Question 1

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

Accepted Answer

Scarcity refers to the unlimited wants and limited resources available to fulfill those wants.

Question 2

A student decides to attend college full-time rather than work. What is the opportunity cost of this decision?

Accepted Answer

The income the student could have earned by working full-time.

Question 3

Which of the following is NOT one of the three key economic ideas?

Accepted Answer

People always make perfect decisions.

Question 4

Suppose Apple is deciding whether to produce more iPhones. If the marginal benefit (MB) of producing an additional iPhone is $$500 and the marginal cost (MC) is 400$$, what should Apple do?

Accepted Answer

Produce more iPhones because $$MB \u003e MC$$

Question 5

Which equation correctly represents the condition for making optimal decisions at the margin?

Accepted Answer

$$MB = MC$$

Question 6

In a market economy, who primarily decides what goods and services will be produced?

Accepted Answer

Consumers and firms through their choices.

Question 7

Which of the following is an example of a trade-off?

Accepted Answer

A company must choose between investing in new machinery or research and development.

Question 8

What is the main difference between a centrally planned economy and a market economy?

Accepted Answer

In a centrally planned economy, the government allocates resources; in a market economy, households and firms make decisions.

Question 9

Which of the following best illustrates the concept of 'voluntary exchange'?

Accepted Answer

Both the buyer and seller are made better off by the transaction.

Question 10

A firm is considering whether to use more machines or more workers in production. This decision is an example of which fundamental economic question?

Accepted Answer

"How will the goods and services be produced?"

Question 11

Which of the following statements about economic models is correct?

Accepted Answer

Economic models are simplified versions of reality used to analyze real-world situations.

Question 12

If a government raises taxes on high-income individuals to fund programs for low-income individuals, which concept is being prioritized?

Accepted Answer

Equity

Question 13

Which of the following best describes 'allocative efficiency'?

Accepted Answer

Production is in accordance with consumer preferences; every good or service is produced up to the point where the last unit provides marginal benefit equal to marginal cost.

Question 14

A company is deciding whether to reopen a hotel after a pandemic. The marginal revenue from reopening is $$10,000 and the marginal cost is 8$$,000. What should the company do?

Accepted Answer

Reopen the hotel because $$MB \u003e MC$$

Question 15

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

Accepted Answer

Formulate a testable hypothesis.

Question 16

Which of the following is an example of responding to economic incentives?

Accepted Answer

Students borrow more when tuition increases and loans are available.

Question 17

Which formula represents the opportunity cost of an activity?

Accepted Answer

$$	ext{Opportunity Cost} = 	ext{Value of Best Alternative Given Up}$$

Question 18

Which of the following is true about productive efficiency?

Accepted Answer

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

Question 19

In a mixed economy, how are most economic decisions made?

Accepted Answer

Through the interaction of buyers and sellers in markets, with some government involvement.

Question 20

Which of the following is a real-world example of marginal analysis?

Accepted Answer

Disney deciding to reopen hotels by comparing marginal revenue and marginal cost.

Fundamental Principles of Economics: Scarcity, Trade-offs, and Economic Models

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