Question 1

Suppose a country can produce either 10 units of wheat or 20 units of corn with all its resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$2$ units of corn$

Question 2

Which of the following best describes Pareto efficiency?

Accepted Answer

A situation where it is impossible to make one person better off without making someone else worse off.

Question 3

Country A can produce 5 cars or 10 computers in a day. Country B can produce 3 cars or 12 computers in a day. Which country has the comparative advantage in producing computers?

Accepted Answer

Country B

Question 4

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 fewer units of the good

Question 5

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in consumer income (assuming electric cars are normal goods)

Question 6

If the government sets a price ceiling below the equilibrium price, what is the likely result in the market?

Accepted Answer

A shortage

Question 7

Which of the following is included in the calculation of GDP as a final good?

Accepted Answer

A new car sold to a consumer

Question 8

Given the income-expenditure identity $Y = C + I + G + NX$, what does $NX$ represent?

Accepted Answer

Net exports (exports minus imports)

Question 9

If nominal GDP increases by 5% and the GDP deflator increases by 3%, what is the approximate percentage change in real GDP?

Accepted Answer

$2\%$

Question 10

Suppose the supply curve for a product shifts to the left. What is the most likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases

Question 11

A country specializes in producing goods for which it has a comparative advantage. What is the most likely outcome?

Accepted Answer

Total world output increases

Question 12

Which of the following best illustrates the law of demand?

Accepted Answer

As the price of coffee increases, the quantity demanded decreases

Question 13

If a price floor is set above the equilibrium price, what is the likely result?

Accepted Answer

A surplus

Question 14

Which of the following is NOT a component of GDP in the expenditure approach?

Accepted Answer

Transfer payments

Question 15

If the production possibilities frontier (PPF) is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced

Question 16

Which of the following would NOT cause a shift in the demand curve for pizza?

Accepted Answer

A change in the price of pizza

Question 17

If a country can produce more of a good with the same resources than another country, it is said to have:

Accepted Answer

An absolute advantage

Question 18

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP is measured in current prices, while real GDP is adjusted for inflation

Question 19

A bakery buys flour for $\$100$ and uses it to bake bread, which it sells for $\$300$. How much is added to GDP?

Accepted Answer

$\$300$

Question 20

If the marginal cost of producing an additional smartphone is $\$150$ and the marginal benefit to consumers is $\$200$, what should the firm do?

Accepted Answer

Increase production of smartphones

Key Concepts in Introductory Macroeconomics

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