Question 1

Suppose a country can produce either 100 units of wheat or 50 units of cloth using all its resources. What is the opportunity cost of producing 1 unit of cloth in terms of wheat?

Accepted Answer

$$2$$

Question 2

If a point lies inside the production possibilities curve (PPC), what does this indicate about resource use?

Accepted Answer

Resources are being used inefficiently.

Question 3

Country A can produce 10 cars or 20 computers with its resources. Country B can produce 8 cars or 16 computers. Which country has the absolute advantage in car production?

Accepted Answer

Country A

Question 4

If the price of a substitute good increases, what is the expected effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 5

A demand schedule shows that when price decreases from $$9 to$$ $$5$$, quantity demanded increases from $$13 to$$ $$25. $$What economic principle does this illustrate?

Accepted Answer

The law of demand

Question 6

Which of the following would cause a shift of the demand curve for smartphones to the right?

Accepted Answer

An increase in consumer income (assuming smartphones are normal goods)

Question 7

If a country has an absolute advantage in producing both goods, can it still benefit from trade? Why?

Accepted Answer

Yes, because comparative advantage determines trade benefits.

Question 8

What does a movement along the demand curve represent?

Accepted Answer

A change in quantity demanded due to a change in the product's price.

Question 9

Suppose the price of butter (a complement to bread) increases. What is the likely effect on the demand for bread?

Accepted Answer

Demand for bread decreases.

Question 10

If the opportunity cost of producing 1 unit of wheat in Great Britain is $$0.5$$ units of cloth, what is the opportunity cost of producing 1 unit of cloth in Great Britain?

Accepted Answer

$$2$$ units of wheat

Question 11

Which of the following best describes the effect of an increase in technology on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 12

A country specializes in producing a good in which it has a comparative advantage. What is the expected effect on global production?

Accepted Answer

Global production increases.

Question 13

If the price of a product increases, what happens to the quantity demanded, according to the law of demand?

Accepted Answer

Quantity demanded decreases.

Question 14

Which of the following would cause a shift in the supply curve for cars?

Accepted Answer

An increase in the number of car producers

Question 15

If wages increase in the car manufacturing industry, what is the likely effect on the supply of cars?

Accepted Answer

Supply decreases, price increases, and quantity decreases.

Question 16

Which of the following best explains why opportunity costs exist?

Accepted Answer

Resources are limited, so producing more of one good requires giving up production of another.

Question 17

A decrease in the price of a product causes which of the following?

Accepted Answer

A movement downward along the demand curve, increasing quantity demanded.

Question 18

If the population of a country increases, what is the likely effect on the market for housing?

Accepted Answer

Demand for housing increases, leading to higher prices and quantities.

Question 19

Which of the following is the correct formula for calculating the opportunity cost of producing good $$X in $$terms of good $$Y$$?

Accepted Answer

$$	ext{Opportunity cost of } X = \frac{	ext{Units of } Y 	ext{ given up}}{	ext{Units of } X 	ext{ produced}}$$

Question 20

Which of the following best describes the difference between a change in demand and a change in quantity demanded?

Accepted Answer

A change in demand shifts the entire demand curve, while a change in quantity demanded is movement along the same curve due to price changes.

Microeconomics Study Guide: Production Possibilities, Opportunity Cost, Demand & Supply

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