Question 1

Which of the following best describes the economic problem known as 'scarcity'?

Accepted Answer

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

Question 2

Which of the following is NOT one of the three key economic ideas discussed in the foundations of microeconomics?

Accepted Answer

All resources are renewable.

Question 3

Suppose a hospital administrator must decide whether to hire an additional nurse. The administrator compares the additional cost of hiring the nurse to the additional benefit the nurse would provide. This is an example of:

Accepted Answer

Making a decision at the margin.

Question 4

Which of the following statements about incentives is correct?

Accepted Answer

Incentives can be both positive and negative, influencing people's choices.

Question 5

A simplified representation of reality that is used to better understand real-life situations is called:

Accepted Answer

An economic model.

Question 6

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

Accepted Answer

A student chooses to study economics instead of going to a concert, giving up the enjoyment of the concert.

Question 7

If a doctor leaves private practice to work for a hospital, which economic concept does this scenario best illustrate?

Accepted Answer

Responding to incentives.

Question 8

Which of the following is a positive economic statement?

Accepted Answer

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

Question 9

Suppose the price of a good increases. According to economic theory, what is the most likely response from consumers?

Accepted Answer

Consumers will buy less of the good, ceteris paribus.

Question 10

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies individual markets and decision-makers, while macroeconomics studies the economy as a whole.

Question 11

A hospital administrator is considering whether to purchase a new MRI machine. The cost of the machine is $$500,000, and it is expected to generate additional revenue of 120$$,000 per year for 5 years. Ignoring interest and other costs, should the administrator purchase the machine based on marginal analysis?

Accepted Answer

Yes, because the total additional revenue ($$600,000) exceeds the cost (500$$,000).

Question 12

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

Accepted Answer

The government should provide free healthcare to all citizens.

Question 13

If a country can produce either 100 units of good A or 200 units of good B with its resources, what is the opportunity cost of producing one unit of good A?

Accepted Answer

$$2$$ units of good B

Question 14

Which of the following best explains why economic models use assumptions?

Accepted Answer

Assumptions simplify reality to make models easier to understand and analyze.

Question 15

A new law increases the cost of malpractice insurance for doctors. According to economic theory, what is a likely result?

Accepted Answer

Some doctors may leave private practice due to higher costs.

Question 16

Which of the following is an example of making an optimal decision at the margin?

Accepted Answer

A student studies for one more hour if the expected benefit exceeds the expected cost.

Question 17

If the marginal benefit of a medical treatment is less than its marginal cost, what should a rational decision-maker do?

Accepted Answer

Not provide the treatment.

Question 18

Which of the following best describes the role of models in economics?

Accepted Answer

Models help economists analyze real-world issues by focusing on essential relationships.

Question 19

Suppose a government wants to encourage more doctors to work in rural areas. Which of the following policies is most likely to be effective, based on economic principles?

Accepted Answer

Offering higher salaries or loan forgiveness to doctors who work in rural areas.

Question 20

Which of the following equations represents the opportunity cost of producing good X in terms of good Y, if a country can produce either $$A$$ units of X or $$B$$ units of Y?

Accepted Answer

$$Opportunity\ Cost\ of\ X = \frac{B}{A}$$

Foundations and Models in Microeconomics

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