Question 1

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

Accepted Answer

The value of the best alternative given up when making a choice.

Question 2

Suppose Jill can produce either 50 loaves of bread or 100 logs of wood per month. What is Jill’s opportunity cost of producing 1 loaf of bread?

Accepted Answer

2 logs of wood

Question 3

If Marie can produce either 40 loaves of bread or 20 logs of wood per month, what is Marie’s opportunity cost of producing 1 log of wood?

Accepted Answer

2 loaves of bread

Question 4

Which of the following statements about comparative advantage is correct?

Accepted Answer

A person has a comparative advantage if they can produce a good at a lower opportunity cost than others.

Question 5

Jill and Marie both produce bread and wood. Jill’s opportunity cost of 1 loaf of bread is 2 logs of wood, and Marie’s is 0.5 log of wood. Who should specialize in bread production?

Accepted Answer

Marie, because she has a lower opportunity cost for bread.

Question 6

Which of the following is NOT an assumption of the production possibilities frontier (PPF) model?

Accepted Answer

All goods are produced in equal quantities.

Question 7

If Jill specializes in wood and Marie specializes in bread, and they trade, what happens to their consumption possibilities?

Accepted Answer

They can consume combinations outside their individual PPFs.

Question 8

Which of the following best illustrates a positive statement?

Accepted Answer

Raising the minimum wage will increase unemployment among teenagers.

Question 9

In the circular flow model, what role do households play in input markets?

Accepted Answer

Sellers of productive resources

Question 10

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

Accepted Answer

The government should subsidize clean energy.

Question 11

Suppose Jill can produce 40 loaves of bread or 100 logs of wood per month. If she is currently producing 20 loaves of bread and 60 logs of wood, what is the opportunity cost of increasing bread production from 20 to 30 loaves?

Accepted Answer

20 logs of wood

Question 12

Which of the following best explains why trade can make everyone better off, even if one person has an absolute advantage in everything?

Accepted Answer

Trade allows each person to specialize according to their comparative advantage.

Question 13

Which of the following is NOT a productive resource in the circular flow model?

Accepted Answer

Finished goods

Question 14

If the opportunity cost of producing an additional log of wood for Jill is 0.5 loaf of bread, and for Marie it is 2 loaves of bread, who has the comparative advantage in wood production?

Accepted Answer

Jill

Question 15

Which of the following best describes the role of incentives in economic decision-making?

Accepted Answer

Incentives are rewards and penalties that influence choices.

Question 16

A student is deciding between studying for an exam or going to a concert. If the student chooses to study, what is the opportunity cost?

Accepted Answer

The enjoyment and experience of attending the concert

Question 17

Which of the following is a key difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics focuses on individual and business choices, while macroeconomics analyzes the performance of the whole economy.

Question 18

Which of the following is a function of government in the circular flow model?

Accepted Answer

Setting rules of the game and interacting in any aspect of the economy

Question 19

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

Accepted Answer

A more efficient use of existing resources

Question 20

Which of the following best describes the purpose of economic models?

Accepted Answer

To focus attention on what is important for understanding economic behavior

Scarcity, Opportunity Cost, Trade, and Economic Models: Foundations of Microeconomics

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