Question 1

Suppose Ford can use its resources to produce either 100 gasoline-powered F-150s or 50 electric F-150s. What is the opportunity cost of producing one electric F-150?

Accepted Answer

$2$ gasoline-powered F-150s$

Question 2

Which of the following best describes the shape of a typical Production Possibilities Frontier (PPF) when opportunity costs are increasing?

Accepted Answer

A bowed outward (concave) curve

Question 3

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

Accepted Answer

Some resources are unemployed or used inefficiently

Question 4

Country A can produce either 40 tons of wheat or 20 tons of steel with its resources. Country B can produce either 30 tons of wheat or 30 tons of steel. Who has the comparative advantage in steel production?

Accepted Answer

Country B, because it has a lower opportunity cost for steel

Question 5

Which of the following statements about opportunity cost is correct?

Accepted Answer

Opportunity cost is the highest-valued alternative that must be given up to engage in an activity

Question 6

Suppose you can spend your evening either studying for an economics exam or working at your part-time job. If you choose to study and give up $\$50$ in wages, what is your opportunity cost of studying?

Accepted Answer

$\$50$

Question 7

If a country experiences technological improvement in the production of both goods, how will its PPF change?

Accepted Answer

It will shift outward

Question 8

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 9

According to the circular-flow diagram, which of the following transactions occurs in the product market?

Accepted Answer

A household buys a new laptop from a store

Question 10

Adam Smith’s concept of the 'invisible hand' suggests that:

Accepted Answer

Individuals pursuing their own self-interest can lead to positive outcomes for society

Question 11

If Jill can do laundry in 1 hour and cook a meal in 2 hours, while Jack can do laundry in 0.5 hours and cook a meal in 1 hour, who has the comparative advantage in laundry?

Accepted Answer

Jack, because his opportunity cost of laundry is lower

Question 12

Which of the following best explains why the PPF is typically bowed outward?

Accepted Answer

Opportunity costs increase as more of one good is produced

Question 13

A country can produce 100 units of good X or 200 units of good Y. What is the opportunity cost of producing 1 unit of good X?

Accepted Answer

$2$ units of good Y$

Question 14

Which of the following is a normative statement?

Accepted Answer

The government should reduce unemployment.

Question 15

If two countries specialize according to their comparative advantage and trade, what is the result?

Accepted Answer

Both countries can consume outside their individual PPFs

Question 16

Which of the following is necessary for a successful market system?

Accepted Answer

Well-defined property rights and contract enforcement

Question 17

Suppose you and your neighbor can each pick apples and cherries. You can pick 20 pounds of apples or 20 pounds of cherries in a day. Your neighbor can pick 30 pounds of apples or 60 pounds of cherries. What is your neighbor's opportunity cost of picking 1 pound of cherries?

Accepted Answer

$0.5$ pounds of apples$

Question 18

Which of the following best describes the role of entrepreneurs in the market system?

Accepted Answer

They bring together factors of production and take risks to create new products

Question 19

In the context of the circular-flow diagram, which of the following is true?

Accepted Answer

Firms buy factors of production from households in the factor market

Question 20

Which of the following is an example of a real-world application of comparative advantage?

Accepted Answer

A tech company outsources customer service to a country where labor costs are lower

Chapter 2: Trade-offs, Comparative Advantage, and The Market System – Microeconomics Study Notes

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