Question 1

Tilly’s Tattoo Centre (TTC) can produce either tattoos or piercings with its current resources. If the opportunity cost of producing one additional tattoo is 5 piercings, what does this imply about TTC’s production possibilities?

Accepted Answer

TTC must give up 5 piercings to produce one more tattoo, indicating increasing opportunity cost.

Question 2

Suppose the marginal opportunity cost of producing tattoos at TTC increases as more tattoos are produced. Which economic principle does this illustrate?

Accepted Answer

The law of increasing opportunity cost.

Question 3

If piercings sell for $1 each, and the opportunity cost of producing the 3rd tattoo is 5 piercings, what is the marginal cost of the 3rd tattoo in dollars?

Accepted Answer

$5

Question 4

Which of the following best describes a supply curve for tattoos if the marginal cost increases with each additional tattoo produced?

Accepted Answer

The supply curve is upward sloping, reflecting increasing marginal cost.

Question 5

If TTC’s supply curve for tattoos is upward sloping, which of the following statements is most accurate?

Accepted Answer

As the price per tattoo increases, TTC is willing to supply more tattoos.

Question 6

Suppose TTC can produce a maximum of 30 piercings if it produces 0 tattoos, and 0 piercings if it produces 5 tattoos. What is the opportunity cost of producing the first tattoo?

Accepted Answer

$$\frac{30}{5} = 6$$ piercings

Question 7

Which of the following is a reason why marginal cost might decrease as output increases for some businesses?

Accepted Answer

Economies of scale allow for more efficient production as output increases.

Question 8

If the marginal cost of producing tattoos at TTC is constant, what would the supply curve look like?

Accepted Answer

A horizontal line at the level of marginal cost.

Question 9

TTC’s production possibilities table shows that as more tattoos are produced, fewer piercings can be produced. What economic concept does this illustrate?

Accepted Answer

Scarcity and trade-offs.

Question 10

If TTC’s marginal opportunity cost of tattoos is increasing, what shape will the production possibilities frontier (PPF) have?

Accepted Answer

Bowed outward (concave to the origin).

Question 11

Suppose TTC can hire more workers or buy more equipment. What would be the effect on its production possibilities frontier (PPF)?

Accepted Answer

The PPF would shift outward, indicating increased productive capacity.

Question 12

If the price of piercings increases while the price of tattoos remains constant, what is the likely effect on TTC’s production decision?

Accepted Answer

TTC will allocate more resources to producing piercings and fewer to tattoos.

Question 13

Which of the following best explains why the marginal opportunity cost of tattoos increases as more tattoos are produced?

Accepted Answer

Resources are not equally efficient in producing both tattoos and piercings.

Question 14

If TTC’s supply curve for tattoos is derived from its marginal cost curve, which of the following is true?

Accepted Answer

The supply curve shows the minimum price TTC is willing to accept for each quantity of tattoos.

Question 15

If TTC faces increasing marginal cost as it produces more tattoos, what is the most likely reason?

Accepted Answer

TTC must use less efficient resources as it increases tattoo production.

Question 16

Suppose the marginal cost of producing the 4th tattoo is $$7. If the price per tattoo is 6$$, should TTC produce the 4th tattoo?

Accepted Answer

No, because the marginal cost exceeds the price.

Question 17

If TTC’s marginal cost of tattoos is $$5 and the market price is 8$$, what is TTC’s producer surplus for the next tattoo?

Accepted Answer

$$8 - 5$$ = $3

Question 18

Which of the following best describes the relationship between marginal cost and supply?

Accepted Answer

The supply curve is the portion of the marginal cost curve above the average variable cost.

Question 19

If TTC’s marginal cost for tattoos decreases as output increases, what might explain this pattern?

Accepted Answer

TTC is experiencing increasing returns to scale.

Question 20

Suppose TTC’s production possibilities table shows that producing the first tattoo costs 3 piercings, the second costs 5, and the third costs 7. What does this pattern indicate?

Accepted Answer

The opportunity cost of tattoos is increasing as more are produced.

Microeconomics Sample Test Study Guide: Marginal Cost, Opportunity Cost, and Supply Curves

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