Unit 1: Basic Economic Concepts

Which statement best describes scarcity as economists use the term?

Most factors of production are scarce. Why may an established piece of knowledge, such as a well-known method for rotating crops, not be scarce in the same way?

Economists group the factors of production into land, labor, capital and entrepreneurship. Which of the following is capital?

A town owns one empty field. It can use the field for a new school or keep it as a public park, but not both. What does this situation illustrate most directly?

Every economic system must answer three basic questions about how to allocate its resources. Which of the following is one of those questions?

In a command economy, how are the three basic economic questions mainly answered?

In a market economy, demand for electric bicycles rises and their price increases. How does the higher price help allocate resources?

Which of the following best describes a mixed economy?

The graph shows a country's production possibilities curve for corn and cars changing from PPC₁ to PPC₂. Which event could explain this change?

An economy is producing on its production possibilities curve when a recession causes many factories and workers to sit idle. How is this shown on the PPC?

A production possibilities curve is a straight downward-sloping line. What does this shape show?

Which shape of production possibilities curve shows decreasing opportunity cost?

The graph shows a country's production possibilities curve for food and clothing shifting from PPC₁ to PPC₂. Which event could explain this shift?

The table shows the number of worker-hours that Country A and Country B need to produce one computer or one ton of corn. To gain from trade, which good should each country specialize in?

Two countries specialize according to comparative advantage and trade at mutually beneficial terms. What is the main result?

Country X can produce more of every good than Country Y can, using the same resources. Which statement is correct?

With all of its resources, Country Z can produce either 60 tons of wheat or 15 tractors, with a constant opportunity cost. What is the opportunity cost of one tractor?

Maya leaves a job that paid 40,000 dollars a year to run her own café. In the first year she pays 30,000 dollars for rent and supplies, and she uses 50,000 dollars of her savings, which had been earning 4% interest a year. What is the total economic cost of running the café for the year?

Priya is deciding how many hours of tutoring to buy. The table shows her total benefit and total cost (in dollars). How many hours should she buy to make the best choice?

Some decisions cannot be broken into small steps and must be judged by comparing total benefit with total cost. Which decision is best judged this way?

Jordan has a concert ticket that he could sell back for its price of 30 dollars. Going to the concert also means missing a 3-hour shift at his job, which pays 15 dollars an hour. What is Jordan's opportunity cost of going to the concert?

In cost-benefit analysis, total benefit is measured differently for consumers and for firms. Which pairing is correct?

Which statement describes diminishing marginal utility?

Kai paid 50 dollars for a nonrefundable ticket to a play. On the night of the play he feels unwell and would rather stay home. How should the 50 dollars affect his decision about going?

A bakery decides how many hours a day to keep a second oven running. The table shows the marginal benefit and marginal cost of each hour (in dollars). How many hours should it run the second oven?

The graph shows Lena's marginal benefit and marginal cost of each mile she runs in a week. She currently runs 6 miles a week. What should she do to make herself better off?

A consumer spends all of her income on two goods. Which condition shows that she is maximizing her total utility?

Lina spends all her budget on apples and oranges. The last apple she buys costs 2 dollars and gives her 30 utils; the last orange costs 4 dollars and gives her 40 utils. Which change would raise her total utility?

Which statement about Alia and Ben is correct?

Alia makes shirts and Ben makes hats, and they trade with each other. Which price of a hat, in shirts, would let both of them gain from the trade?

According to the table, what is the opportunity cost of each additional bicycle when the economy moves from combination C to combination D?

What does the table show about this economy's production possibilities curve?

Which statement about comparative advantage is correct?

North specializes in food and South in cloth. Which of the following terms of trade would benefit both countries?

Which combination maximizes Dev's total utility with his 20 dollars?

Suppose Dev buys 4 sandwiches and 2 juices. How could he raise his total utility without spending more?

What is the opportunity cost of the additional wheat produced when the country moves from point A to point B?

Which statement about points E and F is correct?