Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

Susan has $12 million to spend on road repairs and new bike paths. Road repairs cost $1 million per km and new paths cost $0.5 million per km. What is the opportunity cost of building 1 km of new bike path?

Accepted Answer

$0.5$ km of road repairs

Question 3

Which point on a Production Possibilities Boundary (PPB) represents inefficiency?

Accepted Answer

A point inside the PPB

Question 4

If an economy is operating inside its PPB, what does this indicate?

Accepted Answer

Some resources are idle.

Question 5

Which of the following is NOT considered a factor of production?

Accepted Answer

Consumption

Question 6

What is the main reason that specialization must be accompanied by trade in a modern economy?

Accepted Answer

Specialization requires exchange to obtain other goods and services.

Question 7

Which of the following is a microeconomic problem?

Accepted Answer

Determining the price and quantity of a specific product.

Question 8

According to Adam Smith, what motivates the butcher, brewer, and baker to provide goods and services?

Accepted Answer

Self-interest

Question 9

Which government intervention is intended to address market failures?

Accepted Answer

Correcting misallocation of resources

Question 10

If economic growth shifts the PPB outward, what happens to previously unattainable combinations of goods?

Accepted Answer

They become attainable.

Question 11

Which of the following is a challenge associated with globalization?

Accepted Answer

Human rights and environmental standards

Question 12

A mixed economy is best described as:

Accepted Answer

An economy combining elements of tradition, command, and free-market systems.

Question 13

Which of the following is an example of a tangible good?

Accepted Answer

Steel

Question 14

What does the circular flow diagram illustrate in a market economy?

Accepted Answer

The flow of goods, services, and payments between households and firms

Question 15

Which of the following is NOT a pressing economic concern listed in the study materials?

Accepted Answer

Decreasing technological change

Question 16

If the opportunity cost of attending university includes forgone wages from a job, what is the total cost of the degree?

Accepted Answer

Tuition, books, and the value of forgone wages

Question 17

Which of the following is a key institution provided by government in a market economy?

Accepted Answer

Private property

Question 18

Which equation represents the opportunity cost of 1 km of road repairs if new bike paths cost $0.5$ million/km and road repairs cost $1$ million/km?

Accepted Answer

$\frac{1}{0.5} = 2$ km of new bike paths

Question 19

Which of the following best explains why division of labour increases productivity?

Accepted Answer

It breaks up production into specialized tasks, increasing efficiency.

Question 20

Which of the following is a macroeconomic problem?

Accepted Answer

How total output and employment are determined

Chapter 1: Economic Issues and Concepts – Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards