Question 1

Suppose Country A can produce either 10 units of wheat or 20 units of corn with the same resources, while Country B can produce either 8 units of wheat or 16 units of corn. What is the opportunity cost of producing 1 unit of wheat in Country A?

Accepted Answer

$$2$$ units of corn$

Question 2

Which of the following best describes allocative efficiency?

Accepted Answer

Producing goods and services that consumers value most, given their preferences

Question 3

A point inside the Production Possibilities Frontier (PPF) represents:

Accepted Answer

Inefficient use of resources

Question 4

If a country specializes in producing the good for which it has a comparative advantage, what is the likely outcome?

Accepted Answer

Total world production increases

Question 5

Which of the following is a positive economic statement?

Accepted Answer

An increase in the minimum wage will lead to higher unemployment among teenagers

Question 6

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

Accepted Answer

An improvement in technology

Question 7

If the opportunity cost of producing one more car is 3 computers, what is the opportunity cost of producing one more computer?

Accepted Answer

$$\frac{1}{3}$$ car$

Question 8

Which of the following is NOT considered a factor of production?

Accepted Answer

Money used to buy equipment

Question 9

In the circular flow diagram, households:

Accepted Answer

Provide factors of production to firms and receive income in return

Question 10

Which scenario best illustrates the concept of scarcity?

Accepted Answer

A hospital has only 10 beds available for 20 patients needing care

Question 11

A country can produce either 100 units of good X or 200 units of good Y. If it chooses to produce 60 units of good X, what is the opportunity cost in terms of good Y?

Accepted Answer

$$120$$ units of good Y$

Question 12

Which of the following best describes productive efficiency?

Accepted Answer

Producing goods at the lowest possible cost

Question 13

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

Accepted Answer

The country is using all its resources efficiently

Question 14

Which of the following would cause a movement along the PPF rather than a shift of the PPF?

Accepted Answer

A change in the allocation of resources between two goods

Question 15

Which of the following is an example of a normative economic statement?

Accepted Answer

The government should provide free education to all citizens

Question 16

If a country can produce more of both goods than another country, but has a lower opportunity cost in only one good, it should:

Accepted Answer

Specialize in the good for which it has a comparative advantage

Question 17

Which of the following best explains why trade can make everyone better off?

Accepted Answer

It allows countries to specialize in activities in which they have a comparative advantage

Question 18

A rational decision-maker will take an action only if:

Accepted Answer

The marginal benefit exceeds the marginal cost

Question 19

Which of the following is an example of a microeconomic issue?

Accepted Answer

The price determination for a specific good in a local market

Question 20

If a firm is producing at a point where the marginal cost equals the marginal benefit, what does this imply?

Accepted Answer

The firm is maximizing efficiency

Foundations of Microeconomics and Macroeconomics: Study Guide for Midterm 1

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