Question 1

Suppose a country can produce either 100 units of Good X or 200 units of Good Y using all its resources. What is the opportunity cost of producing one unit of Good X?

Accepted Answer

$$2$$ units of Good Y$

Question 2

Which of the following best describes a point inside the Production Possibilities Frontier (PPF)?

Accepted Answer

It represents inefficient use of resources.

Question 3

If the price of a substitute good increases, what is likely to happen to the demand curve for the original good?

Accepted Answer

The demand curve will shift to the right.

Question 4

A movement along the supply curve is caused by:

Accepted Answer

A change in the good's own price.

Question 5

Which of the following scenarios best illustrates comparative advantage?

Accepted Answer

Country A can produce wheat at a lower opportunity cost than Country B.

Question 6

If a technological advancement occurs in the production of smartphones, what is the likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve will shift to the right.

Question 7

At the market equilibrium price:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 8

If the market price is set below the equilibrium price, what is the likely result?

Accepted Answer

A shortage will occur.

Question 9

Which of the following would cause a shift in the demand curve for coffee?

Accepted Answer

A change in consumer income.

Question 10

Suppose the number of sellers in the market for electric cars increases. What is the likely effect on the market equilibrium, assuming demand remains constant?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 11

If a new health study reveals that eating avocados significantly improves health, what is the most likely effect on the avocado market?

Accepted Answer

The demand curve for avocados will shift to the right.

Question 12

Which of the following is NOT a determinant (shifter) of supply?

Accepted Answer

Consumer income.

Question 13

A country can produce either 50 units of Good A or 100 units of Good B. If it is currently producing 25 units of Good A and 50 units of Good B, what does this point represent on the PPF?

Accepted Answer

Efficient production on the PPF.

Question 14

If the price of raw materials used in car manufacturing increases, what is the likely effect on the supply curve for cars?

Accepted Answer

The supply curve will shift to the left.

Question 15

Which of the following best explains why the PPF is typically bowed outward (concave)?

Accepted Answer

Increasing opportunity costs as production shifts from one good to another.

Question 16

If the price of a complement good decreases, what is the likely effect on the demand for the original good?

Accepted Answer

The demand curve will shift to the right.

Question 17

Which of the following is an example of a movement along the demand curve for gasoline?

Accepted Answer

A decrease in the price of gasoline leads to an increase in quantity demanded.

Question 18

Suppose a market is initially in equilibrium. If both demand and supply increase simultaneously, what will happen to the equilibrium quantity?

Accepted Answer

Equilibrium quantity will increase.

Question 19

Which of the following best describes absolute advantage?

Accepted Answer

The ability to produce more of a good with the same resources.

Question 20

If a surplus exists in the market for wheat, what will happen to the price and why?

Accepted Answer

The price will fall because quantity supplied exceeds quantity demanded.

Fundamentals of the Market System: Scarcity, Trade-offs, and the Interaction of Supply and Demand

Study Guide - Practice Questions

Study Guide - Flashcards