Question 1

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

Accepted Answer

The value of the best alternative forgone when a choice is made.

Question 2

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

Accepted Answer

$ \frac{2}{1} $ units of wheat

Question 3

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

Accepted Answer

Profit

Question 4

A production possibility frontier (PPF) that is bowed outward illustrates which economic principle?

Accepted Answer

Increasing opportunity cost

Question 5

If a point lies inside the PPF curve, what does this indicate about resource use?

Accepted Answer

Resources are underutilized or there is unemployment.

Question 6

Which statement best explains comparative advantage?

Accepted Answer

A person or country can produce a good at a lower opportunity cost than another.

Question 7

In a free market, what determines the distribution of output?

Accepted Answer

Income

Question 8

Which of the following is an example of investment in economic terms?

Accepted Answer

Purchasing machinery for a factory

Question 9

If the marginal rate of transformation (MRT) between two goods is increasing, what does this imply about the PPF?

Accepted Answer

The PPF is bowed outward.

Question 10

Which economic system answers the basic economic questions primarily through government decisions?

Accepted Answer

Command economy

Question 11

A country moves from producing only consumer goods to producing more capital goods. According to the law of increasing opportunity cost, what happens?

Accepted Answer

The opportunity cost of producing capital goods increases.

Question 12

Which of the following best describes consumer sovereignty in a free market?

Accepted Answer

Consumers determine what is produced by their purchasing choices.

Question 13

Suppose the PPF for a country is given by $ x^2 + y^2 = 100 $. If the country produces 6 units of good x, what is the maximum number of units of good y it can produce?

Accepted Answer

$ y = 8 $

Question 14

Which of the following is a result of specialization and trade according to David Ricardo's theory?

Accepted Answer

All parties benefit, even if some have absolute advantage.

Question 15

In the context of the PPF, what does a point above the curve represent?

Accepted Answer

Impossible production with current resources.

Question 16

Which of the following is most likely to increase economic growth in a country?

Accepted Answer

Accumulation of capital and technological advances.

Question 17

If a society invests more in capital goods today, what is the likely effect on future production possibilities?

Accepted Answer

The PPF will shift outward, increasing future production possibilities.

Question 18

Which of the following best describes the role of price in a free market?

Accepted Answer

Price coordinates supply and demand, reflecting what society is willing to pay.

Question 19

A mixed economy is characterized by:

Accepted Answer

Both private enterprise and government involvement in production decisions.

Question 20

If the slope of the PPF between two goods is $ -3 $, what does this mean?

Accepted Answer

Producing one more unit of the good on the x-axis requires giving up 3 units of the good on the y-axis.

Chapter 2: Scarcity, Choice, and Economic Systems: Core Principles of Microeconomics

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