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