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 $$\8$$,000$$ per year on tuition and books for four years, and gives up a job earning $$\$$25,000$$ per year. What is the total opportunity cost of obtaining the degree?

Accepted Answer

$$\132$$,000$

Question 3

If a consumer has $$\16$ to spend, the price of beer is $$\$$4$$ per bottle, and the price of pizza is $$\2$ per slice, which equation represents the consumer's budget line?

Accepted Answer

$$16 = 4Q_b + 2Q_p$$

Question 4

On a production possibilities boundary (PPB), what does a point inside the boundary represent?

Accepted Answer

Inefficient use of resources or failure to use all available resources.

Question 5

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

Accepted Answer

Opportunity cost increases as more of one good is produced due to resources not being equally useful in all activities.

Question 6

If technological advancement occurs specifically in food production, how will the PPB shift?

Accepted Answer

The PPB will shift outward only along the food axis.

Question 7

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

Accepted Answer

Money

Question 8

In a mixed economy, which of the following statements is true?

Accepted Answer

Some economic decisions are determined by the market and some by the government.

Question 9

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

Accepted Answer

Machinery

Question 10

Suppose a country experiences economic growth. How is this represented on the PPB?

Accepted Answer

An outward shift of the PPB.

Question 11

Which of the following best describes a command economy?

Accepted Answer

Most economic decisions are made by a central planning authority.

Question 12

If a consumer wants to purchase 2 beers ($$Q_b = 2) $$and the price of beer is $$\4$ per bottle, how many slices of pizza (Q_p$) can they buy with $$\$$16 if $$pizza costs $$\2$ per slice?

Accepted Answer

$$Q_p = 4$$

Question 13

Which of the following is a role of government in a modern mixed economy?

Accepted Answer

Providing public goods

Question 14

On a budget line, what does a point outside the line represent?

Accepted Answer

An unattainable combination of goods given current income and prices.

Question 15

Which of the following would cause the PPB to shift inward?

Accepted Answer

A decrease in available resources due to war or natural disaster.

Question 16

If the opportunity cost of producing more consumption goods increases as you move along the PPB, what does this imply about the shape of the PPB?

Accepted Answer

The PPB is concave to the origin.

Question 17

Which of the following is NOT a key government-provided institution in market economies?

Accepted Answer

Central planning of all production

Question 18

Which economic system did Karl Marx advocate for?

Accepted Answer

Centrally planned system

Question 19

Which of the following is a consumption good?

Accepted Answer

Food

Question 20

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

Accepted Answer

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

Introduction to Market Economies, Scarcity, and the Production Possibility Boundary

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