Question 1

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

Accepted Answer

A company uses its factory to produce cars instead of trucks. The opportunity cost is the profit it could have earned from producing trucks.

Question 2

Suppose a country can produce either 10 units of wheat or 20 units of corn with its available resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

Which of the following statements is a normative economic statement?

Accepted Answer

The government should increase the minimum wage to help low-income workers.

Question 4

A point inside the production possibilities frontier (PPF) represents:

Accepted Answer

An inefficient use of resources.

Question 5

If the PPF for a country shifts outward, which of the following is a possible explanation?

Accepted Answer

A technological advancement in production.

Question 6

Country A can produce 40 units of cloth or 80 units of food. Country B can produce 30 units of cloth or 90 units of food. Who has the comparative advantage in producing cloth?

Accepted Answer

Country B, because it has a lower opportunity cost for cloth.

Question 7

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 8

A decrease in the price of a substitute good will most likely cause:

Accepted Answer

A decrease in the demand for the original good.

Question 9

Which of the following would cause a movement along the demand curve for ice cream, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of ice cream.

Question 10

Suppose the market for laptops is in equilibrium. If there is a sudden increase in the cost of computer chips (an input), what will happen in the short run?

Accepted Answer

The supply curve will shift to the left, causing a higher equilibrium price.

Question 11

If the market price is above the equilibrium price, which of the following will occur?

Accepted Answer

There will be a surplus, and the price will fall.

Question 12

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

Accepted Answer

Raising taxes on gasoline will reduce gasoline consumption.

Question 13

Which of the following best describes a mixed economy?

Accepted Answer

An economy that combines elements of both centrally planned and market economies.

Question 14

Adam Smith’s ‘invisible hand’ principle suggests that:

Accepted Answer

Individuals pursuing their own self-interest can lead to positive outcomes for society.

Question 15

If a technological innovation increases the productivity of workers in the car industry, what will happen to the production possibilities frontier (PPF)?

Accepted Answer

The PPF will shift outward.

Question 16

Suppose the demand for a product increases while the supply remains unchanged. What will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 17

Which of the following is NOT a factor that shifts the market demand curve for a good?

Accepted Answer

A change in the price of the good itself.

Question 18

If a country can produce more of a good with the same resources than another country, it is said to have:

Accepted Answer

Absolute advantage.

Question 19

Which of the following best describes private property rights in a market economy?

Accepted Answer

Individuals and firms have the right to own and use resources as they choose, within legal limits.

Question 20

A bakery can produce either 100 loaves of bread or 50 cakes per day. If the bakery is currently producing 60 loaves of bread and 20 cakes, is this point efficient, inefficient, or unattainable?

Accepted Answer

Inefficient, because more of one good could be produced without sacrificing the other.

Principles of Microeconomics: Exam 1 Study Guide (Chapters 2)

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