Question 1

Suppose Tesla can produce either Model 3 Sedans or Cybertruck Pickups. If Tesla reallocates resources to produce 200 more Cybertruck Pickups and, as a result, produces 200 fewer Model 3 Sedans, what is the opportunity cost of producing these additional 200 Cybertruck Pickups?

Accepted Answer

$$200$$ Model 3 Sedans$

Question 2

Which of the following statements best describes the concept of scarcity in economics?

Accepted Answer

Scarcity means that resources are limited and cannot satisfy all human wants.

Question 3

A production possibilities frontier (PPF) that is bowed outward (concave to the origin) illustrates which economic concept?

Accepted Answer

Increasing marginal opportunity costs

Question 4

If a country experiences technological improvement in the automobile industry but not in other industries, how will its PPF change?

Accepted Answer

The PPF will rotate outward along the automobile axis only.

Question 5

Which of the following is the best definition of opportunity cost?

Accepted Answer

The highest-valued alternative that must be given up to engage in an activity.

Question 6

Suppose you can pick either 20 kg of apples or 20 kg of cherries in a day, while your neighbour can pick either 30 kg of apples or 60 kg of cherries. Who has the comparative advantage in picking apples?

Accepted Answer

You

Question 7

Why do opportunity costs typically increase as more of a good is produced?

Accepted Answer

Resources are not equally well-suited to all activities.

Question 8

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 9

In the circular-flow diagram, what do households provide to firms?

Accepted Answer

Factors of production

Question 10

Which of the following best explains why both you and your neighbour can benefit from trade, even if your neighbour is better at picking both apples and cherries?

Accepted Answer

Trade is based on comparative advantage, not absolute advantage.

Question 11

If a government increases spending on health care during a pandemic, what is a likely trade-off?

Accepted Answer

Less funding is available for other government-provided goods and services.

Question 12

Which of the following is a positive statement about the production possibilities frontier (PPF)?

Accepted Answer

The PPF shows what can be produced with available resources and technology.

Question 13

Which of the following is a role of government in a market system?

Accepted Answer

Enforcing property rights and contracts

Question 14

Adam Smith’s concept of the 'invisible hand' suggests that:

Accepted Answer

Individuals acting in their own self-interest can collectively satisfy the wants of consumers.

Question 15

Suppose a country’s PPF shifts outward. Which of the following could explain this change?

Accepted Answer

An increase in economic resources

Question 16

Which of the following is an example of a centrally planned economy leading to low standards of living?

Accepted Answer

The former Soviet Union

Question 17

If a point lies inside (below) the PPF, what does this indicate?

Accepted Answer

Resources are not being used efficiently.

Question 18

Which of the following is necessary for specialization and trade to occur in a market system?

Accepted Answer

Well-defined property rights

Question 19

If you and your neighbour specialize according to comparative advantage and trade, what is the result?

Accepted Answer

Both can consume more than they could without trade.

Question 20

Which of the following best describes the circular-flow diagram?

Accepted Answer

A model that illustrates how participants in markets are linked.

Trade-offs, Comparative Advantage, and the Market System: Chapter 2 Study Notes

Study Guide - Practice Questions

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