Question 1

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

Accepted Answer

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

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. If the country decides to produce 60 units of wheat, what is the opportunity cost in terms of corn?

Accepted Answer

$$\frac{200}{100} = 2$$ units of corn per unit of wheat, so $$60 	imes 2 = 120$$ units of corn.

Question 3

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 4

A production possibilities curve (PPC) is bowed outward from the origin. What does this shape indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 5

Which of the following scenarios best illustrates the concept of a trade-off?

Accepted Answer

A government increases spending on healthcare, resulting in less funding for education.

Question 6

In the context of the three fundamental economic questions, which question is primarily concerned with the distribution of goods and services?

Accepted Answer

For whom will it be produced?

Question 7

According to Adam Smith, what is the 'invisible hand' in a free market economy?

Accepted Answer

The collective self-interest and voluntary exchange that guides resources to their most valued uses.

Question 8

Which of the following is a likely consequence of a command economy, according to the study materials?

Accepted Answer

Little incentive for workers to improve and conserve resources.

Question 9

A free rider is considered a type of market failure because:

Accepted Answer

They benefit from resources or services without paying for them, leading to under-provision of those goods.

Question 10

Which of the following best explains why poverty exists in a free market system?

Accepted Answer

Market outcomes are based on individual productivity and resource ownership, leading to unequal distribution of wealth.

Question 11

Suppose a new technology increases the efficiency of producing both cars and computers. How would this affect the production possibilities curve (PPC)?

Accepted Answer

The PPC would shift outward, indicating economic growth.

Question 12

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

Accepted Answer

A homeowner plants a garden, improving neighborhood aesthetics and property values.

Question 13

In a mixed economy, which of the following statements is true?

Accepted Answer

Both the government and the market play a role in allocating resources.

Question 14

Which of the following best describes the role of competition in a free market economy?

Accepted Answer

It encourages producers to improve efficiency and lower prices.

Question 15

According to Karl Marx, what is a primary reason workers would rise up to create a new economic system?

Accepted Answer

The existence of a large gap between the 'haves' and 'have nots' and feelings of exploitation.

Question 16

Which of the following is a real-world example of the 'invisible hand' at work?

Accepted Answer

A local bakery increases its production of gluten-free bread after noticing higher sales, without any government directive.

Question 17

If a country is operating inside its production possibilities curve, what does this indicate?

Accepted Answer

The country is not utilizing all its resources efficiently.

Question 18

Which of the following is a limitation of laissez-faire economics as described in the study materials?

Accepted Answer

It may fail to produce certain goods efficiently and does not always ensure economic equality or security.

Question 19

Why might government involvement be necessary in the case of externalities?

Accepted Answer

To correct market failures by internalizing external costs or benefits.

Question 20

Which of the following best illustrates the concept of economic growth on a production possibilities curve?

Accepted Answer

An outward shift of the entire curve.

Economics unit 1

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