Question 1

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

Accepted Answer

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

Question 2

Suppose the price of reusable water bottles increases. According to the law of demand, what will happen to the quantity demanded, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 3

A new technology allows firms to produce smartphones at a lower cost. What is the most likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve will shift to the right.

Question 4

If the U.S. government increases income taxes, which of the following is a positive statement?

Accepted Answer

Higher income taxes reduce the incentive to work.

Question 5

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

Transfer payments such as Social Security benefits.

Question 6

Suppose the price of coffee beans increases. What is the likely effect on the supply of coffee, and why?

Accepted Answer

Supply decreases because higher input prices reduce profitability.

Question 7

A country’s real GDP increased from $$19,610$$ billion to $$20,018$$ billion in one year. What is the percentage change in real GDP? Use the formula $$	ext{Percentage Change} = \frac{	ext{New Value} - 	ext{Old Value}}{	ext{Old Value}} 	imes 100.$$

Accepted Answer

$$2.1\%$$

Question 8

Which of the following would cause a movement along the demand curve for pizza, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of pizza.

Question 9

If the price of Big Macs increases, what is the expected effect on the demand for Whoppers, assuming they are substitutes?

Accepted Answer

The demand for Whoppers will increase.

Question 10

Which of the following best describes allocative efficiency?

Accepted Answer

Production is in accordance with consumer preferences, where the marginal benefit equals the marginal cost.

Question 11

Suppose a natural disaster destroys several factories in a city. What is the most likely immediate effect on the supply curve for goods produced in those factories?

Accepted Answer

The supply curve shifts to the left.

Question 12

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

Accepted Answer

The government should increase spending on healthcare.

Question 13

If both the demand and supply curves for reusable water bottles shift to the right, what is the expected effect on equilibrium quantity and price?

Accepted Answer

Equilibrium quantity will increase, but the effect on price is ambiguous.

Question 14

Which of the following is a component of GDP as measured by the expenditure approach?

Accepted Answer

Spending by households on services.

Question 15

A firm can produce either corn or soybeans. If the price of soybeans rises, what is the likely effect on the supply of corn?

Accepted Answer

The supply of corn will decrease.

Question 16

Which of the following best explains why market economies tend to be more efficient than centrally planned economies?

Accepted Answer

Market economies allocate resources based on the interaction of buyers and sellers, leading to productive and allocative efficiency.

Question 17

Suppose the demand for a normal good increases as consumer incomes rise. Which of the following is most likely to happen in the market for that good?

Accepted Answer

The demand curve shifts to the right.

Question 18

Which formula would you use to calculate the slope of a straight line on a graph, and what does it represent in economics?

Accepted Answer

$$	ext{Slope} = \frac{	ext{Change in y}}{	ext{Change in x}}$$; it represents the rate at which the y-variable changes with respect to the x-variable.

Question 19

Which of the following is an example of a change in quantity supplied, rather than a change in supply?

Accepted Answer

A decrease in the price of the product.

Question 20

Suppose the government introduces a new subsidy for electric cars, making them cheaper for consumers. What is the most likely effect on the market for gasoline-powered cars?

Accepted Answer

The demand for gasoline-powered cars will decrease.

Macroeconomics: Foundations, Models, and Market Dynamics

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