mix
A PPC is bowed outward from the origin primarily because:
A. Resources are underutilized
B. All goods have constant opportunity cost
C. Resources are equally efficient in all uses
D. Resources are not equally adaptable to all production processes
D. Resources are not equally adaptable to all production processes
If a country moves from a point inside its PPC to a point on the curve, it has:
A. Grown economically
B. Reduced opportunity cost
C. Improved allocative efficiency
D. Improved productive efficiency
D. Improved productive efficiency
Consider a PPC showing capital and consumer goods. An inward shift of the PPC suggests:
A. An increase in investment
B. A reallocation of resources
C. A loss of resources or technological capacity
D. A fall in opportunity cos
C. A loss of resources or technological capacity
Which scenario would cause the PPC to rotate outward only on one axis?
A. Increase in overall population
B. Improved technology in producing capital goods
C. Improved health of the workforce
D. Better education in all sectors
B. Improved technology in producing capital goods
A linear PPC implies:
A. Constant marginal utility
B. Increasing opportunity cost
C. Constant opportunity cost
D. Productive inefficiency
C. Constant opportunity cost
A firm can produce either 200 units of X or 100 units of Y. If it chooses to produce 160 units of X, what is the opportunity cost in terms of Y?
A. 20 units of Y
B. 30 units of Y
C. 40 units of Y
D. 80 units of Y
Answer: C
(Opportunity cost per unit X = 0.5Y, so 160 X = 160×0.5 = 80 Y forgone → 100 – 80 = 20 Y produced)
In a multi-product firm, opportunity cost is best measured by:
A. The price of the alternative product
B. The profit made on the chosen product
C. The value of the next best alternative forgone
D. The market value of the chosen product
C. The value of the next best alternative forgone
If all resources are perfectly mobile, the opportunity cost of producing more of one good is:
A. Increasing
B. Constant
C. Zero
D. Diminishing
B. Constant
Opportunity cost does not arise when:
A. Resources are scarce
B. A choice must be made
C. Choices involve alternatives
D. Supply of goods is unlimited
D. Supply of goods is unlimited
In a centrally planned economy, opportunity cost is:
A. Not considered by planners
B. Always zero
C. Reflected in market prices
D. Still present, though not priced
D. Still present, though not priced
Which of the following is least likely to be considered an advantage of a planned economy?
A. Reduction in inequality
B. Elimination of unemployment
C. Incentivized innovation
D. Economic stability
C. Incentivized innovation
In a market system, a shortage of doctors would most likely be corrected by:
A. Government wage controls
B. Higher prices for medical services
C. Importing foreign doctors
D. Fixed wage schemes
B. Higher prices for medical services
In a mixed economy, if a public good is underprovided, the government might:
A. Raise interest rates
B. Reduce taxes
C. Provide subsidies to private providers
D. Impose maximum prices
C. Provide subsidies to private providers
Which of the following is most consistent with the invisible hand concept?
A. State intervention corrects market failure
B. Self-interest leads to socially optimal outcomes
C. Free riders are eliminated through subsidies
D. Governments always improve efficiency
B. Self-interest leads to socially optimal outcomes
A command economy may achieve allocative efficiency only if:
A. Consumers directly control production
B. Central planners perfectly understand consumer preferences
C. Prices are determined by market forces
D. All markets are in equilibrium
B. Central planners perfectly understand consumer preferences
Which of the following is a quasi-public good?
A. A streetlight
B. National defense
C. A toll road
D. A fireworks show
C. A toll road
A good is non-rivalrous and excludable. It is best described as:
A. A public good
B. A private good
C. A quasi-public good
D. A common good
C. A quasi-public good
Which feature distinguishes a merit good from a public good?
A. Marginal cost of provision is zero
B. Presence of positive externalities
C. Underprovision in a free market
D. Degree of rivalry and excludability
D. Degree of rivalry and excludability
Which of the following is the best reason for government provision of education as a merit good?
A. It is rival and excludable
B. It causes negative externalities
C. Consumers may undervalue its long-term benefits
D. The market overprovides it
C. Consumers may undervalue its long-term benefits
Negative externalities arise when:
A. Social costs are equal to private costs
B. Marginal private cost exceeds marginal social cost
C. Marginal social cost exceeds marginal private cost
D. External benefits exceed private benefits
C. Marginal social cost exceeds marginal private cost
A subsidy to consumers of merit goods aims to:
A. Decrease supply
B. Internalize negative externalities
C. Increase private consumption to socially optimal level
D. Encourage monopoly provision
C. Increase private consumption to socially optimal level
If marginal social benefit > marginal private benefit:
A. A negative production externality exists
B. A positive consumption externality exists
C. Government failure has occurred
D. Market is in equilibrium
B. A positive consumption externality exists
A market for cigarettes shows equilibrium at Qm. The socially optimal output is Qs < Qm. This indicates:
A. A positive consumption externality
B. A public good
C. A negative consumption externality
D. Excess supply
C. A negative consumption externality
Which of the following most accurately describes tax incidence?
A. Who files the tax form
B. Who the government legally charges
C. The final burden of the tax
D. The tax rate imposed on the firm
C. The final burden of the tax
The incidence of a tax falls mostly on consumers when:
A. Supply is elastic, demand is inelastic
B. Demand is elastic, supply is inelastic
C. Both supply and demand are elastic
D. Both supply and demand are inelastic
A. Supply is elastic, demand is inelastic