Question 1

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

Accepted Answer

The value of the next best alternative foregone when making a choice.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

Which of the following statements about comparative and absolute advantage is correct?

Accepted Answer

A country should specialize in producing goods for which it has the lowest opportunity cost.

Question 4

If the production possibility frontier (PPF) for a country shifts outward, which of the following is the most likely cause?

Accepted Answer

An improvement in technology

Question 5

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

Accepted Answer

"Raising taxes will reduce consumer spending."

Question 6

A market is in equilibrium when:

Accepted Answer

The quantity supplied equals the quantity demanded.

Question 7

If the price of a substitute good increases, what is the likely effect on the demand for the original good?

Accepted Answer

Demand for the original good will increase.

Question 8

Which of the following would NOT shift the supply curve for cars?

Accepted Answer

A change in consumer preferences for electric vehicles

Question 9

Suppose the government imposes a tariff on imported steel. According to the study materials, what is a likely consequence?

Accepted Answer

Specialization according to comparative advantage will decrease.

Question 10

Which of the following best explains why property rights are important in a market economy?

Accepted Answer

They provide incentives for individuals to use resources efficiently.

Question 11

If a country has a balance of trade deficit, which of the following is true?

Accepted Answer

The country imports more than it exports.

Question 12

Which of the following is an example of a movement along the production possibility frontier (PPF), rather than a shift of the PPF?

Accepted Answer

A country reallocates resources from producing cars to producing computers.

Question 13

Suppose the demand for a normal good increases as consumer incomes rise. Which of the following best describes this relationship?

Accepted Answer

The good is a normal good.

Question 14

If the government uses eminent domain to take private land for a highway, which economic principle is most directly involved?

Accepted Answer

The trade-off between equity and efficiency.

Question 15

Which of the following is a likely result of specialization and trade between two countries?

Accepted Answer

Both countries can consume beyond their individual production possibility frontiers.

Question 16

If a graph exaggerates changes by manipulating the scale of the axes, which of the following is true?

Accepted Answer

The graph may mislead viewers about the magnitude of changes.

Question 17

Suppose the market for milk is initially in equilibrium. If a new health study increases the popularity of milk, what is the likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 18

Which of the following is a mechanism used to limit international trade?

Accepted Answer

Tariffs

Question 19

If the law of supply holds, which of the following is true?

Accepted Answer

As price increases, quantity supplied increases.

Question 20

A country has the following production possibilities: it can produce either 50 units of good X or 100 units of good Y. If the country is currently producing 25 units of X and 50 units of Y, what can be said about its production?

Accepted Answer

The country is producing at an efficient point on its PPF.

ECON 1020 Exam 1 Review: Foundations of Economics, Production, Trade, and Markets

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