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 government can spend its budget on either repairing roads or building new bicycle paths. If road repairs cost $1$ million per km and new bike 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 an inefficient use of resources?

Accepted Answer

A point inside the PPB

Question 4

Economic growth is illustrated on the PPB by:

Accepted Answer

An outward shift of the PPB

Question 5

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

Accepted Answer

Money

Question 6

If a student chooses to attend university instead of working a full-time job, what is the opportunity cost of their university degree?

Accepted Answer

The value of the income they could have earned working full-time

Question 7

Which of the following economic problems is primarily addressed by microeconomics?

Accepted Answer

What is produced and how?

Question 8

Adam Smith argued that in a market economy, most economic interactions are motivated by:

Accepted Answer

Self-interest

Question 9

Which of the following is a direct result of specialization and division of labour in production?

Accepted Answer

Increased need for trade

Question 10

A mixed economy is best described as:

Accepted Answer

An economy that combines elements of traditional, command, and free-market systems

Question 11

Which government policy is most likely to address the fairness of distribution of consumption across individuals?

Accepted Answer

Addressing fairness of distribution

Question 12

Suppose the PPB for a country shifts outward. Which of the following is a possible cause?

Accepted Answer

An increase in productive capacity due to technological advancement

Question 13

Which of the following statements about scarcity is correct?

Accepted Answer

Scarcity implies the need for choice.

Question 14

In the circular flow of income and expenditure, which of the following best describes the flow between households and firms?

Accepted Answer

Firms supply goods and services to households, while households supply factors of production to firms.

Question 15

Which of the following is a plausible reason for government intervention in a market economy?

Accepted Answer

To correct market failures

Question 16

If a country is operating inside its PPB, what does this indicate?

Accepted Answer

Some resources are idle or inefficiently used.

Question 17

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

Accepted Answer

Human rights and environmental concerns

Question 18

Karl Marx argued that free-market economies could not guarantee:

Accepted Answer

A 'just' distribution of output

Question 19

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

Accepted Answer

National defense

Question 20

If the opportunity cost of producing $1$ unit of good $A$ is $2$ units of good $B$, what is the opportunity cost of producing $1$ unit of good $B$?

Accepted Answer

$0.5$ units of good $A$

Chapter 1 Economic Issues and Concepts

Study Guide - Practice Questions

Study Guide - Flashcards