likely effect on its PPF?

Accepted Answer

The PPF will shift outward.

Question 19

Which of the following scenarios best illustrates increasing marginal opportunity costs?

Accepted Answer

Giving up 10 tablets to gain 20 tacos, then giving up 10 tablets to gain only 2 tacos as more resources are shifted to taco production.

Question 20

If property rights are not enforced in a market economy, what is the most likely outcome?

Accepted Answer

Decreased incentives to produce, leading to lower economic growth

The Market System and Production Possibilities Frontier (PPF)

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