Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

Scarcity is when unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

A student decides to sleep for 5 more minutes instead of getting up for breakfast. According to economic theory, what is the opportunity cost of this decision?

Accepted Answer

The lower quality of breakfast or missing breakfast.

Question 3

Which equation represents the condition for making an optimal decision at the margin?

Accepted Answer

$$MB = MC$$

Question 4

A firm is considering hiring a great singer using standard production techniques or a bad singer with auto-tune. This scenario best illustrates which economic concept?

Accepted Answer

Trade-off due to scarcity of resources.

Question 5

Which of the following is an example of a positive (non-monetary) incentive?

Accepted Answer

Grades for students.

Question 6

If the marginal benefit ($$MB) of an $$activity is less than the marginal cost ($$MC$$), what should a rational decision-maker do?

Accepted Answer

Decrease or stop the activity.

Question 7

Which of the following best defines opportunity cost?

Accepted Answer

The highest-valued alternative that must be given up to engage in another activity.

Question 8

In a market economy, what determines the allocation of economic resources?

Accepted Answer

Decisions of households and firms interacting in markets.

Question 9

Which of the following statements about economic models is correct?

Accepted Answer

Economic models are simplified versions of reality used to analyze real-world economic situations.

Question 10

A government increases taxes on high incomes and uses the revenue to fund programs for the poor. This is an example of:

Accepted Answer

Redistribution of income.

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Question 12

Suppose a country can produce either more cars or more computers, but not both at the same time due to limited resources. This situation illustrates:

Accepted Answer

Trade-off due to scarcity.

Question 13

Which of the following is a normative statement?

Accepted Answer

"The government should increase the minimum wage."

Question 14

A hypothesis in an economic model is:

Accepted Answer

A statement about an economic variable that may be either correct or incorrect.

Question 15

Which of the following is an example of a marginal cost?

Accepted Answer

The extra cost of producing one more unit of a good or service.

Question 16

If a market is allocatively efficient, which of the following must be true?

Accepted Answer

The marginal benefit to consumers equals the marginal cost of production for the last unit produced.

Question 17

Which of the following is a reason why markets may not result in efficient outcomes?

Accepted Answer

Governments may interfere with market outcomes.

Question 18

Which of the following best describes the difference between positive and normative analysis?

Accepted Answer

Positive analysis is concerned with what is, while normative analysis is concerned with what ought to be.

Question 19

A market economy is characterized by:

Accepted Answer

Decisions of households and firms interacting in markets determining the allocation of resources.

Question 20

Suppose the marginal benefit ($$MB) of $$eating an additional slice of pizza is $$\2$, and the marginal cost (MC$) is $$\$$3. $$According to economic theory, what should you do?

Accepted Answer

Do not eat the additional slice because $$MB \u003c MC.$$

Core Principles and Models in Microeconomics: Scarcity, Choice, and Economic Systems

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