Q: Which formula correctly represents the opportunity cost of producing one more unit of good X in terms of good Y?

$OC_{X} = \frac{\text{Units of Y foregone}}{\text{Units of X gained}}$

Question 1

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

Accepted Answer

Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

Ford is deciding whether to allocate more resources to producing electric vehicles (EVs) or gasoline-powered F-150s. What economic concept does this scenario illustrate?

Accepted Answer

Trade-off

Question 3

Suppose Ford moves from producing 60 gasoline-powered F-150s and 20 electric F-150s to producing 40 gasoline-powered F-150s and 40 electric F-150s. What is the opportunity cost of this change?

Accepted Answer

20 gasoline-powered F-150s

Question 4

Which of the following points on a production possibilities frontier (PPF) represents an unattainable combination of goods?

Accepted Answer

A point above the PPF

Question 5

If the opportunity cost of producing additional electric vehicles increases as more are produced, what does the shape of the PPF look like?

Accepted Answer

A bowed-outward curve

Question 6

Economic growth can be represented on a production possibilities frontier (PPF) by:

Accepted Answer

An outward shift of the PPF

Question 7

Suppose you have 10 hours to study for two exams: Economics and Accounting. The first hour spent on Economics yields more benefit than the last hour. What does this imply about the opportunity cost of studying Economics?

Accepted Answer

Opportunity cost increases as more hours are devoted to Economics.

Question 8

You can pick 20 pounds of apples or 2 pounds of cherries in a week. Your neighbor can pick 30 pounds of apples or 60 pounds of cherries. Who has the comparative advantage in picking apples?

Accepted Answer

You

Question 9

If you and your neighbor specialize and trade, you pick 20 pounds of apples and your neighbor picks 60 pounds of cherries. You trade 10 pounds of apples for 15 pounds of cherries. What is your final consumption bundle?

Accepted Answer

10 pounds of apples and 15 pounds of cherries

Question 10

Which statement best explains why both parties can benefit from trade even if one has an absolute advantage in both goods?

Accepted Answer

Trade allows each party to specialize in the good for which they have a comparative advantage.

Question 11

Given the following opportunity costs: You give up 10 pounds of apples to pick 1 pound of cherries, and your neighbor gives up 0.5 pounds of apples to pick 1 pound of cherries. Who should specialize in picking cherries?

Accepted Answer

Your neighbor

Question 12

Which formula correctly represents the opportunity cost of producing one more unit of good X in terms of good Y?

Accepted Answer

$OC_{X} = \frac{	ext{Units of Y foregone}}{	ext{Units of X gained}}$

Question 13

If technological improvement occurs only in the automobile industry, how will the PPF change?

Accepted Answer

The PPF will shift outward only for automobiles.

Question 14

Jack is faster than Jill at both cooking and laundry, but much faster at cooking. According to comparative advantage, who should specialize in cooking?

Accepted Answer

Jack

Question 15

Which of the following is a normative statement?

Accepted Answer

Ford should produce more electric vehicles to help the environment.

Question 16

Suppose a country can produce either 100 units of wheat or 50 units of corn. What is the opportunity cost of producing 1 unit of corn?

Accepted Answer

$OC_{corn} = \frac{100}{50} = 2$ units of wheat

Question 17

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

Accepted Answer

Resources are being used inefficiently.

Question 18

Which of the following best defines absolute advantage?

Accepted Answer

The ability to produce more of a good or service than competitors using the same amount of resources.

Question 19

If Ford wants to increase production of electric F-150s, but must reduce production of gasoline-powered F-150s, this is an example of:

Accepted Answer

A trade-off

Question 20

Which of the following is NOT a reason why opportunity costs increase as more resources are devoted to an activity?

Accepted Answer

All resources are equally efficient in all activities.

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

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