Question 1

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

Accepted Answer

The highest-valued alternative that must be given up to get something.

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

$$\frac{2}{1}$$ units of corn

Question 3

A rational choice is made when:

Accepted Answer

The marginal benefit equals the marginal cost.

Question 4

Which of the following statements is a positive statement?

Accepted Answer

"Raising interest rates will decrease inflation."

Question 5

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 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

If a technological advancement lowers the cost of producing smartphones, what happens to the supply curve for smartphones?

Accepted Answer

It shifts rightward.

Question 8

Which of the following best illustrates the law of supply?

Accepted Answer

As the price of laptops increases, the quantity supplied increases.

Question 9

Suppose the demand for electric cars increases while the supply remains unchanged. What will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases; equilibrium quantity increases.

Question 10

If both the demand and supply for a product decrease, what can be said about the new equilibrium price and quantity?

Accepted Answer

Equilibrium quantity will decrease, but the change in equilibrium price is uncertain.

Question 11

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

Accepted Answer

"The government should reduce taxes to stimulate growth."

Question 12

A point inside the production possibilities frontier (PPF) represents:

Accepted Answer

Production inefficiency due to unemployed or misallocated resources.

Question 13

If the marginal benefit of producing one more unit of a good is less than the marginal cost, what should a rational producer do?

Accepted Answer

Produce less of the good.

Question 14

Which of the following is NOT a factor of production?

Accepted Answer

Money used to buy raw materials.

Question 15

A country can produce either 50 cars or 100 computers. If it is currently producing 25 cars and 50 computers, what does this point represent on the PPF?

Accepted Answer

A point on the PPF, representing production efficiency.

Question 16

If the price of a complement in production rises, what happens to the supply of the original good?

Accepted Answer

Supply increases.

Question 17

Which of the following best describes allocative efficiency?

Accepted Answer

Producing goods and services at the lowest possible cost in quantities that provide the greatest benefit.

Question 18

If a natural disaster destroys a large portion of farmland, what is the likely effect on the supply curve for agricultural products?

Accepted Answer

The supply curve shifts leftward.

Question 19

Which of the following is an example of capital as a factor of production?

Accepted Answer

A factory building used to manufacture cars.

Question 20

If the population of a country increases significantly, what is the likely effect on the demand for housing?

Accepted Answer

Demand for housing increases, shifting the demand curve rightward.

Foundations of Economics: Scarcity, Choice, and Market Dynamics

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