Question 1

Which of the following best describes a comparative advantage?

Accepted Answer

The ability to produce a good at a lower opportunity cost than another producer.

Question 2

Suppose the United States can produce either 100 tons of steel or 200 tons of wheat, and China can produce either 80 tons of steel or 160 tons of wheat. What is the opportunity cost for the United States to produce 1 ton of steel?

Accepted Answer

$$2 	ext{ tons of wheat}$$

Question 3

Which of the following is NOT a function of markets in an economy?

Accepted Answer

Ensuring equal distribution of income among all participants.

Question 4

Why are property rights important in a market economy?

Accepted Answer

They allow individuals to own resources and benefit from their use.

Question 5

In the circular flow model, what do households provide to firms?

Accepted Answer

Labor, land, and capital

Question 6

Which of the following best explains why money is important in an economy?

Accepted Answer

It serves as a medium of exchange, making transactions more efficient.

Question 7

If Russia specializes in producing oil and trades with China, which specializes in producing electronics, what economic principle is being demonstrated?

Accepted Answer

Comparative advantage

Question 8

Which of the following is an example of a firm in the circular flow model?

Accepted Answer

A company that manufactures cars

Question 9

What is the main role of prices in market economies?

Accepted Answer

To coordinate the decisions of buyers and sellers

Question 10

Which of the following statements about the circular flow model is correct?

Accepted Answer

Households supply factors of production to firms.

Question 11

A country can consume beyond its production possibilities frontier (PPF) if:

Accepted Answer

It specializes and trades based on comparative advantage.

Question 12

Which of the following is a direct result of well-defined property rights?

Accepted Answer

Greater incentives for investment and innovation

Question 13

If a market is missing or incomplete, what is likely to occur?

Accepted Answer

Market failure

Question 14

Which of the following best describes the flow of money in the circular flow model?

Accepted Answer

From households to firms for goods and services, and from firms to households for factors of production

Question 15

Suppose a new technology increases the productivity of labor in producing smartphones. What is the likely effect on the market for smartphones?

Accepted Answer

The supply curve shifts to the right, decreasing prices.

Economic Coordination and the Market Economy

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