Question 1

Which of the following best describes the fundamental economic problem faced by all societies?

Accepted Answer

How to allocate limited resources to satisfy unlimited wants.

Question 2

A government offers a cash reward for every snake killed to reduce a dangerous snake population. Instead, people begin breeding snakes to collect the reward. This is an example of:

Accepted Answer

A backfiring incentive, also known as the cobra effect.

Question 3

Which of the following statements is most consistent with the economic idea that 'people are rational'?

Accepted Answer

People use all available information to make the best possible decision for themselves.

Question 4

Suppose the price of a shirt decreases from $$20 to 15. $$What is the percentage change in price? Use the formula $$	ext{Percent Change} = \frac{	ext{New Value} - 	ext{Old Value}}{	ext{Old Value}} 	imes 100\%.$$

Accepted Answer

$$25\%$$ decrease

Question 5

Which of the following is an example of a decision made at the margin?

Accepted Answer

Choosing to study one more hour instead of watching TV.

Question 6

In economics, what does the term 'trade-off' refer to?

Accepted Answer

The idea that producing more of one good requires producing less of another due to limited resources.

Question 7

Which of the following best illustrates the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics focuses on the choices of households and firms, while macroeconomics examines the economy as a whole, such as inflation and unemployment.

Question 8

A car manufacturer decides to move its factory to a country with lower labor costs. This decision is most closely related to which economic question?

Accepted Answer

"How will goods and services be produced?"

Question 9

If a government increases funding for space exploration, what is the opportunity cost of this decision?

Accepted Answer

The value of the next best alternative foregone, such as funding for cancer research.

Question 10

Which of the following is NOT a key economic idea discussed in the study materials?

Accepted Answer

All resources are unlimited.

Question 11

A government offers a $7,500 subsidy for purchasing electric vehicles. As a result, more people buy electric cars. This is an example of:

Accepted Answer

People responding to economic incentives.

Question 12

Which of the following best describes the use of graphs and formulas in economics?

Accepted Answer

They help summarize essential details and relationships between variables.

Question 13

Suppose a country can produce either 100 units of food or 200 units of clothing with its resources. If it chooses to produce 100 units of food, what is the opportunity cost per unit of food in terms of clothing?

Accepted Answer

2 units of clothing per unit of food.

Question 14

Which of the following scenarios best demonstrates a marginal analysis?

Accepted Answer

A worker considers whether to work one extra hour for overtime pay.

Question 15

If the value of a currency falls relative to other currencies, which branch of economics would most likely study the causes and effects of this change?

Accepted Answer

Macroeconomics

Question 16

A firm is considering whether to hire one more worker. The additional revenue generated by this worker is $$200, and the additional cost is 150. $$According to marginal analysis, what should the firm do?

Accepted Answer

Hire the worker, because the marginal benefit ($$200) exceeds the marginal cost (150).$$

Question 17

Which of the following is an example of a positive incentive?

Accepted Answer

A bonus for employees who meet their sales targets.

Question 18

If a formula gives you a negative number of workers in an economy, what should you conclude?

Accepted Answer

You likely made a mistake in applying the formula.

Question 19

Which of the following is a macroeconomic issue?

Accepted Answer

What determines the inflation rate in a country.

Question 20

A student is deciding whether to spend an extra hour studying or to go out with friends. According to economic theory, what should the student compare to make this decision?

Accepted Answer

The marginal benefit of studying for one more hour and the marginal cost of not going out.

Foundations and Models in Economics: Key Concepts and Applications

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