Unit 1: Basic Economic Concepts

Country A and Country B can both produce cars and planes. If it is advantageous for both countries to specialize and trade, which of the following must be true?

• One of the countries has an absolute advantage in the production of both goods.

• The countries have different opportunity costs of production.

• The opportunity costs of production are the same for both countries.

• Opportunity costs for cars will be less than planes.

• One country has an absolute advantage in the production of cars while the other has an absolute advantage in the production of planes.

Which of the following is the best example of physical capital?

• A $100,000 business loan from a bank

• A business hiring 10,000 workers at a factory

• A truck for a delivery company

• An oven for a family of four

• An increase in construction jobs

When making a decision, the next best alternative is called

• The production possibilities

• The opportunity cost

• Scarcity

• The absolute advantage

• Efficiency

Which of the following must be true if an individual’s next best alternative to going to the beach is studying for an economics exam?

• They will decide to study for the exam

• The opportunity costs is seeing their friends at the beach

• The person prefers playing volleyball at the beach to study for the exam

• The opportunity cost of going to the beach is all the other things they could have done

• The opportunity cost of going to the beach is being better prepared for the exam

If the production possibilities curve is concave from the origin (or bowed out), then economists say that

• Resources are scarce in the economy

• Resources are not equally suited for the production of both goods

• Economic growth is occurring in the economy

• Resources are being inefficiently used in the economy

• Resources are equally suited for the production of either good

A point outside the production possibilities curve would represent

• An efficient use of resources

• Future output once producers become more efficient

• An inefficient use of resources

• A combination that cannot be achieved due to scarcity

• Full employment of resources in the economy

An increase in which of the following would cause an outward shift of the production possibilities curve for consumer goods and capital goods?

• An increase in the demand for consumer goods

• An increase in taxes on consumers

• A decrease in unemployment

• An increase in the resources to produce capital goods

• The efficient production of consumer goods

Which of the following is true regarding the production possibilities curve (PPC)?

• An increase in resources will shift the PPC inward

• A decrease in unemployment will cause the PPC to move outward

• Consumers prefer capital goods

• The production of capital goods will lead to more economic growth in the future

• The government prefers consumer goods

An increase in which of the following will increase the quantity supplied of volleyballs?

• Taxes on volleyball producers

• The price of a substitute

• The number of volleyball consumers

• Subsidies for volleyball net producers

• The price of volleyballs

If demand for mp3 players decreases when the price of mobile phones decreases, we can say that cell phones and mp3 players are

• Normal goods

• Inferior goods

• Substitute goods

• Complementary goods

• Unrelated due to the substitution effect