Question 1

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

Accepted Answer

The value of the best alternative forgone when making a choice.

Question 2

Suppose a country can produce either 1000 cars or 500 computers with its available resources. What is the opportunity cost of producing one car?

Accepted Answer

$0.5$ computers

Question 3

If the production possibilities frontier (PPF) is bowed outward, what does this indicate about opportunity cost?

Accepted Answer

Opportunity cost is increasing.

Question 4

Given the linear equation $y = mx + b$, what does the parameter $m$ represent?

Accepted Answer

The slope of the line

Question 5

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

Accepted Answer

An inefficient allocation of resources

Question 6

If the marginal cost of producing an additional hamburger is $2$ milkshakes, and the marginal benefit is $3$ milkshakes, what should a rational decision-maker do?

Accepted Answer

Produce more hamburgers

Question 7

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

Accepted Answer

Comparative advantage is based on lower opportunity cost.

Question 8

Suppose Bob can produce either $100$ burgers or $50$ shakes in a day, while Sam can produce either $60$ burgers or $60$ shakes. Who has the comparative advantage in burgers?

Accepted Answer

Bob, because his opportunity cost of burgers is lower.

Question 9

The slope of a curve at a given point is best described as:

Accepted Answer

The slope of the tangent line at that point

Question 10

If a country is operating on its PPF, what does this imply?

Accepted Answer

The country is using all its resources efficiently.

Question 11

Which of the following equations correctly represents the slope between two points $(x_0, y_0)$ and $(x_1, y_1)$?

Accepted Answer

$\frac{y_1 - y_0}{x_1 - x_0}$

Question 12

If the marginal benefit of consuming an additional unit of a good is less than its marginal cost, what should a rational consumer do?

Accepted Answer

Decrease consumption of the good

Question 13

Which of the following is NOT a reason for the outward curvature of the PPF?

Accepted Answer

Resources are equally suited for all production

Question 14

Suppose the equation for a line is $y = -x + 20$. What is the slope and the vertical intercept?

Accepted Answer

Slope: $-1$, Intercept: $20$

Question 15

If a country can produce more of both goods than another country, but has a higher opportunity cost in both, what should it do according to the theory of comparative advantage?

Accepted Answer

Specialize in the good with the lowest opportunity cost and trade

Question 16

Which of the following best defines allocative efficiency?

Accepted Answer

Producing at a point where marginal cost equals marginal benefit

Question 17

If the marginal cost of producing a good is increasing, what does this imply about the shape of the PPF?

Accepted Answer

The PPF is bowed outward

Question 18

A country is currently producing at a point on its PPF where the marginal benefit of good A is less than the marginal cost of good A. What should the country do to achieve allocative efficiency?

Accepted Answer

Produce less of good A and more of good B

Question 19

Which of the following is a real-world example of gains from trade based on comparative advantage?

Accepted Answer

A doctor treats patients while a carpenter builds houses, and they exchange services.

Question 20

If the marginal benefit curve for a good is downward sloping, what does this indicate?

Accepted Answer

Marginal benefit decreases as more is consumed

The Economic Problem: Production Possibilities, Opportunity Cost, and Gains from Trade

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