Q: 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?

$$\frac{200}{100} \times 60 = 120$$ units of corn

Question 1

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

Accepted Answer

The value of the next best alternative forgone 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

$$\frac{200}{100} 	imes 60 = 120$$ units of corn

Question 3

Which of the following statements is a positive statement?

Accepted Answer

Raising taxes will reduce the budget deficit.

Question 4

A competitive market is best described as:

Accepted Answer

A market in which there are many buyers and sellers, and no single buyer or seller can influence the price.

Question 5

If the demand for a product increases while the supply remains unchanged, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 6

Which of the following best illustrates the law of demand?

Accepted Answer

As the price of coffee increases, the quantity demanded of coffee decreases.

Question 7

Suppose the market for electric cars is initially in equilibrium. If the price of gasoline rises significantly, what is the most likely effect on the market for electric cars?

Accepted Answer

The demand curve for electric cars will shift to the right.

Question 8

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

Accepted Answer

The government should reduce income inequality.

Question 9

If a supply curve is represented by the equation $$Q_s = 10 + 2P$$, what is the slope of the supply curve?

Accepted Answer

$$2$$

Question 10

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

Accepted Answer

A decrease in the price of ice cream.

Question 11

Adam Smith’s concept of the 'invisible hand' refers to:

Accepted Answer

The self-regulating nature of markets where individuals pursuing their own interests unintentionally benefit society.

Question 12

If the market price is above the equilibrium price, what will result?

Accepted Answer

A surplus will occur, causing the price to fall.

Question 13

Which of the following is NOT one of the six key ideas that define the economic way of thinking?

Accepted Answer

All resources are unlimited.

Question 14

A linear demand curve is given by $$Q_d = 50 - 3P. If $$the price increases from $$P = 10 to$$ $$P = 12$$, what is the change in quantity demanded?

Accepted Answer

$$Q_d$$ decreases by $$6$$ units

Question 15

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

Accepted Answer

A technological advancement in smartphone production.

Question 16

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

Accepted Answer

Equilibrium quantity will increase, but the effect on equilibrium price is indeterminate without more information.

Question 17

Which of the following best describes a mixed economy?

Accepted Answer

An economy that combines elements of both market and command economies.

Question 18

Suppose the supply of oranges decreases due to a hurricane destroying crops, while demand remains unchanged. What will happen to the equilibrium price and quantity of oranges?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will decrease.

Question 19

Which of the following is an example of a real-world incentive that could affect economic choices?

Accepted Answer

A tax credit for purchasing electric vehicles.

Question 20

If the equation for a straight-line graph is $$y = 4 - 2x$$, what is the slope of the line?

Accepted Answer

$$-2$$

Ch. 1 & 3: Introduction to Economics and the Market System: Supply and Demand

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