Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when a choice is made.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of cloth with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$2$$ units of cloth

Question 3

Which of the following statements is a normative statement?

Accepted Answer

"The tax on gasoline should be increased to reduce pollution."

Question 4

A production possibilities frontier (PPF) is bowed outward (concave to the origin) because:

Accepted Answer

Resources are not equally productive in all uses, leading to increasing opportunity costs.

Question 5

If a country is producing at a point inside its PPF, which of the following is true?

Accepted Answer

The country can increase production of both goods without sacrificing either.

Question 6

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

Accepted Answer

Money

Question 7

Suppose Country A can produce 60 units of wheat or 20 units of cloth, and Country B can produce 20 units of wheat or 40 units of cloth. Which country has the absolute advantage in cloth production?

Accepted Answer

Country B

Question 8

Which of the following best illustrates the concept of marginal analysis?

Accepted Answer

Comparing the additional benefit of studying one more hour to the additional cost of less sleep.

Question 9

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

Accepted Answer

Both countries can consume beyond their individual PPFs.

Question 10

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

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment among teenagers."

Question 11

A country is currently producing at a point on its PPF. What must be true about its resource use?

Accepted Answer

Resources are fully employed and used efficiently.

Question 12

Which of the following best explains why economic growth requires a tradeoff with current consumption?

Accepted Answer

Resources used for investment in capital and technology cannot be used for producing current consumption goods.

Question 13

Suppose the opportunity cost of producing 1 pizza is 2 sodas in Country X, and the opportunity cost of producing 1 pizza is 4 sodas in Country Y. Which country has a comparative advantage in pizza production?

Accepted Answer

Country X

Question 14

Which of the following is a function of property rights in a market economy?

Accepted Answer

They provide incentives for individuals to use resources efficiently.

Question 15

If a country moves from a point inside its PPF to a point on the PPF, what happens to its production efficiency?

Accepted Answer

Production efficiency increases.

Question 16

Which of the following is an example of the fallacy of composition?

Accepted Answer

Assuming that because one person saves money, everyone saving money will benefit the economy in the same way.

Question 17

In the circular flow model, which of the following flows from households to firms through the factor markets?

Accepted Answer

Factors of production

Question 18

Suppose a country increases its investment in capital goods this year. According to the PPF model, what is the likely effect in the future?

Accepted Answer

The PPF will shift outward, allowing for greater production possibilities.

Question 19

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

Accepted Answer

Microeconomics studies the choices of individuals and firms, while macroeconomics studies the performance of the entire economy.

Question 20

A country can produce either 30 units of wheat or 50 units of cloth. What is the opportunity cost of producing one unit of cloth?

Accepted Answer

$$0.6$$ units of wheat

Foundations of Microeconomics: Scarcity, Choice, and Production Possibilities

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