Q: If the opportunity cost of producing 1 unit of corn is 0.2 units of pork, what is the opportunity cost of producing 5 units of corn?

$$0.2 \times 5 = 1$$ unit of pork

Question 1

Suppose a country is producing at a point inside its Production Possibilities Frontier (PPF). Which of the following statements is true?

Accepted Answer

The country is not using all its resources efficiently.

Question 2

If the opportunity cost of producing 1 unit of corn is 0.2 units of pork, what is the opportunity cost of producing 5 units of corn?

Accepted Answer

$$0.2 	imes 5 = 1$$ unit of pork

Question 3

Which of the following would cause an outward shift of a country’s PPF?

Accepted Answer

A technological improvement in production

Question 4

A country can produce either 10 tons of butter or 20 guns. What is the opportunity cost of producing 1 gun?

Accepted Answer

$$\frac{10}{20} = 0.5$$ tons of butter

Question 5

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the combination of goods most desired by society, where $$MB = MC$$

Question 6

If a country invests more in capital goods today, what is the likely trade-off?

Accepted Answer

Lower current consumption and higher future growth

Question 7

Germany can produce 200 cameras or 300 cheeses. France can produce 50 cameras or 100 cheeses. Which country has an absolute advantage in cheese production?

Accepted Answer

Germany

Question 8

Why can trade allow countries to consume outside their PPF?

Accepted Answer

Trade allows countries to specialize according to comparative advantage and exchange for other goods.

Question 9

Which of the following is NOT a reason why opportunity cost increases as we specialize?

Accepted Answer

All resources are perfectly adaptable to any production process.

Question 10

Suppose the marginal benefit (MB) of a good decreases as more is consumed. What does this imply about the willingness to pay for additional units?

Accepted Answer

Willingness to pay decreases with quantity consumed.

Question 11

If Mexico can produce 8 barrels of oil or 20 silicon chips, what is the opportunity cost of producing 1 barrel of oil in terms of silicon chips?

Accepted Answer

$$\frac{20}{8} = 2.5$$ silicon chips

Question 12

Which of the following is an example of a country experiencing a point outside its PPF?

Accepted Answer

A country producing more goods than its resources allow, which is unattainable without trade or growth

Question 13

Which of the following institutions is NOT essential for reaping the gains from trade?

Accepted Answer

Price controls

Question 14

If a recession occurs, what is the most likely effect on a country’s PPF?

Accepted Answer

The country produces at a point inside the PPF.

Question 15

Which of the following best explains why LeBron James would hire someone to move his furniture instead of doing it himself?

Accepted Answer

His opportunity cost of moving furniture is higher than hiring someone else.

Question 16

If the marginal benefit (MB) of a good equals its marginal cost (MC), what does this indicate?

Accepted Answer

Allocative efficiency is achieved.

Question 17

Which of the following is a cost of economic growth?

Accepted Answer

Less current consumption

Question 18

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country should specialize in the good for which it has the lowest opportunity cost.

Question 19

If a country discovers a new, abundant resource, what is the likely effect on its PPF?

Accepted Answer

The PPF shifts outward.

Question 20

Which of the following is an example of diminishing returns to specialization?

Accepted Answer

A country becomes more vulnerable to external shocks as it specializes more.

Production Possibilities, Opportunity Cost, and Comparative Advantage: Tools for Microeconomics

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