Question 1

Suppose the marginal benefit (MB) and marginal cost (MC) of producing widgets are given as follows: For the 1st unit, $$MB = 30$$, $$MC = 10$$; for the 2nd unit, $$MB = 20$$, $$MC = 15$$; for the 3rd unit, $$MB = 12$$, $$MC = 18. $$According to marginal analysis, how many widgets should be produced to maximize efficiency?

Accepted Answer

Produce 2 units, since MB \u003e MC for the first two units but not the third.

Question 2

Which of the following best describes a situation that is Pareto efficient?

Accepted Answer

A situation where it is impossible to make someone better off without making someone else worse off.

Question 3

Alex can produce 8 cars or 16 bikes in a day. Jamie can produce 6 cars or 18 bikes in a day. Who has the comparative advantage in producing bikes?

Accepted Answer

Jamie, because she has a lower opportunity cost for bikes.

Question 4

If the production possibilities frontier (PPF) shifts outward, which of the following is the most likely cause?

Accepted Answer

A technological improvement that increases productivity.

Question 5

Country A specializes in producing wheat, while Country B specializes in producing cars. If both countries trade, what is the main economic reason both can end up consuming more than they could alone?

Accepted Answer

Specialization based on comparative advantage allows for gains from trade.

Question 6

Which of the following would cause a movement along the demand curve for coffee, rather than a shift of the curve?

Accepted Answer

A decrease in the price of coffee.

Question 7

Suppose the supply equation for a good is $$QS = 10 + 3P$$ and the demand equation is $$QD = 40 - 2P. $$What is the equilibrium price?

Accepted Answer

$$P = 6$$

Question 8

A government sets a price ceiling below the equilibrium price for rental apartments. What is the most likely result?

Accepted Answer

A shortage of apartments.

Question 9

Which of the following is counted in a country's GDP?

Accepted Answer

The sale of bread from a bakery to a consumer.

Question 10

If $$C = 400$$, $$I = 150$$, $$G = 200$$, and $$NX = -50$$, what is the value of GDP?

Accepted Answer

$$900$$

Question 11

Which of the following best explains why real GDP is a better measure of economic growth than nominal GDP?

Accepted Answer

Real GDP uses constant prices to remove the effects of inflation.

Question 12

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 13

Which of the following would shift the supply curve for smartphones to the right?

Accepted Answer

A technological advancement in smartphone production.

Question 14

Suppose $$QD = 120 - 4P$$ and $$QS = 20 + 2P. $$What is the equilibrium quantity?

Accepted Answer

$$Q = 80$$

Question 15

If a point lies inside the production possibilities frontier (PPF), what does this indicate?

Accepted Answer

The economy is not using all resources efficiently.

Question 16

Which of the following is true about price floors?

Accepted Answer

A price floor set above equilibrium price causes a surplus.

Question 17

If the price of the good itself changes, what happens in the market?

Accepted Answer

There is a movement along the demand or supply curve.

Question 18

If a country’s exports are $$200$$ and imports are $$250$$, what is the value of net exports ($$NX$$)?

Accepted Answer

$$NX = -50$$

Question 19

Which of the following scenarios would cause the PPF to shift inward?

Accepted Answer

A natural disaster that destroys factories.

Question 20

If nominal GDP increases but real GDP does not, what can we conclude?

Accepted Answer

Prices have increased but production has not.

Core Principles of Macroeconomics: Marginal Analysis, Comparative Advantage, Supply & Demand, and GDP

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