IVY SOFTWARE MBA PREPWORKS FUNDAMENTALS OF ECONOMICS EXAM STUDY GUIDE 2026 COMPLETE QUESTIONS WITH CORRECT DETAILED ANSWERS || 100% GUARANTEED PASS LATEST VERSION

IVY SOFTWARE MBA PREPWORKS FUNDAMENTALS OF ECONOMICS EXAM STUDY GUIDE 2026 COMPLETE QUESTIONS WITH CORRECT DETAILED ANSWERS || 100% GUARANTEED PASS LATEST VERSION 1. The main concept demonstrated in the production possibilities frontier is - ANSWER Opportunity cost 2. When country A has a lower opportunity cost of producing sugar relative to country B, then country A is said to have - ANSWER Comparative Advantage 3. A graph that shows the combinations of two goods that the economy can produce given the available scarce resources and available technology is called a - ANSWER Production Possibilities Frontier 4. Assume a production possibilities frontier for pickup trucks and big Mac hamburgers. The economy is producing 20 big Mac hamburgers and 65 pickup trucks (point 20, 65). What is the opportunity cost of producing an additional 20 Big Mac hamburgers (point 40, 60)? - ANSWER Five Pickup Trucks 5. The opportunity cost of an item is - ANSWER whatever must be given up to obtain the item. 6. Consider market for pork, suppose that price of beef, a substitute for pork, increases. Because of the change in price of beef, the equilibrium price of pork...? - ANSWER Increases 7. Consider the market for pork, suppose that the price of beef, a substitute for pork, increases. Because of this change in the price of beef, the equilibrium quantity of pork will...? - ANSWER Increase because increase in price of beef causes demand curve for pork to shift North East. B/c of this shift, the equilibrium quantity of pork will increase. 8. Consider the market for pork. Suppose that the price of hog feed, an input to the production of pork, increases. Because of that change in the price of hog feed, the equilibrium quantity of pork ...? - ANSWER Decreases because the increase in price of hog feed causes the supply curve for pork to shift NW. B/c of this shift, the quantity of pork decreases. 9. Consider the market for pork. Suppose that disposable income increases and pork is an inferior good. Because of that change in income, the equilibrium price of pork...? - ANSWER Decreases because the increase in disposable income causes the demand curve for pork to shift south west, because pork is an inferior good. because of this shift, the equilibrium price of pork decreases. 10. If consumers' expectations about the state of the economy improve, ceteris paribus, the change will cause the economy to move into a(n)______ gap and will cause the price level to _______ - ANSWER inflationary/increase 11. If the Federal Reserve Bank sells government bonds, ceteris paribus, the change will cause the economy to move into a(n)______ gap and will cause the price level to _______ - ANSWER deflationary/decrease X 12. Policy Instrument: the required reserve-deposit ratio. The Federal Reserve bank should ________ the required reserve deposit ratio if the economy is in a deflationary gap. - ANSWER decrease. 13. Policy instrument: the Federal Reserve Bank discount rate. The Federal Reserve bank should ______ the discount rate if the economy is in a deflationary gap. - ANSWER decrease 14. Policy instrument: federal marginal income tax rates. The President and Congress should _______ federal marginal income tax rates if the economy is in a deflationary gap. - ANSWER decrease 15. Policy instrument: government spending: The President and Congress should ________ government spending if the economy is in a deflationary gap. - ANSWER Increase 16. THe idea that the money supply affects only nominal variables and not real variables is formally known as the classical dichotomy. (True or False) - ANSWER False. In the long run, the money supply affects only nominal variables and not real variables. This means that when there is a change in the money supply by the Federal Reserve Bank, then the only effect is a change in the price level (ie: causing inflation or deflation). In the long run, a change in the money supply has absolutely no effect on the real value people place on goods and services. This second idea is formally called monetary neutrality 17. The idea that the money supply affects only nominal variables and not real variables is formally known as monetary neutrality. (T/F) - ANSWER True. 18. The aggregate demand curve reflects the real GDP demanded by all groups in the economy at any given price level (T/F) - ANSWER True. 19. Factors of Production - ANSWER Encompass all productive resources used to produce goods and services. Land, Labor, Capital, Entrepreneurial Ability 20. Opportunity Cose - ANSWER What you give up to get something 21. Production Possibilities Frontier - ANSWER A model of a two- good economy that shows how much the economy can produce using all its factors of production effeciently 22. Increasing Opportunity Cost - ANSWER As more and more of an economy's factors of production are employed in the production of a good, the economy must sacrifice the production of other goods at an increasing rate 23. Absolute Advantage - ANSWER One has the lowest production cost relative with whom they're being compared 24. Comparative Advantage - ANSWER One has the lowest opportunity cost relative with whom they're being compared 25. Demand Schedule - ANSWER A table showing the relationship between price and the quantity of a good that buyers are willing to buy 26. A government imposed and legally enforced minimum market price. a. price ceiling b. surplus c. economic burden d. price floor - ANSWER d. price floor 27. The ___________________ of any life activity is the cost of what you give up to partake in that activity. Among a comparison of individuals, businesses or countries, the one who has the lowest opportunity cost of an activity has a comparative advantage in that activity. a. opportunity cost b. comparative advantage c. factors of production d. entrepreneurial ability - ANSWER a. opportunity cost 28. All the productive resources of the earth may be put in one of the following four categories: land, labor, capital, and entrepreneurial ability. In limited supply, so they must be allocated among members of society. a. comparative advantage b. entrepreneurial ability c. opportunity cost d. factors of production - ANSWER d. factors of production 29. Includes all natural resources that are used to produce goods & services a. land b. labor c. capital d. entrepreneurial ability - ANSWER a. land