ME UNIT: 1

Which of the following best defines opportunity cost?

The measure of the potential gain of an alternative choice not taken.

Which of the following best explains the cause of the outward shift of the production possibilities curve (PPC) below?

The availability of economic resources necessary to produce each good has increased leading to economic growth.

Based on the provided PPC, point Z best represents a/an ____________________ level of production.

inefficient

Based on the provided PPC, point Q best represents a/an ____________________ level of production.

infeasible

What is the significance of a linear PPC?

The opportunity cost is constant.

Assuming that Mark could produce 2 radios or 6 TVs in one day while Justin could produce 7 radios or 14 TVs in the same period, which of the following statements can be supported by the output table above?

Justin's opportunity cost for producing 1 radio is 2 TVs.

Assuming that Zach could produce 25 pencils or 150 erasers in one day while Christine could produce 30 pencils or 120 erasers in the same period, which of the following statements can be supported by the output table above?

Correct!

Zach's opportunity cost for producing 1 pencil is 6 erasers.

Which of the following best describes absolute advantage?

Absolute advantage is when a country can produce more of a particular good using the same resources compared to another country.

Which of the following best describes comparative advantage?

Comparative advantage is associated with having the lowest opportunity cost for producing a particular good.

In one day, Zach is able to make 20 hamburgers or 40 tacos while Jason can make 45 hamburgers or 15 tacos. Which of the following can be supported by the output table provided?

Jason has a comparative advantage in making hamburgers because he has the lowest opportunity cost.

In one day, Zach is able to make 20 hamburgers or 40 tacos while Jason can make 45 hamburgers or 15 tacos. Which of the following can be supported by the output table provided?

Zach has a comparative advantage in making tacos because he has the lower opportunity cost.

It takes Cindy 20 minutes to build one chair and 60 minutes to build one table. It takes Stuart 15 minutes to build one chair and 90 minutes to build one table. Which of the following statements can be supported by the input table?

Cindy has an absolute advantage in making tables because she can make the most in the least amount of time.

In one hour, Cindy is able to build 3 chairs or 1 table. In the same amount of time, Stuart can build 6 chairs or build 1.5 tables. Which of the following statements can be supported by the output table?

Cindy should specialize in making tables because she has the lower opportunity cost.

In one day, Paul is able to pick 75 apples or 125 oranges while during the same period, Abby is able to pick 50 apples or 150 oranges. Which of the following statements can be supported by the output table?

Abby has an absolute advantage in picking oranges.

In one day, Paul is able to pick 75 apples or 125 oranges while during the same period, Abby is able to pick 50 apples or 150 oranges. Which of the following statements can be supported by the output table?

Paul has a comparative advantage in picking apples because he has the lower opportunity cost.

What is the benefit for countries to trade with each other?

Production specialization according to comparative advantage can result in exchange opportunities that lead to consumption opportunities beyond the PPC.

Which of the following is used to determine mutually beneficial terms of trade?

Comparative advantage

In one day, Paul is able to pick 75 apples or 125 oranges while during the same period, Abby is able to pick 50 apples or 150 oranges. Which of the following represents mutually beneficial terms of trade for apples?

2 oranges for every apple.

Which of the following best explains how the price of inputs affects the supply of a good?

The price of inputs affects supply because as the cost of production decreases, producers are more likely to increase production which increases the supply of a good at every price point.

Which of the following would lead to an decrease in demand?

Decreasing population

Which of the following best describes the effect of an increase in prices? (Demand)

The quantity demanded decreases along the demand curve.

Which of the following best describes a market surplus?

When the quantity demanded is less than the quantity supplied.

Which of the following best describes the effect of a decrease in prices? (Supplied)

The quantity supplied decreases along the supply curve.

Which of the following best describes a market shortage.

When the quantity demanded is higher than the quantity supplied.

Which of the following best describes how producers overcome a market shortage or market surplus?

Increasing or decreasing prices.

Which of the following best describes the change occurring in the graph above? (Right shift of AD)

A decrease in the prices of complimentary goods,

Which of the following best explains the change occurring in the graph above? (Left shift of SRAS

An increase in the price of inputs required to produce a good.

Which of the following best describes the law of demand?

There is an indirect relationship between price and quantity demanded.

Which of the following best describes the law of supply?

There is a direct relationship between prices and the quantity supplied.

Which of the following would lead to an increase in supply?

Decreasing costs of production (inputs)

Which of the following would lead to a decrease in supply?

Increased government regulation

Which of the following best explains how income level affects demand?

Income level affects demand because as individuals make more money, they are more likely going to want to purchase goods they previously couldn't afford, which increases demand.

Assume that the market is at equilibrium. If the demand curve shifts to the left, which of the following will occur to re-establish equilibrium price and quantity?

Price decreases and the quantity supplied decreases.

Assume the market is at equilibrium. If the supply curve shifts to the right, which of the the following would best describes what occurs to establish a new market equilibrium?

Price decreases and the quantity demanded increases.

If the price of a good is higher than the equilibrium price, which of the following will occur?

A market surplus

If the price of a good is lower than the equilibrium price, which of the following will occur?

A market shortage

Which of the following can be supported by the data in the table when the price of a particular good is $28?

Market surplus of 20