ASU ECON 211 FINAL EXAM QUESTION AND ANSWERS 100%
CORRECT | UPDATED 2025/2026
Question 1
Which of the following does a production possibilities frontier (PPF) display?
A) The amount of profit an economy can earn.
B) The possible combinations of output an economy can produce given its available resources
and technology.
C) The growth rate of an economy's output over time.
D) The distribution of income among the factors of production.
Correct Answer: B) The possible combinations of output an economy can produce given its
available resources and technology.
Rationale: The PPF is a graphical representation showing all the different combinations of
two goods that can be produced with available resources and technology, assuming full and
efficient use of those resources.
Question 2
Which of the following is an example of a normative statement?
A) An increase in the minimum wage will cause an increase in unemployment.
B) Policymakers should increase the minimum wage to improve the standard of living.
C) The current minimum wage is $7.25 per hour.
D) The unemployment rate is currently 3.7%.
Correct Answer: B) Policymakers should increase the minimum wage to improve the
standard of living.
Rationale: A normative statement expresses a value judgment or an opinion about
what should be. It is a prescriptive statement. In contrast, a positive statement (A, C, D) is a
descriptive statement that attempts to describe the world as it is and can be tested with
data.
Question 3
What is the opportunity cost of helping a friend move for a day?
A) The money you spent on gas to get to their house.
B) The physical effort and energy you exert.
C) The next best use of the time and energy you spent helping your friend.
D) There is no cost, as you are helping a friend.
Correct Answer: C) The next best use of the time and energy you spent helping your friend.
Rationale: Opportunity cost is the value of the best alternative that is forgone when a
choice is made. If you spend your Saturday helping a friend move, your opportunity cost is
whatever you would have done otherwise with that time (e.g., working and earning money,
studying, or relaxing).
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Question 4
An entity has a comparative advantage in the production of a good if it can produce that good:
A) At a lower absolute cost than another entity.
B) At a lower opportunity cost than another entity.
C) With a higher quality than another entity.
D) In a larger quantity than another entity.
Correct Answer: B) At a lower opportunity cost than another entity.
Rationale: This is the definition of comparative advantage, which is the basis for gains from
trade. An entity should specialize in producing the good for which it has the lowest
opportunity cost (it gives up less of other goods to produce it).
Question 5
Suppose the United States has an absolute advantage in producing both oil and wheat. Does this
mean the U.S. would not gain from trading these goods?
A) True, the U.S. should produce everything itself.
B) False, gains from trade are based on comparative advantage, not absolute advantage.
C) True, unless the other country also has an absolute advantage.
D) False, but the U.S. would only gain if it trades for a different good.
Correct Answer: B) False, gains from trade are based on comparative advantage, not
absolute advantage.
Rationale: Even if one country can produce everything more efficiently (absolute
advantage), both countries can still gain from trade by specializing in the production of the
good in which they have a comparative advantage (the lower opportunity cost).
Question 6
The United States has a comparative advantage in wheat production and an absolute advantage in
both apples and wheat relative to Canada. If the two countries specialize and trade, what should
the U.S. produce?
A) Apples
B) Wheat
C) Both apples and wheat
D) Neither apples nor wheat
Correct Answer: B) Wheat
Rationale: The principle of gains from trade is based on comparative advantage. A country
should specialize in producing the good in which it has a comparative advantage. Since the
U.S. has a comparative advantage in wheat, it should specialize in producing wheat and
trade for apples.
Question 7
The law of demand states that, all else being equal, as the price of a good rises, the quantity
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demanded of that good will:
A) Increase
B) Decrease
C) Remain the same
D) Fluctuate unpredictably
Correct Answer: B) Decrease
Rationale: This is the fundamental principle of demand. There is an inverse relationship
between the price of a good and the quantity consumers are willing and able to purchase.
Question 8
We would expect the demand curve for cars to shift to the right (an increase in demand) if:
A) The price of cars increases.
B) The price of gasoline falls.
C) Consumer income decreases.
D) The price of public transportation falls.
Correct Answer: B) The price of gasoline falls.
Rationale: Gasoline and cars are complementary goods. When the price of a complement
falls, it makes the original good more attractive, which increases the demand for it at every
price level, shifting the demand curve to the right.
Question 9
As consumer income increases, people purchase more cars. Based on this, cars are what type of
good?
A) Normal goods
B) Inferior goods
C) Substitute goods
D) Complementary goods
Correct Answer: A) Normal goods
Rationale: A normal good is one for which demand increases as consumer income rises. An
inferior good (B) is one for which demand decreases as income rises (e.g., instant noodles).
Question 10
Assuming the law of supply holds, supply curves are typically:
A) Downward sloping
B) Upward sloping
C) Horizontal
D) Vertical
Correct Answer: B) Upward sloping
Rationale: The law of supply states that, all else being equal, as the price of a good rises, the
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quantity producers are willing and able to supply increases. This positive relationship
between price and quantity supplied results in an upward sloping supply curve.
Question 11
Which of the following would cause a leftward shift in the supply curve for apples (a decrease in
supply)?
A) A technological improvement in apple harvesting.
B) A decrease in the price of apples.
C) An increase in the price of labor for apple pickers.
D) An unusually good growing season.
Correct Answer: C) An increase in the price of labor for apple pickers.
Rationale: The price of inputs is a key determinant of supply. An increase in the cost of
labor makes it more expensive to produce apples, which will decrease the quantity that
producers are willing to supply at any given price, shifting the supply curve to the left.
Question 12
An increase in the equilibrium price of coffee, with a decrease in the equilibrium quantity, could
be caused by:
A) An increase in the supply of coffee.
B) An increase in the demand for coffee.
C) A decrease in the supply of coffee.
D) A decrease in the demand for coffee.
Correct Answer: C) A decrease in the supply of coffee.
Rationale: A decrease in supply (a leftward shift of the supply curve) means that less coffee
is available at every price. This will lead to a new equilibrium with a higher price and a
lower quantity traded.
Question 13
What is consumer surplus?
A) The amount a buyer is willing to pay for a good less the amount the buyer actually pays.
B) The amount a buyer actually pays for a good less the amount they were willing to pay.
C) The total amount spent by all consumers in a market.
D) The excess quantity of a good that consumers are willing to buy.
Correct Answer: A) The amount a buyer is willing to pay for a good less the amount the
buyer actually pays.
Rationale: Consumer surplus is a measure of the economic welfare that buyers receive
from participating in a market. It is the difference between the maximum price a consumer
is willing to pay and the actual market price they do pay.
Question 14
A market is considered efficient when:
CORRECT | UPDATED 2025/2026
Question 1
Which of the following does a production possibilities frontier (PPF) display?
A) The amount of profit an economy can earn.
B) The possible combinations of output an economy can produce given its available resources
and technology.
C) The growth rate of an economy's output over time.
D) The distribution of income among the factors of production.
Correct Answer: B) The possible combinations of output an economy can produce given its
available resources and technology.
Rationale: The PPF is a graphical representation showing all the different combinations of
two goods that can be produced with available resources and technology, assuming full and
efficient use of those resources.
Question 2
Which of the following is an example of a normative statement?
A) An increase in the minimum wage will cause an increase in unemployment.
B) Policymakers should increase the minimum wage to improve the standard of living.
C) The current minimum wage is $7.25 per hour.
D) The unemployment rate is currently 3.7%.
Correct Answer: B) Policymakers should increase the minimum wage to improve the
standard of living.
Rationale: A normative statement expresses a value judgment or an opinion about
what should be. It is a prescriptive statement. In contrast, a positive statement (A, C, D) is a
descriptive statement that attempts to describe the world as it is and can be tested with
data.
Question 3
What is the opportunity cost of helping a friend move for a day?
A) The money you spent on gas to get to their house.
B) The physical effort and energy you exert.
C) The next best use of the time and energy you spent helping your friend.
D) There is no cost, as you are helping a friend.
Correct Answer: C) The next best use of the time and energy you spent helping your friend.
Rationale: Opportunity cost is the value of the best alternative that is forgone when a
choice is made. If you spend your Saturday helping a friend move, your opportunity cost is
whatever you would have done otherwise with that time (e.g., working and earning money,
studying, or relaxing).
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Question 4
An entity has a comparative advantage in the production of a good if it can produce that good:
A) At a lower absolute cost than another entity.
B) At a lower opportunity cost than another entity.
C) With a higher quality than another entity.
D) In a larger quantity than another entity.
Correct Answer: B) At a lower opportunity cost than another entity.
Rationale: This is the definition of comparative advantage, which is the basis for gains from
trade. An entity should specialize in producing the good for which it has the lowest
opportunity cost (it gives up less of other goods to produce it).
Question 5
Suppose the United States has an absolute advantage in producing both oil and wheat. Does this
mean the U.S. would not gain from trading these goods?
A) True, the U.S. should produce everything itself.
B) False, gains from trade are based on comparative advantage, not absolute advantage.
C) True, unless the other country also has an absolute advantage.
D) False, but the U.S. would only gain if it trades for a different good.
Correct Answer: B) False, gains from trade are based on comparative advantage, not
absolute advantage.
Rationale: Even if one country can produce everything more efficiently (absolute
advantage), both countries can still gain from trade by specializing in the production of the
good in which they have a comparative advantage (the lower opportunity cost).
Question 6
The United States has a comparative advantage in wheat production and an absolute advantage in
both apples and wheat relative to Canada. If the two countries specialize and trade, what should
the U.S. produce?
A) Apples
B) Wheat
C) Both apples and wheat
D) Neither apples nor wheat
Correct Answer: B) Wheat
Rationale: The principle of gains from trade is based on comparative advantage. A country
should specialize in producing the good in which it has a comparative advantage. Since the
U.S. has a comparative advantage in wheat, it should specialize in producing wheat and
trade for apples.
Question 7
The law of demand states that, all else being equal, as the price of a good rises, the quantity
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demanded of that good will:
A) Increase
B) Decrease
C) Remain the same
D) Fluctuate unpredictably
Correct Answer: B) Decrease
Rationale: This is the fundamental principle of demand. There is an inverse relationship
between the price of a good and the quantity consumers are willing and able to purchase.
Question 8
We would expect the demand curve for cars to shift to the right (an increase in demand) if:
A) The price of cars increases.
B) The price of gasoline falls.
C) Consumer income decreases.
D) The price of public transportation falls.
Correct Answer: B) The price of gasoline falls.
Rationale: Gasoline and cars are complementary goods. When the price of a complement
falls, it makes the original good more attractive, which increases the demand for it at every
price level, shifting the demand curve to the right.
Question 9
As consumer income increases, people purchase more cars. Based on this, cars are what type of
good?
A) Normal goods
B) Inferior goods
C) Substitute goods
D) Complementary goods
Correct Answer: A) Normal goods
Rationale: A normal good is one for which demand increases as consumer income rises. An
inferior good (B) is one for which demand decreases as income rises (e.g., instant noodles).
Question 10
Assuming the law of supply holds, supply curves are typically:
A) Downward sloping
B) Upward sloping
C) Horizontal
D) Vertical
Correct Answer: B) Upward sloping
Rationale: The law of supply states that, all else being equal, as the price of a good rises, the
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quantity producers are willing and able to supply increases. This positive relationship
between price and quantity supplied results in an upward sloping supply curve.
Question 11
Which of the following would cause a leftward shift in the supply curve for apples (a decrease in
supply)?
A) A technological improvement in apple harvesting.
B) A decrease in the price of apples.
C) An increase in the price of labor for apple pickers.
D) An unusually good growing season.
Correct Answer: C) An increase in the price of labor for apple pickers.
Rationale: The price of inputs is a key determinant of supply. An increase in the cost of
labor makes it more expensive to produce apples, which will decrease the quantity that
producers are willing to supply at any given price, shifting the supply curve to the left.
Question 12
An increase in the equilibrium price of coffee, with a decrease in the equilibrium quantity, could
be caused by:
A) An increase in the supply of coffee.
B) An increase in the demand for coffee.
C) A decrease in the supply of coffee.
D) A decrease in the demand for coffee.
Correct Answer: C) A decrease in the supply of coffee.
Rationale: A decrease in supply (a leftward shift of the supply curve) means that less coffee
is available at every price. This will lead to a new equilibrium with a higher price and a
lower quantity traded.
Question 13
What is consumer surplus?
A) The amount a buyer is willing to pay for a good less the amount the buyer actually pays.
B) The amount a buyer actually pays for a good less the amount they were willing to pay.
C) The total amount spent by all consumers in a market.
D) The excess quantity of a good that consumers are willing to buy.
Correct Answer: A) The amount a buyer is willing to pay for a good less the amount the
buyer actually pays.
Rationale: Consumer surplus is a measure of the economic welfare that buyers receive
from participating in a market. It is the difference between the maximum price a consumer
is willing to pay and the actual market price they do pay.
Question 14
A market is considered efficient when:
