Q: Suppose a country can produce either 100 units of oil or 200 units of wheat with all its resources. If it chooses to produce 60 units of oil, what is the opportunity cost in terms of wheat?

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

Question 1

Which of the following is an example of an implicit (hidden) opportunity cost for an entrepreneur starting a new oil drilling company?

Accepted Answer

The salary the entrepreneur could have earned working for another company.

Question 2

Suppose a country can produce either 100 units of oil or 200 units of wheat with all its resources. If it chooses to produce 60 units of oil, what is the opportunity cost in terms of wheat?

Accepted Answer

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

Question 3

Which of the following best describes the ceteris paribus assumption in economic modeling?

Accepted Answer

All other variables are held constant except those being studied.

Question 4

In the context of the oil industry, which resource category does a petroleum engineer represent?

Accepted Answer

Human capital

Question 5

Which of the following statements is a normative statement?

Accepted Answer

"The government should increase spending to reduce unemployment."

Question 6

If marginal benefit ($$MB) is $$greater than marginal cost ($$MC$$), what should a rational decision-maker do according to the $$MB=MC$$ principle?

Accepted Answer

Increase the activity until $$MB = MC$$

Question 7

Which of the following best illustrates the principle of diminishing returns in the context of studying for an exam?

Accepted Answer

Each additional hour spent studying yields a smaller increase in test score.

Question 8

Which of the following is NOT considered an economic resource?

Accepted Answer

Money

Question 9

Suppose Kate can gather 10 coconuts or catch 5 fish in a day, while Fred can gather 8 coconuts or catch 4 fish in a day. Who has the absolute advantage in both activities?

Accepted Answer

Kate

Question 10

Which type of advantage forms the foundation for mutually beneficial trade between two countries?

Accepted Answer

Comparative advantage

Question 11

If a country mistakenly counts both intermediate and final goods in its GDP calculation, what is the likely result?

Accepted Answer

GDP will be overstated due to double counting.

Question 12

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 13

Which component of GDP spending is the most volatile in the United States?

Accepted Answer

Investment

Question 14

A circular flow diagram illustrates which of the following?

Accepted Answer

The movement of goods, services, and money between households and firms.

Question 15

Which of the following is a positive statement?

Accepted Answer

"An increase in the minimum wage will lead to higher unemployment among teenagers."

Question 16

If the marginal benefit ($$MB) of $$using fertilizer on farmland decreases with each additional unit, but total benefit ($$TB) $$continues to rise, which of the following is true?

Accepted Answer

$$TB$$ increases at a decreasing rate as $$MB$$ decreases.

Question 17

Which of the following best explains why price is important in a market economy?

Accepted Answer

Prices act as signals that allocate resources efficiently.

Question 18

Which of the following is NOT one of the three key economic questions every society must address?

Accepted Answer

"How should profits be maximized?"

Question 19

Which of the following would be considered an example of economic growth on a production possibilities curve (PPC)?

Accepted Answer

An outward shift of the PPC.

Question 20

Which of the following best describes the difference between labor and human capital?

Accepted Answer

Labor refers to the physical and mental effort of workers, while human capital refers to the skills and knowledge acquired by workers.

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