Question 1

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

Accepted Answer

Scarcity refers to the inability to satisfy all wants due to limited resources.

Question 2

According to the law of demand, what happens when the price of a good increases, ceteris paribus?

Accepted Answer

The demand for the good decreases.

Question 3

Which of the following is an example of an opportunity cost?

Accepted Answer

The value of the next best alternative you give up to attend the concert.

Question 4

A rational choice is best described as:

Accepted Answer

A choice that uses available resources to achieve the greatest benefit.

Question 5

Which of the following equations correctly represents the marginal benefit equals marginal cost rule for optimal decision-making?

Accepted Answer

$$MB = MC$$

Question 6

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

Accepted Answer

Money

Question 7

In the context of income distribution, what does 'functional distribution of income' refer to?

Accepted Answer

Distribution of income among owners of factors of production.

Question 8

Which of the following best describes a 'competitive market'?

Accepted Answer

A market with many buyers and sellers, where no single buyer or seller can influence the price.

Question 9

If the price of a good decreases, what is the expected effect on the quantity demanded, according to the law of demand?

Accepted Answer

Quantity demanded will increase.

Question 10

Which of the following is an example of a capital good?

Accepted Answer

A computer used by a business to produce software.

Question 11

Which payment is associated with the factor of production 'land'?

Accepted Answer

Rent

Question 12

What is the main role of entrepreneurship in the production process?

Accepted Answer

To organize land, labor, and capital into production.

Question 13

Which of the following best describes the difference between a change in quantity demanded and a change in demand?

Accepted Answer

A change in quantity demanded refers to a movement along the demand curve due to a price change, while a change in demand refers to a shift of the entire demand curve.

Question 14

Suppose a firm is deciding whether to produce one more unit of a good. If the marginal benefit of producing the unit is $$10 and the marginal cost is 8$$, what should the firm do?

Accepted Answer

Produce the unit, because $$MB \u003e MC.$$

Question 15

Which of the following is an example of a real-world application of opportunity cost?

Accepted Answer

A student chooses to study for an exam instead of going to a party, giving up the enjoyment of the party.

Question 16

Which of the following best describes the concept of 'marginal analysis'?

Accepted Answer

Comparing additional (incremental) benefits and additional (incremental) costs.

Question 17

Which of the following is NOT a characteristic of goods and services?

Accepted Answer

They are always tangible.

Question 18

Which of the following best describes the personal distribution of income?

Accepted Answer

Distribution of income among different households.

Question 19

If a market is described as 'competitive,' what is the implication for individual buyers and sellers?

Accepted Answer

They are price takers and cannot influence the market price.

Question 20

Which of the following is the best example of a marginal decision?

Accepted Answer

A student decides whether to spend one more hour studying for an exam.

Microeconomics Study Notes: Chapters 1 & 2 (Scarcity, Choices, Goods, and Demand)

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