Microeconomics Unit 1 Review

Scarcity causes economic problem. Which of the following statements is true about scarcity?

• Scarcity is our inability to satisfy all of our wants.

• Scarcity problem arises because our wants are greater than resources available.

• The poor and the rich both face scarcity.

• All of the above.

Individuals A and B can produce good X. We say that A has a comparative advantage in the Production of good X if:

• A has a lower opportunity cost of producing X than B
•   A can produce less units of X in a given time period than B.
•   A can produce X using newer technology than B.
•   A can produce more units of X in a given time period than B.

The night before an economics test, you decide to go to the movies instead of studying for the test. You get 50% for the test – not the 70% you normally score. What was the opportunity cost of your evening at the movies?

• 50%

• 70%

• 20%

• Nil.

Which of the following statements is incorrect?

• The marginal cost of a good is the opportunity cost of producing one more unit of it.

• As the opportunity cost of producing more goods increases, the marginal cost of producing the good decreases.

• The marginal cost of a good or service is the change in cost resulting from producing one more unit of it.

• The marginal benefit of a good or service is the change in benefit resulting from producing one more unit of it.

There are two goods, X and Y. If the opportunity cost of producing good X is lower for Jack than for Jill, then

• Jack has an absolute advantage in the production of X.

• Jack has a comparative advantage in the production of X.

• Jill has a comparative advantage in the production of Y.

• Jill has an absolute advantage in the production of X.

Which of the following statements is correct?

• The production possibilities curve (PPC) is the boundary between those combinations of goods and services that can be consumed and those which cannot.

• Choices above the PPC are attainable with different combination of given resources.

• Production is efficient inside the PPC because we may have unused resources.

• All choices on the PPF curve are the maximum attainable production efficiency points.

Assume Sandy has the absolute advantage in producing both bread and butter over Andy. Also assume that both Andy and Sandy agree to specialize in the production of the good in which each has a comparative advantage. What will be the total production of bread and butter in the market?

• Sandy will produce all bread and butter because she has the absolute advantage.

• Sandy will produce all bread and butter because she has the comparative advantage.

• The same amount as when Andy & Sandy did not specialize.

• More bread and more butter than could be produced individually

Which is the best example of a scarce resource?

• Air

• Water

• Money

• Dirt

Which type of economy is controlled by the government

• Command Economy

• Free Market Economy

• Mixed Economy

• Traditional Economy

Which type of economy is controlled by "the Invisible Hand"

• Command Economy

• Free Market Economy

• Mixed Economy

• Traditional Economy