Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when a choice is made.

Question 2

Suppose a student spends 3 hours studying for an economics exam instead of working at a job that pays $15 per hour. What is the opportunity cost of studying for the exam?

Accepted Answer

$45, which is the income forgone from not working.

Question 3

Which statement best illustrates the concept of 'no free lunch' in economics?

Accepted Answer

Every choice involves a trade-off and an opportunity cost.

Question 4

A production possibilities curve (PPC) is bowed outward from the origin. What does this shape indicate?

Accepted Answer

Increasing opportunity costs as more of one good is produced.

Question 5

If a country is operating inside its production possibilities curve, what does this imply?

Accepted Answer

Resources are underutilized or there is unemployment.

Question 6

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 7

Marginal analysis involves comparing:

Accepted Answer

Marginal benefits and marginal costs.

Question 8

Which equation represents the condition for optimal decision-making in marginal analysis?

Accepted Answer

$$MB = MC$$

Question 9

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

Accepted Answer

"Government should increase the minimum wage."

Question 10

A student is deciding whether to take an extra course. The marginal benefit of the course is an increase in future earnings of $$2,000, while the marginal cost is 1$$,500 in tuition and fees. What should the student do according to marginal analysis?

Accepted Answer

Take the course, because $$MB \u003e MC.$$

Question 11

Which of the following best describes the ceteris paribus assumption?

Accepted Answer

Only the variables being studied are changed, while others are held constant.

Question 12

Which of the following is a positive economic statement?

Accepted Answer

"An increase in demand raises the equilibrium price."

Question 13

Which of the following is an example of purposeful behavior in economics?

Accepted Answer

A consumer chooses the product that maximizes their utility.

Question 14

Which of the following is NOT a step in the scientific method as applied in economics?

Accepted Answer

Ignoring contradictory evidence.

Question 15

If a nation experiences economic growth, what happens to its production possibilities curve?

Accepted Answer

It shifts outward, indicating increased capacity.

Question 16

Which of the following is a pitfall to sound economic reasoning?

Accepted Answer

Confusing correlation with causation.

Question 17

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies individual markets; macroeconomics studies the economy as a whole.

Question 18

A country can produce either 100 units of wheat or 200 units of corn. If it chooses to produce 50 units of wheat, what is the opportunity cost in terms of corn?

Accepted Answer

100 units of corn

Question 19

Which of the following is an example of capital as a factor of production?

Accepted Answer

A factory building used to manufacture cars.

Question 20

Suppose a firm is considering hiring an additional worker. The marginal benefit of hiring is $$500 in extra output, and the marginal cost is 400 in $$wages. According to marginal analysis, what should the firm do?

Accepted Answer

Hire the worker, because $$MB \u003e MC.$$

Limits, Alternatives, and Choices: Foundations of Microeconomics

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