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

Apple chooses to assemble most iPhones in China rather than the United States. According to economic reasoning, which principle best explains this decision?

Accepted Answer

People respond to economic incentives.

Question 3

Suppose the government introduces a new student loan program that reduces annual payments for borrowers. What is a possible unintended consequence of this policy, according to economic analysis?

Accepted Answer

Colleges may have an incentive to increase tuition.

Question 4

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

Accepted Answer

Deciding whether to study one more hour for an exam.

Question 5

If a government decides to increase funding for space exploration, what is the opportunity cost of this decision?

Accepted Answer

The value of the next best alternative forgone, such as funding cancer research.

Question 6

Which of the following best defines a mixed economy?

Accepted Answer

An economy in which most decisions result from market interactions, but the government plays a significant role in resource allocation.

Question 7

Productive efficiency occurs when:

Accepted Answer

Every good or service is produced at the lowest possible cost.

Question 8

Which of the following is an example of allocative efficiency?

Accepted Answer

Producing goods up to the point where the marginal benefit equals the marginal cost.

Question 9

A voluntary exchange in a market will:

Accepted Answer

Make both the buyer and the seller better off.

Question 10

Which of the following statements is an example of positive analysis?

Accepted Answer

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

Question 11

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

Accepted Answer

$$\frac{\14$$-\$$12}{55-65} = \frac{2}{-10} = -0.2$$

Question 12

If the value of real GDP increased from $$19,610$$ billion in 2021 to $$20,018$$ billion in 2022, what is the percentage change in real GDP?

Accepted Answer

$$\frac{20,018 - 19,610}{19,610} 	imes 100 \approx 2.08\%$$

Question 13

Which of the following is a normative statement?

Accepted Answer

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

Question 14

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies individual households and firms, while macroeconomics studies the economy as a whole.

Question 15

A pharmaceutical company is deciding whether to invest in a new cancer treatment. According to economic models, what should the company compare to make an optimal decision?

Accepted Answer

The marginal benefit and marginal cost of the investment.

Question 16

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

Accepted Answer

Formulate a testable hypothesis.

Question 17

If a market is allocatively efficient, which of the following must be true?

Accepted Answer

The marginal benefit to consumers equals the marginal cost of production.

Question 18

Which of the following is a potential drawback of market economies discussed in the materials?

Accepted Answer

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

Question 19

Suppose a firm’s total revenue is represented by the area of a rectangle on a graph, where the base is the quantity sold and the height is the price. If the firm sells 125,000 units at a price of $2.00 per unit, what is the total revenue?

Accepted Answer

$$125,000 	imes \2.00$$ = \$$250,000$$

Foundations of Economics: Key Concepts, Models, and Methods

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