Question 1

Which of the following best describes the fundamental problem of economics?

Accepted Answer

Scarcity of resources and unlimited wants

Question 2

Which of the following is NOT one of the four key resources of production?

Accepted Answer

Technology

Question 3

Microeconomics is primarily concerned with:

Accepted Answer

How households and firms make choices and interact in markets

Question 4

Which scenario best illustrates productive efficiency in a competitive market?

Accepted Answer

A firm uses the most cost-effective production techniques and achieves the lowest possible cost per unit of output.

Question 5

Allocative efficiency is achieved when:

Accepted Answer

A firm sets the price of its product to match the marginal cost of production.

Question 6

Apple is considering producing 300,000 more iPhones. According to economic reasoning, Apple should continue production up to the point where:

Accepted Answer

$MB = MC$

Question 7

Which of the following statements is normative?

Accepted Answer

The government should raise the minimum wage to $10.

Question 8

A production possibilities frontier (PPF) is considered a:

Accepted Answer

Positive tool

Question 9

If Ford moves from producing 60 gasoline-powered F-150s and 20 Lightnings to 40 gasoline-powered F-150s and 40 Lightnings, what is the opportunity cost?

Accepted Answer

20 gasoline-powered F-150s

Question 10

Why is the PPF typically bowed outward from the origin?

Accepted Answer

Because opportunity cost increases as more resources are allocated to one good

Question 11

Which of the following would cause an outward shift in the PPF?

Accepted Answer

Increase in a country's resources

Question 12

Assume a music company moves from producing 0 banjos and 10 saxophones to 1 banjo and 9 saxophones. What is the opportunity cost of producing 1 additional banjo?

Accepted Answer

1 saxophone

Question 13

Who has the absolute advantage in writing papers if Shaun can write 8 papers per month and Bryan can write 4 papers per month?

Accepted Answer

Shaun

Question 14

Comparative advantage is determined by:

Accepted Answer

Who has the lower opportunity cost in producing a good

Question 15

If the opportunity cost of producing 1 lecture for Shaun is 0.8 papers and for Bryan is 2 papers, who has the comparative advantage in producing lectures?

Accepted Answer

Shaun

Question 16

Which of the following points on a PPF graph represent efficient allocations of resources?

Accepted Answer

Points on the curve

Question 17

Which of the following is a positive statement?

Accepted Answer

The U.S. minimum wage increased in 2009.

Question 18

If a country specializes in producing a good for which it has a comparative advantage and trades for other goods, what is the likely outcome?

Accepted Answer

Society can consume beyond its PPF

Question 19

Which equation represents the optimal decision rule for continuing an activity in microeconomics?

Accepted Answer

$MB = MC$

Question 20

If a firm is producing at a point inside its PPF, what does this indicate?

Accepted Answer

The firm is operating inefficiently

Microeconomics Exam 1 Review: Foundations, Models, and Trade-offs

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