Question 1

Which of the following best describes a budget constraint?

Accepted Answer

All possible combinations of goods that someone can afford, given the prices of goods, when all income is spent.

Question 2

If Alphonso has $$10, burgers cost 2$$, and bus tickets cost $0.50, what is the opportunity cost of buying one burger?

Accepted Answer

Four bus tickets

Question 3

Which equation represents a straight-line budget constraint for two goods, $$x$$ and $$y$$, with prices $$P_x$$ and $$P_y$$ and income $$I$$?

Accepted Answer

$$P_x x + P_y y = I$$

Question 4

What does the slope of the production possibilities frontier (PPF) represent?

Accepted Answer

The opportunity cost of producing one good in terms of the other

Question 5

Which of the following is an example of a sunk cost?

Accepted Answer

Money spent on a new product that cannot be recovered if the product fails

Question 6

According to the law of diminishing marginal utility, which statement is most accurate?

Accepted Answer

Each additional unit of a good provides less satisfaction than the previous unit.

Question 7

Which of the following points on a PPF curve represents productive efficiency?

Accepted Answer

Any point on the PPF curve

Question 8

A country has a comparative advantage in producing a good if:

Accepted Answer

It can produce the good at a lower opportunity cost than another country.

Question 9

Which of the following is NOT a difference between a budget constraint and a PPF?

Accepted Answer

A budget constraint always shows productive efficiency, while a PPF does not.

Question 10

If a student spends 4 hours studying instead of working a job that pays $15 per hour, what is the opportunity cost of studying?

Accepted Answer

$60

Question 11

Which concept explains why the first slice of pizza brings more satisfaction than the sixth?

Accepted Answer

Law of diminishing marginal utility

Question 12

If a society is operating inside its PPF, what does this indicate?

Accepted Answer

The society is not using all its resources efficiently.

Question 13

Which of the following best describes allocative efficiency?

Accepted Answer

When the mix of goods produced represents the mix that society most desires.

Question 14

Which statement about the 'invisible hand' is most accurate?

Accepted Answer

It describes how self-interested behavior can lead to positive social outcomes.

Question 15

Suppose the opportunity cost of producing wheat in the U.S. is lower than in Brazil, and the opportunity cost of producing sugar cane is lower in Brazil than in the U.S. Which country has the comparative advantage in wheat?

Accepted Answer

U.S.

Question 16

Which formula would you use to calculate the opportunity cost of good $$A in $$terms of good $$B$$ along a straight-line budget constraint?

Accepted Answer

$$\frac{P_A}{P_B}$$

Question 17

If a point lies outside the PPF, what does this indicate?

Accepted Answer

The society does not have enough resources to produce at that point.

Question 18

Which of the following is a positive statement in economics?

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment rates."

Question 19

Why is the PPF typically bowed outward (concave to the origin)?

Accepted Answer

Because of the law of diminishing returns.

Question 20

Which of the following scenarios best illustrates the concept of opportunity cost?

Accepted Answer

A student chooses to spend time studying instead of going to a concert, missing out on the enjoyment of the concert.

Choice in a World of Scarcity: Budget Constraints, Opportunity Cost, and the Production Possibilities Frontier

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