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Question 1(Multiple Choice Worth 2 points)

(01.03 MC)

On a production possibilities curve (PPC), an improvement in the state of technology affecting all goods would signify what type of shift?

A shift beyond the vertical axis

A shift beyond the horizontal axis

An inward shift

An outward shift

No shift at all

Question 2(Multiple Choice Worth 2 points)

(01.03 MC)

Which graph represents an increasing opportunity cost of changing production?

Question 3(Multiple Choice Worth 2 points)

(01.03 MC)

On a production possibilities curve (PPC), what does an outward shift imply?

There has been an increase in technology and/or resources.

Government intervention has introduced alternative inputs.

Inputs and outputs have balanced out to make an efficient market.

Trade has increased to allow more resources to enter the market.

There has been an increase in both supply and demand.

Question 4(Multiple Choice Worth 2 points)

(01.04 MC)

Company Q can produce 15 pairs of socks and 5 belts in one hour. Company Z can produce 20 pairs of socks and 20 belts in one hour. Which of the following is true?

Only Company Q can benefit from specialization and trade.

Company Q has an absolute advantage in both socks and belts.

Company Q has an absolute advantage in belts and a comparative advantage in socks.

The opportunity cost for Company Q is the same whether producing socks or belts.

Company Q has a comparative advantage in socks and Company Z has an absolute advantage in both socks and belts.

Question 5(Multiple Choice Worth 2 points)

(01.04 HC)

Assume Country Q and Country P can produce only two goods: gadgets and widgets. Country Q has an absolute advantage in widgets and a comparative advantage in gadgets. Assume each country has constant opportunity costs of production. Country P must have

an absolute advantage in gadgets

a comparative advantage in widgets

an absolute and comparative advantage in widgets

an absolute and comparative advantage in gadgets

no absolute advantage in either good, but a comparative advantage in widgets

Question 6(Multiple Choice Worth 2 points)

(01.06 MC)

What role do fixed costs play in marginal analysis?

They are averaged into the marginal cost.

Their value is the level that marginal costs should equal.

The sum of all marginal costs equals the fixed costs.

They are ignored and have no bearing on marginal cost.

They determine the marginal benefit a consumer or producer is referencing.

Question 7(Multiple Choice Worth 2 points)

(01.06 MC)

Below shows the total utility Mike enjoys based on eating different quantities of miniature powdered donuts.

Miniature Powdered Donuts Consumed	Total utility (utils)
1	12
2	20
3	26
4	29
5	28
6	25

Based on the table above, what is the marginal utility of the fourth powdered donut?

3 utils

12 utils

20 utils

26 utils

29 utils

Question 8(Multiple Choice Worth 2 points)

(01.06 LC)

According to rational consumer choice, what will happen to the optimal quantity of consumption for a good if the price increases?

It will increase along with total utility.

It will decrease.

It will increase.

It will be unaffected.

Insufficient data to determine

Question 9(Multiple Choice Worth 2 points)

(01.01 MC)

Which of the following is an example of a non-rival good?

Fireworks for everyone in their sightline

A toll road

A glass of water

Seats at a movie theater

An unclaimed spot on a beach

Question 10(Multiple Choice Worth 2 points)

(01.04 MC)

A producer can produce a good at lower unit cost than any other producer. For that good, the producer must have

a comparative advantage

diminishing marginal utility

beneficial terms of trade to offer

an absolute advantage

more factors of production

Question 11(Multiple Choice Worth 2 points)

(01.05 MC)

The table below shows the amounts of products that Company Z can produce together.

Production Level	Bags of Beans	Bags of Rice
A	60	0
B	57	1
C	53	2
D	49	3
E	42	4
F	30	5
G	25	6
H	0	7

Which of the following statements is true?

Resources are underutilized.

The data shows a constant opportunity cost.

The profits from sale of bags of beans are higher than profits from sale of bags of rice.

The opportunity cost of the second bag and seventh bag of rice are 53 and 0, respectively.

The opportunity cost of moving from production level A to B is lower than moving from D to E.

Question 12(Multiple Choice Worth 2 points)

(01.01 LC)

Which of the following makes trade-offs necessary?

Diminishing marginal returns

Diminishing marginal utility

Limited resources and unlimited wants and needs

Different opportunity costs

An excess of supply

Question 13(Multiple Choice Worth 2 points)

(01.02 MC)

Which of the following questions helps leaders of business firms determine resource allocation?

Who consumes the goods?

Which people most need the goods or services?

Is the opportunity cost of resources constant or increasing?

How much money do people have to pay for the goods or services?

Are the resources used to produce the goods scarce?

Question 14(Multiple Choice Worth 2 points)

(01.05 LC)

Which of the following accurately defines total net benefits?

The difference between total benefits and total costs

The sum of all benefits for a given choice

The total benefits minus the sum of all other foregone alternatives

The total benefits minus only implicit costs

The sum of benefits for all alternative choices

Question 15(Multiple Choice Worth 2 points)

(01.02 MC)

The government of Country Y does not regulate businesses in any way. It does not set minimum prices for any goods or regulate wages. It allows individuals to make independent decisions that impact the economy. What economic system best describes Country Y?

Command

Free enterprise

Market

Mixed

Indeterminate

Question 16(Multiple Choice Worth 2 points)

(01.05 MC)

Johnson won a free ticket to tour around the world in one year, but he will have to resign from his job. Which of the following is correct if he does cost-benefit analysis?

The tour provides only benefits.

The only cost will be paying for food.

There is no opportunity cost to be considered.

The cost of the lost income is equal to the benefit of the free ticket.

The result may lead to a sub-optimal choice if opportunity costs are not considered.

Question 17(Multiple Choice Worth 2 points)

(01.05 LC)

The benefits to businesses are known as ________ and the benefits to consumers are known as ________.

revenues; utility

profits, revenues

incentives; revenues

subsidies; taxes

utility; profits

Question 18(Multiple Choice Worth 2 points)

(01.03 LC)

Production at a level that is not maximizing available inputs can be illustrated through a

circular flow diagram

supply curve

demand curve

marginal cost curve

production possibility curve

Question 19(Multiple Choice Worth 2 points)

(01.03 MC)

Use the graph to answer the prompt.

The market above could consume at point B with ________ but would need ________ in order to produce there.

trade; economic growth

more supply; more demand

government intervention; alternative inputs

inputs; outputs

economic growth; trade

Question 20(Multiple Choice Worth 2 points)

(01.06 HC)

Below is the total benefit Michelle estimates she would get for eating handfuls of dried cranberries in one sitting.

Number of Handfuls	Total Benefit (dollars)
1	$2.00
2	$3.50
3	$4.50
4	$5.00
5	$5.25
6	$5.00
7	$4.00

If there is no cost to Michelle for a handful of dried cranberries, what is the optimal number of handfuls for her to eat?

2

3

4

5

6

Question 21(Multiple Choice Worth 2 points)

(01.06 HC)

Below is the marginal utility that Chris gains from purchasing oil paints and canvases for his painting hobby.

Units of Oil Paints	Marginal Utility of Oil Paints	Units of Canvases	Marginal Utility of Canvases
1	10	1	25
2	7.5	2	20
3	5	3	15
4	2.5	4	10
5	1	5	5

Chris has $35 and spends it all on paints and canvases. If oil paints are $2.50 per unit and canvases are $25 per unit, Chris will maximize his utility by buying which of the following combinations of paints and canvases?

1 canvas and 1 paint

1 canvas and 3 paints

1 canvas and 4 paints

2 canvases and 0 paints

2 canvases and 1 paint

Question 22(Multiple Choice Worth 2 points)

(01.06 MC)

A consumer has spent all his income on popcorn and candy at a movie. If the marginal utility per dollar of the last candy bar is less than the marginal utility per dollar of the popcorn, what should the consumer do to maximize utility?

Buy more candy bars

Buy more popcorn and the same number of candy bars

Buy fewer candy bars and more popcorn

Buy more candy bars and more popcorn

Buy more candy bars and less popcorn

Question 23(Multiple Choice Worth 2 points)

(01.04 HC)

Use the production possibilities table below to answer the following question. Assume constant opportunity costs for Tommy and Gina.

	Pillows per Day	Rugs per Day
Tommy	5	10
Gina	15	15

Given the data above, which statement provides the correct rationale for a trade agreement of 1.5 rugs for 1 pillow?

Gina's opportunity cost for producing pillows is less than Tommy's.

Tommy has a comparative advantage in both products, so he can dictate the terms of trade.

Gina has no incentive to trade with Tommy, because she has an absolute advantage in both products.

Tommy has a comparative advantage in rugs, and Gina has a comparative advantage in pillows.

Tommy has an opportunity cost that is lower than Gina for pillows, so he will want to trade pillows for rugs at a lower cost than he can produce them for himself.

Question 24(Multiple Choice Worth 2 points)

(01.05 LC)

The optimal choice will

equalize total benefits and total costs

maximize benefits regardless of costs

minimize total costs regardless of total benefits

maximize revenues

maximize the difference between total benefits and total costs

Question 25(Multiple Choice Worth 2 points)

(01.06 LC)

Eric goes to the grocery store and all the goods he wants will cost $45. However, he can only afford to purchase $20 in groceries. This is an example of a consumer's

marginal utility

being irrational

budget constraint

diminishing returns to consumption

optimal choice