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 health care or 50 units of education. If the country moves from producing 100 units of health care and 0 units of education to producing 80 units of health care and 10 units of education, what is the opportunity cost of producing the additional 10 units of education?

Accepted Answer

$$20$$ units of health care

Question 3

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

Accepted Answer

An increase in the price of coffee.

Question 4

If the price of a good increases and total revenue decreases, what can you conclude about the price elasticity of demand (PED) for that good?

Accepted Answer

Demand is elastic $$(|PED| \u003e 1).$$

Question 5

Which of the following scenarios best illustrates the concept of scarcity?

Accepted Answer

A government must choose between spending on healthcare or education due to limited funds.

Question 6

Ceteris paribus is an important assumption in economics because it:

Accepted Answer

Allows economists to isolate the effect of one variable by holding others constant.

Question 7

If the price of raw materials increases, what is the likely effect on the supply curve for a manufactured good, ceteris paribus?

Accepted Answer

The supply curve shifts to the left.

Question 8

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 9

Suppose the price elasticity of demand for a product is $$|PED| = 0.5. If $$the firm increases the price, what will happen to total revenue?

Accepted Answer

Total revenue will increase.

Question 10

Which of the following is NOT a factor that shifts the demand curve for a good?

Accepted Answer

A change in the price of the good itself.

Question 11

If a government introduces a subsidy for producers, what is the most likely effect on the market supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 12

A flatter demand curve indicates:

Accepted Answer

More elastic demand.

Question 13

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

Accepted Answer

Demand decreases.

Question 14

Which of the following best describes the total revenue test for price elasticity of demand?

Accepted Answer

If price and total revenue move in opposite directions, demand is elastic.

Question 15

Suppose a business faces a demand curve with $$|PED| = 1. If it $$raises its price by 10%, what happens to its total revenue?

Accepted Answer

Total revenue remains unchanged.

Question 16

Which of the following is an example of a real-world trade-off as described by the Production Possibility Frontier (PPF)?

Accepted Answer

A government allocating more funds to defense and less to social welfare.

Question 17

If a natural disaster destroys factories, what is the likely effect on the supply curve for manufactured goods?

Accepted Answer

The supply curve shifts to the left.

Question 18

Which of the following best explains why not all points on a PPF are attainable for an economy?

Accepted Answer

Resources are limited and cannot produce unlimited combinations of goods.

Question 19

If the population of a country increases, what is the likely effect on the demand curve for normal goods, ceteris paribus?

Accepted Answer

The demand curve shifts to the right.

Question 20

A business is considering whether to invest in new technology or hire more staff. According to economic theory, what should the business consider when making this decision?

Accepted Answer

The opportunity cost of each option and the expected benefits.

Foundations of Economics: Scarcity, Choice, and Market Dynamics

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