Question 1

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

Accepted Answer

The highest-valued alternative that must be forgone to undertake an activity.

Question 2

Refer to the PPF table: What is the opportunity cost of moving from point C (2 million pizzas, 12 million colas) to point D (3 million pizzas, 9 million colas)?

Accepted Answer

$$3$$ million colas

Question 3

Which point on the PPF graph represents an unattainable combination of goods with current resources?

Accepted Answer

Any point outside the PPF curve

Question 4

If the marginal cost of producing a pizza increases as more pizzas are produced, what does this imply about the shape of the PPF?

Accepted Answer

The PPF is bowed outward (concave to the origin).

Question 5

According to the economic way of thinking, what does it mean to make a choice at the margin?

Accepted Answer

Comparing the additional benefit and additional cost of a small change.

Question 6

Suppose Joe can produce 6 smoothies or 30 salads per hour, and Liz can produce 30 smoothies or 30 salads per hour. Who has the comparative advantage in smoothies?

Accepted Answer

Liz, because her opportunity cost of producing a smoothie is lower.

Question 7

Which of the following is true about allocative efficiency?

Accepted Answer

It occurs when marginal benefit equals marginal cost.

Question 8

If a country moves from point B (1 million pizzas, 14 million colas) to point C (2 million pizzas, 12 million colas), what is the opportunity cost of producing the additional million pizzas?

Accepted Answer

$$2$$ million colas

Question 9

Which of the following statements is a positive economic statement?

Accepted Answer

Raising taxes will increase government revenue.

Question 10

What is the main benefit of specialization and trade between two individuals or countries?

Accepted Answer

It allows both parties to consume outside their individual PPFs.

Question 11

If the willingness to pay for a pizza in terms of cans of cola is $$4$$ when $$2.5$$ million pizzas are available, what does this represent?

Accepted Answer

The marginal benefit of pizza.

Question 12

Which of the following is NOT a requirement for decentralized economic coordination to work effectively?

Accepted Answer

Central economic planning

Question 13

If the economy is producing at a point inside the PPF, such as point Z, what does this indicate?

Accepted Answer

Resources are being underutilized.

Question 14

Suppose the marginal cost of producing the 4th million pizza is $$4$$ cans of cola, and the marginal benefit is $$3$$ cans of cola. What should the economy do to achieve allocative efficiency?

Accepted Answer

Produce fewer pizzas.

Question 15

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

Accepted Answer

Resources are not equally productive in all uses, leading to increasing opportunity costs.

Question 16

If Liz and Joe both specialize according to their comparative advantage and trade, what is the result?

Accepted Answer

Both can consume more than they could without trade.

Question 17

Which of the following is an example of a normative economic statement?

Accepted Answer

The government should provide free education to all citizens.

Question 18

What causes economic growth as shown by an outward shift of the PPF?

Accepted Answer

An increase in available resources or technological improvement.

Question 19

In the circular flow diagram, what do households provide to firms through the factor markets?

Accepted Answer

Labour, land, capital, and entrepreneurship

Question 20

If the marginal benefit of a pizza is greater than its marginal cost, what should the economy do?

Accepted Answer

Produce more pizzas.

Introduction to Microeconomics: Scarcity, Production Possibilities, and Gains from Trade

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