Question 1

Which of the following best describes the role of assumptions in economic modeling?

Accepted Answer

Assumptions simplify reality to isolate core insights without altering fundamental lessons.

Question 2

In the circular-flow diagram, which of the following is true about the flow of money and resources?

Accepted Answer

Firms buy factors of production and sell goods and services; households sell factors and buy goods and services.

Question 3

Suppose an economy can produce either 500 smartphones or 5,000 tons of rice using 50,000 labor hours. What is the opportunity cost of producing 1 smartphone?

Accepted Answer

$$10$$ tons of rice

Question 4

Which of the following statements is a normative statement?

Accepted Answer

The government should subsidize electric vehicles to reduce air pollution.

Question 5

If an economy is operating at a point inside its Production Possibilities Frontier (PPF), what does this indicate?

Accepted Answer

Some resources are unemployed or misallocated, indicating inefficiency.

Question 6

Given the following: 1 smartphone requires 100 hours of labor, 1 ton of rice requires 10 hours of labor, and the economy has 50,000 labor hours. If the economy produces 100 smartphones and 3,000 tons of rice, how many labor hours are used and is this point efficient?

Accepted Answer

$$40,000$$ hours used; the point is inefficient.

Question 7

Which event would cause an outward shift of the PPF?

Accepted Answer

A massive influx of foreign direct investment building new high-tech plants.

Question 8

If Vietnam can produce a maximum of 600 tons of coffee or 300 drones, what is the opportunity cost of producing 1 drone?

Accepted Answer

$$2$$ tons of coffee

Question 9

Why is the PPF typically bowed outward (concave to the origin)?

Accepted Answer

Resources are specialized, so increasing production of one good requires sacrificing increasingly larger amounts of the other.

Question 10

Which of the following is NOT a limitation of the basic circular-flow model?

Accepted Answer

It accounts for technological change in production.

Question 11

A policy adviser recommends, 'Public funds should make metro transit completely free for students.' This is an example of:

Accepted Answer

A normative statement

Question 12

If the opportunity cost of producing 1 ton of rice is $$0.1$$ smartphones, how many smartphones must be sacrificed to produce 4,000 tons of rice?

Accepted Answer

$$400$$ smartphones

Question 13

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics focuses on individual units like households and firms; macroeconomics studies aggregate economic performance.

Question 14

If a country reallocates resources from rice to smartphone production, moving along its PPF, what is the result?

Accepted Answer

The country faces a trade-off, sacrificing rice to gain more smartphones.

Question 15

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

Accepted Answer

Raising the minimum wage increases costs and may lower entry employment.

Question 16

If Korea can produce a maximum of 200 tons of coffee or 400 drones, what is the opportunity cost of producing 1 drone?

Accepted Answer

$$0.5$$ tons of coffee

Question 17

Which of the following best explains why economists use natural experiments?

Accepted Answer

Because laboratory experiments are often impossible in economics.

Question 18

A massive natural disaster destroys transportation roads and energy grids. What is the likely impact on the PPF?

Accepted Answer

Inward shift of the PPF.

Question 19

Which of the following is true about points outside the PPF?

Accepted Answer

They are unattainable given current resources and technology.

Question 20

If the PPF for an economy is a straight line, what does this imply about opportunity costs?

Accepted Answer

Opportunity cost is constant.

Thinking Like an Economist: Foundations of Microeconomic Analysis

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