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

Suppose a city has a budget of $$12 million to allocate between road repairs and new bicycle paths. If the cost of repairing 1 km of road is 1 $$million and the cost of building 1 km of bicycle path is $0.5 million, what is the opportunity cost of building 1 km of new bicycle path?

Accepted Answer

$$0.5 km of $$road repairs

Question 3

Which of the following statements about the production possibilities boundary (PPB) is correct?

Accepted Answer

Points on the PPB represent efficient use of resources.

Question 4

A country can produce either 10 units of good A or 20 units of good B with its available resources. What is the opportunity cost of producing 1 unit of good A?

Accepted Answer

$$2$$ units of good B

Question 5

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

Accepted Answer

Money

Question 6

In a market economy, what is the primary mechanism that coordinates the allocation of resources?

Accepted Answer

The price system

Question 7

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

Accepted Answer

Their own self-interest

Question 8

Which of the following best illustrates the concept of scarcity?

Accepted Answer

A government must choose between funding healthcare or education due to limited resources.

Question 9

If an economy is operating inside its production possibilities boundary, what does this indicate?

Accepted Answer

Some resources are idle or being used inefficiently.

Question 10

Which of the following is a real-world example of opportunity cost?

Accepted Answer

A student spends an hour studying economics instead of working at a part-time job.

Question 11

Which of the following is a characteristic of a mixed economy?

Accepted Answer

It combines elements of free markets, tradition, and government intervention.

Question 12

Why is money important in facilitating trade in a modern economy?

Accepted Answer

It allows for the separation of transactions and overcomes the limitations of barter.

Question 13

Which of the following is an example of a public good that governments typically provide?

Accepted Answer

National defense

Question 14

If a country experiences economic growth, how is this represented on a production possibilities boundary (PPB) diagram?

Accepted Answer

The PPB shifts outward.

Question 15

Which of the following is a key difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics examines individual markets and resource allocation, while macroeconomics studies overall economic aggregates.

Question 16

Which of the following is an example of specialization of labour?

Accepted Answer

A worker assembles only car doors on an automobile production line.

Question 17

Which of the following is a potential challenge associated with globalization?

Accepted Answer

Human rights and environmental concerns

Question 18

Suppose a government wants to correct a market failure caused by pollution. Which policy tool is most appropriate?

Accepted Answer

Imposing a tax on polluting activities

Question 19

Which of the following best describes the role of incentives in a market economy?

Accepted Answer

Incentives encourage individuals to act in ways that align with their self-interest.

Question 20

A country is currently producing at a point on its PPB. What must happen for it to produce more of one good without producing less of another?

Accepted Answer

It must experience economic growth, shifting the PPB outward.

Economic Issues and Concepts: Foundations of Microeconomics

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