#1
Which of the following best defines microeconomics?
The study of individual economic units and markets
ExplanationFocuses on individual economic actors and markets.
#2
What does the law of demand state in microeconomics?
There is an inverse relationship between price and quantity demanded.
ExplanationPrice increase leads to demand decrease.
#3
What does the production possibilities frontier (PPF) illustrate?
The maximum amount of goods and services an economy can produce
ExplanationShows the limit of production capabilities.
#4
What does the slope of the production possibilities frontier (PPF) represent?
The opportunity cost of producing one good in terms of the other
ExplanationReflects the trade-off between two goods.
#5
What is allocative efficiency?
When an economy produces a combination of goods and services that maximizes social welfare
ExplanationAchieves the best possible distribution of resources.
#6
What is the law of increasing opportunity cost?
As more of a good is produced, the opportunity cost of producing that good increases
ExplanationIllustrates diminishing returns to specialization.
#7
What does a point inside the production possibilities frontier (PPF) indicate?
Underutilization of resources
ExplanationNot efficiently using available resources.
#8
Which of the following is an assumption of the production possibilities model?
There is full employment of all resources in the economy
ExplanationAssumes no wasted resources.
#9
Which of the following factors can shift the production possibilities frontier (PPF) outward?
Increase in capital investment
ExplanationExpanding resource base improves production.
#10
What is the opportunity cost of moving from point A to point B on the production possibilities frontier (PPF)?
The amount of resources required to produce one more unit of the good measured on the vertical axis
ExplanationRepresents the trade-off in production.
#11
What is the difference between a movement along the production possibilities frontier (PPF) and a shift of the entire PPF?
A movement along the PPF represents a change in the quantity of both goods produced, while a shift of the entire PPF represents a change in resource allocation.
ExplanationMovement indicates efficiency; shift indicates resource change.
#12
What is the difference between explicit and implicit costs?
Explicit costs are monetary payments for resources, while implicit costs are the opportunity costs of using self-owned resources.
ExplanationTangible versus opportunity costs.