Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

Suppose a city has a budget of $$12 million to spend on road repairs and new bicycle paths. If the cost of repairing 1 km of road is 1 $$million and the cost of building 1 km of new bicycle path is $500,000, what is the opportunity cost of building 1 km of new bicycle path?

Accepted Answer

0.5 km of road repairs

Question 3

Which of the following statements about the Production Possibilities Boundary (PPB) is correct?

Accepted Answer

Points on the PPB represent efficient use of resources.

Question 4

If an economy is operating inside its production possibilities boundary, what does this indicate?

Accepted Answer

Some resources are idle or being used inefficiently.

Question 5

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

Accepted Answer

Money

Question 6

Adam Smith argued that market economies are self-organizing. What does this mean?

Accepted Answer

Order emerges from the independent actions of individuals pursuing their own interests.

Question 7

Which of the following best illustrates the concept of scarcity?

Accepted Answer

There are not enough resources to produce all the goods and services people want.

Question 8

A student decides to attend university full-time rather than work at a job that pays $30,000 per year. What is the opportunity cost of attending university for one year?

Accepted Answer

The $30,000 salary forgone plus the cost of tuition and books.

Question 9

Which of the following is a key function of money in a market economy?

Accepted Answer

It facilitates trade by acting as a medium of exchange.

Question 10

If a country experiences economic growth, how is this represented on a production possibilities boundary (PPB) diagram?

Accepted Answer

The PPB shifts outward.

Question 11

Which of the following is an example of a real-world government intervention to correct a market failure?

Accepted Answer

Imposing taxes on firms that emit pollution.

Question 12

Which of the following best describes a mixed economy?

Accepted Answer

An economy that combines elements of free markets, tradition, and government intervention.

Question 13

Suppose a country can produce either 10 units of good A or 20 units of good B with its resources. What is the opportunity cost of producing 1 unit of good A?

Accepted Answer

2 units of good B

Question 14

Which of the following is NOT a key economic problem faced by all societies?

Accepted Answer

How to eliminate scarcity completely?

Question 15

Which of the following is a plausible reason for resources being idle in an economy?

Accepted Answer

There may be insufficient demand for goods and services.

Question 16

Which of the following best explains why specialization increases productivity?

Accepted Answer

Workers focus on a limited set of tasks, becoming more skilled and efficient.

Question 17

Which of the following is a characteristic of a command economy?

Accepted Answer

Resource allocation is determined by central planners.

Question 18

Suppose a country is currently producing at a point on its PPB. If it wants to produce more of one good, what must it do?

Accepted Answer

Reduce the production of another good.

Question 19

Which of the following is an example of a public good provided by government?

Accepted Answer

National defense

Question 20

Which of the following best describes the role of incentives in a market economy?

Accepted Answer

Incentives influence the choices of consumers and producers.

Chapter 1: Economic Issues and Concepts – Microeconomics Study Notes

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