This work addresses the balance between temporal signal-to-noise ratio (tSNR) and partial volume effects (PVE) in functional magnetic resonance imaging (fMRI) and investigates the impact of the choice of spatial resolution and smoothing. In fMRI, since physiological time courses are monitored, tSNR is of greater importance than image SNR. Improving SNR by an increase in voxel volume may be of negligible benefit when physiological fluctuations dominate the noise. Furthermore, at large voxel volumes, PVE are more pronounced, leading to an overall loss in performance. Artificial fMRI time series, based on high-resolution anatomical data, were used to simulate BOLD activation in a controlled manner. The performance was subsequently quantified as a measure of how well the resulted activation matched the simulated activation. The performance was highly dependent on the spatial resolution. At high contrast-to-noise ratio (CNR), the optimal voxel volume was small, i.e. in the region of 23 mm3. It was also shown that using a substantially larger voxel volume in this case could potentially negate the CNR benefits. The optimal smoothing kernel width was dependent on the CNR, being larger at poor CNR. At CNR > 1, little or no smoothing proved advantageous. The use of artificial time series gave an opportunity to quantitatively investigate the effects of partial volume and smoothing in single subject fMRI. It was shown that a proper choice of spatial resolution and smoothing kernel width is important for fMRI performance.