Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

Scarcity refers to the limited availability of resources relative to unlimited human wants.

Question 2

Suppose the Production Possibility Frontier (PPF) for an economy producing only pizza and cola is bowed outward. What does this shape indicate about opportunity costs?

Accepted Answer

Opportunity cost increases as more pizza is produced.

Question 3

If the marginal benefit (MB) of producing an additional unit of a good is $$MB = 10 - Q$$ and the marginal cost (MC) is $$MC = 2 + Q$$, what is the allocatively efficient quantity to produce?

Accepted Answer

$$Q = 4$$

Question 4

Liz can produce 4 smoothies or 8 salads in an hour. Joe can produce 6 smoothies or 6 salads in an hour. Who has the comparative advantage in producing salads?

Accepted Answer

Liz, because her opportunity cost of producing a salad is lower.

Question 5

Which of the following is true about points inside, on, and outside the PPF?

Accepted Answer

Points outside the PPF are unattainable with current resources.

Question 6

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied at the equilibrium price.

Question 7

If the demand for microchips increases due to higher demand for electronic devices, what will happen to the equilibrium price and quantity of microchips, ceteris paribus?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 8

Which of the following best illustrates the tension between self-interest and social interest?

Accepted Answer

A company polluting a river to reduce costs, increasing profits but harming the community.

Question 9

Suppose the supply of cars decreases due to a shortage of microchips. What is the likely effect on the equilibrium price and quantity of cars?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 10

Which of the following statements about economic models is correct?

Accepted Answer

Economic models are useful if they predict economic outcomes accurately, even with unrealistic assumptions.

Question 11

If the demand curve for a product shifts to the right and the supply curve shifts to the left, what can we say about the new equilibrium?

Accepted Answer

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

Question 12

Which of the following is a requirement for allocative efficiency on the PPF?

Accepted Answer

$$MB = MC$$

Question 13

If a country produces more capital goods and fewer consumption goods today, what is the likely long-term effect?

Accepted Answer

The PPF will shift outward, indicating economic growth.

Question 14

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 15

Given the following demand and supply equations: $$Q_D = 20 - 2P$$ and $$Q_S = 4P$$, what is the equilibrium price ($$P^*$$)?

Accepted Answer

$$P^* = 3$$

Question 16

Which of the following is an example of a change in quantity demanded, not a change in demand?

Accepted Answer

A decrease in the price of the good leads to more being purchased.

Question 17

If the price of a good is above the equilibrium price, what will result in the market?

Accepted Answer

A surplus, causing the price to fall.

Question 18

Which of the following best describes productive efficiency?

Accepted Answer

Producing goods at the lowest possible cost, using all resources fully.

Question 19

If both the demand and supply for a product increase, what will definitely happen to the equilibrium quantity?

Accepted Answer

Equilibrium quantity will increase.

Question 20

Which of the following is NOT one of the three core economic principles discussed in class?

Accepted Answer

Maximization of government spending

Macroeconomics Study Guide: Principles, PPF, and Market Forces (Midterm Review)

Study Guide - Practice Questions

Study Guide - Flashcards