Question 1

Which of the following best describes the first principle of economics?

Accepted Answer

People try to optimize by choosing the best available option with the information they have.

Question 2

What is meant by 'opportunity cost' in economics?

Accepted Answer

The best alternative use of a resource that is given up when making a choice.

Question 3

A government must choose between building a new hospital or a new highway. This scenario best illustrates which economic concept?

Accepted Answer

Trade-offs due to scarce resources

Question 4

Which of the following is an example of a positive economic statement?

Accepted Answer

If the price of gasoline rises, people will buy less gasoline.

Question 5

Suppose you can buy a book for $$20 at a nearby store or drive 3 miles to buy it for 10. $$According to cost-benefit analysis, what should you consider before deciding?

Accepted Answer

The value of your time and the cost of driving 3 miles, compared to the $10 savings.

Question 6

Which of the following equations correctly represents a budget constraint if you have $$100 to spend on books (b$) at p_b = 20$ and movies (m$) at p_m = 10$?

Accepted Answer

$$20b + 10m = 100$$

Question 7

Which of the following best describes equilibrium in economics?

Accepted Answer

A situation where everyone is optimizing and no one can be better off by changing their behavior.

Question 8

Why might an equilibrium not be optimal in the presence of externalities?

Accepted Answer

Because externalities can cause too much or too little of a good to be produced, harming overall welfare.

Question 9

Which of the following is an example of the free rider problem?

Accepted Answer

A person who enjoys fireworks from a public park without contributing to the cost.

Question 10

Which of the following statements about empiricism in economics is correct?

Accepted Answer

Empiricism means using data to test theories and determine causality.

Question 11

A country must choose between spending money on military equipment or on schools and hospitals. According to Dwight D. Eisenhower, what is the opportunity cost of military spending?

Accepted Answer

The schools, hospitals, and infrastructure that could have been built instead.

Question 12

Which of the following best illustrates the difference between positive and normative economics?

Accepted Answer

Positive economics describes what is; normative economics describes what ought to be.

Question 13

If a 1% increase in annual GDP generates a 0.7% rise in emissions, what is the relationship between GDP and emissions?

Accepted Answer

There is a positive correlation between GDP and emissions.

Question 14

Which of the following is NOT an example of an economic agent?

Accepted Answer

A rock

Question 15

Which of the following best describes a budget constraint?

Accepted Answer

The set of all things a person can choose to do or buy without exceeding their budget.

Question 16

Which of the following is a real-world example of a trade-off?

Accepted Answer

Choosing to spend time studying instead of working a part-time job.

Question 17

Which of the following statements about correlation and causality is correct?

Accepted Answer

Correlation does not imply causality.

Question 18

If a country must spend $$2.8$$ trillion a year to reduce emissions and $$3$$ trillion a year on education and health care, what economic concept does this illustrate?

Accepted Answer

Scarcity and the need for trade-offs

Question 19

Which of the following is a key feature that unifies all things economists study?

Accepted Answer

Choice

Question 20

Which of the following best describes the role of econometrics in economics?

Accepted Answer

It uses statistical theory to test economic theories with real-world data.

Principles and Practice of Economics: An Introduction to Microeconomics

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