Question 1

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

Accepted Answer

Scarcity means that resources are limited, so individuals and societies must make choices about how to allocate them.

Question 2

Suppose a country can produce either 500 tons of cheese and 700 gallons of wine (Point C), or 750 tons of cheese and 400 gallons of wine (Point D). What is the opportunity cost of increasing cheese production from 500 to 750 tons?

Accepted Answer

$$300$$ gallons of wine

Question 3

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

Accepted Answer

Unemployment increased by 2% last year.

Question 4

If the United States can increase automobile production without decreasing the production of any other good, what does this imply about its current production point?

Accepted Answer

It is operating inside its Production Possibilities Frontier (PPF).

Question 5

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

Accepted Answer

Wages paid to workers

Question 6

A farmer is deciding whether to harvest lettuce using machines or migrant workers. Which fundamental economic question is the farmer addressing?

Accepted Answer

How will the goods and services be produced?

Question 7

Susan can attend a movie, study, or talk with friends. If she chooses to go to the movie, but her next best alternative is talking with friends, what is her opportunity cost?

Accepted Answer

Talking with friends

Question 8

Which of the following best explains why the Production Possibilities Frontier (PPF) is typically bowed outward (concave)?

Accepted Answer

Opportunity cost of producing additional units of a good increases as more resources are devoted to its production.

Question 9

If the USA and USSR both have the same marginal benefit for guns, but the USA's PPF is flatter at comparable quantities, which country will produce more guns?

Accepted Answer

The USA

Question 10

Which of the following is an example of a movement along the supply curve?

Accepted Answer

A change in the price of the good itself

Question 11

Suppose the price of a normal good increases. What is the expected effect on the quantity demanded, ceteris paribus?

Accepted Answer

Quantity demanded will decrease

Question 12

Which of the following best describes opportunity cost?

Accepted Answer

The value of the next best alternative forgone

Question 13

If a cold winter increases the demand for blankets, what will happen to the equilibrium price and quantity of blankets, assuming supply is unchanged?

Accepted Answer

Price increases; quantity increases

Question 14

Which of the following is a normative economic statement?

Accepted Answer

The government should reduce taxes to help families.

Question 15

If a point lies inside the Production Possibilities Frontier (PPF), what does this indicate?

Accepted Answer

Resources are underutilized or there is inefficiency.

Question 16

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

Accepted Answer

The cost of living has increased 10 percent over the past 10 years.

Question 17

Which of the following is NOT a basic question every economic system must answer?

Accepted Answer

Who will produce the goods and services?

Question 18

If the opportunity cost of producing guns increases as more guns are produced, what does this illustrate?

Accepted Answer

The law of increasing opportunity cost

Question 19

Which of the following is most likely to cause a shift in the demand curve for a product?

Accepted Answer

A change in consumer preferences

Question 20

Which of the following best describes microeconomics?

Accepted Answer

The study of individual decision-making units, such as households and firms.

Core Concepts in Microeconomics: Scarcity, Choice, Opportunity Cost, and Production Possibilities

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