Question 1

Which of the following best describes the three basic economic questions every society must answer?

Accepted Answer

What gets produced? How is it produced? Who gets what is produced?

Question 2

Suppose Tom can collect either 3 fish or 15 coconuts in a day. What is the opportunity cost of collecting 1 fish?

Accepted Answer

$$5$$ coconuts

Question 3

Wilson can collect either 4 fish or 28 coconuts in a day. What is the opportunity cost of collecting 1 coconut for Wilson?

Accepted Answer

$$1/7 of a $$fish

Question 4

If Tom and Wilson specialize according to their comparative advantage and trade, what is the main benefit they both experience?

Accepted Answer

They can consume outside their individual production possibilities frontiers (PPFs).

Question 5

Which of the following statements about absolute and comparative advantage is correct?

Accepted Answer

A person can have the absolute advantage in both goods, but not the comparative advantage in both.

Question 6

Given Colleen can collect either 10 logs or 10 food bushels, and Bill can collect either 4 logs or 8 food bushels, what is Bill's opportunity cost of producing 1 log?

Accepted Answer

$$2$$ food bushels

Question 7

If a society is producing at a point inside its PPF, which of the following could explain this situation?

Accepted Answer

Unemployment or inefficient use of resources

Question 8

The law of increasing opportunity cost implies that the PPF is:

Accepted Answer

Bowed outward from the origin

Question 9

If a new technology improves only the production of bananas (as shown by a rotation of the PPF), what happens to the PPF?

Accepted Answer

The y-intercept (bananas) increases while the x-intercept (coffee) remains unchanged.

Question 10

In a free market economy, what determines the allocation of resources and the mix of output?

Accepted Answer

The behavior of buyers and sellers in the market

Question 11

Which of the following is an example of a capital good?

Accepted Answer

A sewing machine used to make clothing

Question 12

Suppose an economy experiences a natural disaster that destroys factories and infrastructure. What is the likely effect on the PPF?

Accepted Answer

The PPF shifts inward

Question 13

If Kristen can produce 15 wristbands or 3 pot holders per hour, and Anna can produce 12 wristbands or 2 pot holders per hour, who has the comparative advantage in pot holder production?

Accepted Answer

Anna

Question 14

Which of the following best describes consumer sovereignty?

Accepted Answer

Consumers dictate what will be produced by choosing what to purchase.

Question 15

If a society invests more in capital goods rather than consumer goods, what is the likely long-term effect?

Accepted Answer

Future economic growth due to increased productive capacity

Question 16

Which of the following is NOT a reason why a society might be producing inside its PPF?

Accepted Answer

Technological advancement

Question 17

In the Feeding America example, what role did introducing a market for food donations play?

Accepted Answer

It helped allocate goods to the food banks that valued them most.

Question 18

If the opportunity cost of producing one more unit of good X increases as more of X is produced, this is an example of:

Accepted Answer

The law of increasing opportunity cost

Question 19

Which of the following best describes a mixed economic system?

Accepted Answer

A system that combines elements of both command and free market economies

Question 20

If a technological improvement only affects the production of one good, what happens to the PPF?

Accepted Answer

The PPF rotates outward for that good

Scarcity, Choice, and Production Possibilities in Microeconomics

Study Guide - Practice Questions

Study Guide - Flashcards