Q: Which formula correctly calculates the percentage change in an economic variable?

$$\frac{\text{Value in the second period} - \text{Value in the first period}}{\text{Value in the first period}} \times 100$$

Question 1

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

Accepted Answer

Scarcity means that resources are limited and cannot satisfy all human wants.

Question 2

According to economic theory, why do people respond to incentives?

Accepted Answer

Because incentives change the costs and benefits associated with different actions.

Question 3

A student is deciding whether to study for an extra hour or watch TV. According to marginal analysis, the student should:

Accepted Answer

Study for the extra hour if the marginal benefit of studying exceeds the marginal cost.

Question 4

Which of the following is an example of opportunity cost?

Accepted Answer

Choosing to fund cancer research instead of space exploration means the opportunity cost is the benefits of space exploration.

Question 5

In a mixed economy, which of the following statements is true?

Accepted Answer

Most economic decisions result from the interaction of buyers and sellers, but the government also plays a significant role.

Question 6

Which formula correctly calculates the percentage change in an economic variable?

Accepted Answer

$$\frac{	ext{Value in the second period} - 	ext{Value in the first period}}{	ext{Value in the first period}} 	imes 100$$

Question 7

A firm can produce a product using either more labor or more machines. If the cost of labor rises, what is the most likely response according to economic theory?

Accepted Answer

The firm will use more machines and less labor to minimize costs.

Question 8

Which of the following best illustrates the concept of a trade-off?

Accepted Answer

Allocating more resources to healthcare means fewer resources are available for education.

Question 9

What is the main difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies individual markets and choices, while macroeconomics studies the economy as a whole.

Question 10

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

Accepted Answer

"An increase in the minimum wage will lead to higher unemployment among teenagers."

Question 11

Suppose the price of pizza decreases from $$14 to 12 $$and the quantity demanded increases from 55 to 65 per week. What is the slope of the demand curve between these two points?

Accepted Answer

$$\frac{-2}{10} = -0.2$$

Question 12

Which of the following best describes allocative efficiency?

Accepted Answer

Goods and services are produced up to the point where the last unit provides a marginal benefit equal to the marginal cost.

Question 13

A bar graph and a pie chart are used to represent market share data. What is the main difference in how they display information?

Accepted Answer

A bar graph uses the height of bars, while a pie chart uses the size of slices.

Question 14

If a government imposes a tariff on imported goods, what is a likely outcome according to economic analysis?

Accepted Answer

The losses to consumers and some producers usually outweigh the gains to other producers and the government.

Question 15

Which of the following is a normative economic statement?

Accepted Answer

"The government should provide free healthcare to all citizens."

Question 16

A firm’s total revenue can be represented graphically as:

Accepted Answer

The area of a rectangle with base equal to quantity and height equal to price.

Question 17

Which of the following is a step in building an economic model?

Accepted Answer

Formulate a testable hypothesis.

Question 18

If the area of a triangle on a graph has a base of 25,000 and a height of $0.50, what is the area?

Accepted Answer

$$\frac{1}{2} 	imes 25,000 	imes 0.50 = 6,250$$

Question 19

Which of the following is a reason why market outcomes may not be fully efficient?

Accepted Answer

Market outcomes might ignore the desires of people not involved in transactions, such as those affected by pollution.

Chapter 1: Economics—Foundations and Models (with Graphs and Formulas Appendix)

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