Unit 1: Basic Economic Concepts

Which of the following constitute the fundamental questions every economic system must answer? I. What goods and services will be produced? II. How will they be produced? III. When will they be produced? IV. For whom will they be produced? V. Where will they be produced?

Country A can produce a maximum of 40 shirts or 40 chairs. Country B can produce a maximum of 30 shirts or 20 chairs. Both countries have the same resources. Which of the following statements is correct?

A production possibilities frontier will be a straight line when

Based on the PPF described above, the opportunity cost of producing the seventh carrot is

Which of the following goods is likely to provide both the largest total utility and the smallest marginal utility?

The law of diminishing marginal utility is most useful for explaining the

A rational consumer maximizes utility when the

A country is currently producing at a point inside its production possibilities frontier. Which of the following is true?

After Julia received a raise in her income, she began purchasing more ice cream cones and fewer popsicles. For Julia, popsicles

The opportunity cost of a decision is best defined as

Based on the table above, Country X has a comparative advantage in which good?

Which of the following would cause an outward shift of the production possibilities frontier?

In a circular flow model, which of the following is true?

A country has a comparative advantage in producing a good when it can produce that good

Which of the following is a normative economic statement?

If both countries fully specialize according to comparative advantage, the maximum combined output of shoes is

A point inside the production possibilities frontier indicates that

The law of increasing opportunity cost states that

According to the principle of voluntary exchange, trade occurs because

Marginal analysis involves comparing

Based on the table, what is the opportunity cost of producing 1 unit of food in Country A?

Property rights are important in a market economy because they

Which of the following best describes absolute advantage?

A sunk cost is a cost that

Specialization and trade allow countries to

A rational decision maker takes an action only if the

Which of the following statements about trade between two countries is true?

An increase in immigration would be represented on the production possibilities frontier as

A country can produce either 200 tons of steel or 100 tons of aluminum with its resources. If it currently produces 150 tons of steel, what is the maximum amount of aluminum it can produce, assuming a linear PPF?

A consumer has [math]4 and Good Y costs $2. Currently, the marginal utility of the last unit of X consumed is 12 and the marginal utility of the last unit of Y consumed is 8. To maximize utility, the consumer should

A technological improvement in the production of computers but NOT televisions would be represented by

Country X can produce either 100 units of cloth or 50 units of wine. Country Y can produce either 80 units of cloth or 60 units of wine. Which of the following statements about comparative advantage is correct?

An economy currently operates inside its production possibilities curve. Which of the following must be true?

A consumer has a budget of [math]2 each or bananas at $3 each. The marginal utility from the last apple is 8 and the marginal utility from the last banana is 9. To maximize utility, the consumer should: