Question 1

Which of the following is NOT considered one of the five factors of production?

Accepted Answer

Government Regulation

Question 2

Suppose a country can produce either tablets or smart phones. If the opportunity cost of producing 1 smart phone is 2 tablets, what is the opportunity cost of producing 1 tablet?

Accepted Answer

$$\frac{1}{2}$$ smart phone

Question 3

A straight-line Production Possibilities Frontier (PPF) between tablets and smart phones implies:

Accepted Answer

Constant opportunity costs

Question 4

If a point lies inside the PPF, what does this indicate about resource use?

Accepted Answer

Resources are underemployed or used inefficiently

Question 5

Which of the following would cause an outward shift of the entire PPF?

Accepted Answer

A technological improvement in the production of both goods

Question 6

If the PPF between tablets and tacos is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs are increasing

Question 7

Moving from point A (inside the PPF) to point B (on the PPF) represents:

Accepted Answer

A more efficient use of resources

Question 8

If a technological improvement only affects the production of tacos, how will the PPF shift?

Accepted Answer

It will shift outward along the tacos (horizontal) axis only

Question 9

Which of the following best describes the 'invisible hand' in a market economy?

Accepted Answer

Self-interested actions of individuals leading to positive social outcomes

Question 10

In the circular flow diagram, which of the following flows from households to firms in the factor (input) market?

Accepted Answer

Factors of production (labor, capital, etc.)

Question 11

Suppose a country moves from producing 100 tablets and 0 tacos to 90 tablets and 20 tacos. What is the opportunity cost of producing 20 tacos?

Accepted Answer

$$10$$ tablets

Question 12

Which of the following is necessary for a market economy to function effectively?

Accepted Answer

Private property rights and contract enforcement

Question 13

If a country lacks enforcement of property rights, what is the most likely economic consequence?

Accepted Answer

Reduced economic growth

Question 14

Which of the following best explains why the gains from shifting resources become smaller as more resources are devoted to an activity, as shown by a bowed PPF?

Accepted Answer

Resources are not equally suited to all activities, leading to increasing marginal opportunity costs

Question 15

In the context of the circular flow diagram, which of the following statements is correct?

Accepted Answer

Income = Spending = Production = Output

Question 16

A point outside the PPF (such as point E) is best described as:

Accepted Answer

Unattainable with current resources and technology

Question 17

Which of the following is an example of human capital?

Accepted Answer

A worker's education and skills

Question 18

If a country experiences an increase in both its labor force and technological knowledge, what will happen to its PPF?

Accepted Answer

The PPF will shift outward

Question 19

Which of the following best describes the difference between the product (output) market and the factor (input) market?

Accepted Answer

The product market is where households buy goods and services, while the factor market is where firms buy inputs

Question 20

If a country is currently producing at a point on its PPF, what must be true?

Accepted Answer

It is producing efficiently

The Market System and Production Possibilities Frontier (PPF)

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