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1. In microeconomics, the law of demand states that:
A. consumers will buy more of a good at higher prices
B. consumers will buy less of a good at lower prices
C. consumers will buy the same amount regardless of price
D. consumers will only buy goods that are on sale
Answer: B. consumers will buy less of a good at lower prices
Rationale: The law of demand states that as the price of a good decreases,
the quantity demanded for that good will increase, and vice versa.
2. The concept of opportunity cost in economics refers to:
A. the value of the next best alternative that is foregone
B. the cost of producing an additional unit of a good
C. the total cost of all resources used in production
D. the highest price that a consumer is willing to pay for a good
Answer: A. the value of the next best alternative that is foregone
Rationale: Opportunity cost is the value of the next best alternative that is
foregone when a decision is made to allocate resources towards a
particular choice.
3. The production possibility frontier represents:
A. the maximum possible output that can be produced with current
resources
B. the minimum possible output that can be produced with current
resources
C. the average level of output that can be produced with current resources
D. the total output that can be produced with unlimited resources
Answer: A. the maximum possible output that can be produced with
current resources
Rationale: The production possibility frontier shows the maximum
possible output that can be produced with current resources and
technology.
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