Question 1

Suppose a country can produce either 10 units of wheat or 20 units of corn with all its resources. What is the opportunity cost of producing 1 unit of wheat?

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 production possibilities frontier (PPF) is bowed outward from the origin. What does this shape indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced

Question 4

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 5

If Country A can produce 30 cars or 60 computers, and Country B can produce 20 cars or 40 computers, which country has the comparative advantage in producing cars?

Accepted Answer

Country A, because its opportunity cost of producing cars is lower

Question 6

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 7

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

Accepted Answer

Inefficient use of resources

Question 8

If a technological advancement increases the productivity of labor in producing smartphones, what happens to the PPF?

Accepted Answer

The PPF shifts outward, especially for smartphones

Question 9

Which scenario best illustrates the concept of scarcity?

Accepted Answer

A student must choose between buying a textbook or going to a concert with limited money

Question 10

In the circular flow diagram, households supply _______ to the factor market and receive _______ in return.

Accepted Answer

Labor; income

Question 11

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

Accepted Answer

A reallocation of resources from producing one good to another

Question 12

Suppose the opportunity cost of producing 1 unit of good X is 3 units of good Y in Country A, and 2 units of good Y in Country B. Who has the comparative advantage in producing good X?

Accepted Answer

Country B

Question 13

Which of the following best describes productive efficiency?

Accepted Answer

Producing goods at the lowest possible cost

Question 14

A country is currently producing on its PPF. What does this imply?

Accepted Answer

The country is using all its resources efficiently

Question 15

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

Accepted Answer

The government should provide free healthcare to all citizens

Question 16

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

Accepted Answer

Both countries can consume beyond their individual PPFs

Question 17

Which of the following is NOT a characteristic of a market?

Accepted Answer

Government sets all prices

Question 18

If a country is operating at a point outside its PPF, what does this indicate?

Accepted Answer

The point is unattainable with current resources and technology

Question 19

Which of the following best explains why opportunity cost exists?

Accepted Answer

Resources are scarce and have alternative uses

Question 20

A firm decides to produce more of good A and less of good B. According to rational behavior, this decision is most likely due to:

Accepted Answer

An increase in the expected profit from good A

Midterm 1 Study Guide: Core Concepts in Macroeconomics and Microeconomics

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