Q: Suppose a student spends $$4,000 per year on tuition and 1$$,000 per year on books for a 4-year degree. If the student could have earned $20,000 per year working instead, what is the total opportunity cost of the degree?

$$(4,000 + 1,000) \times 4 + 20,000 \times 4 = 20,000 + 80,000 = 100,000$$

Question 1

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

Accepted Answer

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

Question 2

Suppose a student spends $$4,000 per year on tuition and 1$$,000 per year on books for a 4-year degree. If the student could have earned $20,000 per year working instead, what is the total opportunity cost of the degree?

Accepted Answer

$$(4,000 + 1,000) 	imes 4 + 20,000 	imes 4 = 20,000 + 80,000 = 100,000$$

Question 3

On a budget line showing combinations of beer and pizza, if the price of beer is $$4 and the price of pizza is 2$$, and the consumer has $16, which equation represents the budget constraint?

Accepted Answer

$$16 = 4Q_b + 2Q_p$$

Question 4

If a consumer chooses to buy 2 beers ($$Q_b = 2$$), how many slices of pizza ($$Q_p) $$can they buy with $$16, given beer costs 4 $$and pizza costs $2?

Accepted Answer

$$Q_p = 4$$

Question 5

Which point on the Production Possibilities Boundary (PPB) represents full and efficient use of society’s resources?

Accepted Answer

Any point on the PPB

Question 6

Why is a typical PPB concave to the origin?

Accepted Answer

Because each factor of production is not equally useful in producing all goods.

Question 7

If the PPB shifts outward, what does this indicate?

Accepted Answer

Economic growth and an increase in productive capacity.

Question 8

Which of the following is an example of an investment good?

Accepted Answer

Machinery

Question 9

Suppose a technological advance increases productivity in food production only. How will the PPB change?

Accepted Answer

The PPB will shift outward only along the food axis.

Question 10

In a mixed economy, economic decisions are made by:

Accepted Answer

Both the market and the government.

Question 11

Which of the following is NOT a function of government in a modern mixed economy?

Accepted Answer

Maximizing profits for firms

Question 12

Karl Marx argued that free-market economies could not be relied upon to generate:

Accepted Answer

A 'just' distribution of output

Question 13

Which of the following best describes a command economy?

Accepted Answer

Most economic decisions are made by a central planning authority.

Question 14

If a point lies inside the budget line, what does this indicate?

Accepted Answer

The combination is attainable but does not use all available income.

Question 15

Which of the following statements about opportunity cost along the PPB is correct?

Accepted Answer

Opportunity cost increases as more of a good is produced.

Question 16

If a country moves from point a to point b on its PPB, increasing consumption goods, what is the opportunity cost?

Accepted Answer

The decrease in investment goods equal to $$\Delta y$$

Question 17

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 18

In the context of the budget line, what does the slope represent?

Accepted Answer

The opportunity cost of one good in terms of the other

Question 19

Which of the following is a consumption good?

Accepted Answer

Food

Question 20

Which economic system relies primarily on tradition to make decisions?

Accepted Answer

Traditional economy

Fundamental Concepts in Microeconomics: Scarcity, Choice, Opportunity Cost, and Economic Systems

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