Question 1

Which of the following best describes opportunity cost?

Accepted Answer

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

Question 2

Scarcity in economics means that:

Accepted Answer

Resources are limited and wants are unlimited.

Question 3

Which of the following is a normative statement?

Accepted Answer

The government should increase the minimum wage.

Question 4

Suppose a country can produce either 10 cars or 20 computers with its resources. What is the opportunity cost of producing one car?

Accepted Answer

$$2$$ computers

Question 5

The law of increasing opportunity cost is best illustrated by:

Accepted Answer

A bowed-outward (concave) production possibilities curve.

Question 6

Which of the following would shift the production possibilities curve outward?

Accepted Answer

A technological improvement.

Question 7

If a country can produce a good at a lower opportunity cost than another country, it has:

Accepted Answer

A comparative advantage.

Question 8

Which of the following is NOT an assumption of the basic production possibilities model?

Accepted Answer

There is unemployment of resources.

Question 9

A point inside the production possibilities curve represents:

Accepted Answer

Inefficient use of resources.

Question 10

In the circular flow model, households:

Accepted Answer

Provide factors of production to firms.

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the combination of goods most desired by society.

Question 12

If the opportunity cost of producing the second piano is 3 wheat, what is the opportunity cost of producing the third piano if the law of increasing opportunity cost holds?

Accepted Answer

Greater than 3 wheat

Question 13

Which of the following is a sunk cost?

Accepted Answer

The cost of a non-refundable concert ticket you already purchased.

Question 14

A positive economic statement is:

Accepted Answer

Testable and based on facts.

Question 15

Which of the following policies would most likely shift the PPC outward?

Accepted Answer

Increasing investment in physical capital.

Question 16

If a country specializes in producing the good for which it has a comparative advantage and trades with another country, what is the likely outcome?

Accepted Answer

Both countries can consume beyond their individual production possibilities frontiers.

Question 17

Which of the following best explains why the PPC is typically bowed outward?

Accepted Answer

Resources are not equally productive in all uses.

Question 18

In the circular flow model, what do firms provide to households in exchange for factors of production?

Accepted Answer

Wages, rent, and profit

Question 19

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

Accepted Answer

Higher interest rates will reduce consumer spending.

Question 20

If a country moves from a point inside its PPC to a point on the PPC, what does this represent?

Accepted Answer

An improvement in productive efficiency.

Principles of Microeconomics: Scarcity, Opportunity Cost, and Production Possibilities

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