Question 1

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

Accepted Answer

Scarcity refers to the situation where unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

A student is deciding whether to sleep for 5 more minutes or get up for breakfast before class. If the marginal benefit (MB) of extra sleep is greater than the marginal cost (MC) of missing breakfast, what should the student do according to economic theory?

Accepted Answer

Sleep for 5 more minutes, because $$MB \u003e MC.$$

Question 3

Which of the following is an example of a non-monetary incentive?

Accepted Answer

Grades for students

Question 4

Suppose a government increases taxes on higher incomes and uses the revenue to fund programs for the poor. This is an example of:

Accepted Answer

Redistribution of income

Question 5

Which equation represents the optimal decision rule for continuing an activity in microeconomics?

Accepted Answer

$$MB = MC$$

Question 6

A music producer can make a song using different methods. Hiring a great singer but using standard production techniques, or hiring a bad singer and using auto-tune. This scenario illustrates which economic concept?

Accepted Answer

Trade-off

Question 7

Which of the following statements about opportunity cost is correct?

Accepted Answer

Opportunity cost is the value of the highest-valued alternative that must be given up to engage in an activity.

Question 8

In a market economy, what determines the allocation of economic resources?

Accepted Answer

Decisions of households and firms interacting in markets

Question 9

Which of the following best describes allocative efficiency?

Accepted Answer

Production is in accordance with consumer preferences, where the marginal benefit to consumers equals the marginal cost of producing it.

Question 10

A firm responds to an increase in the cost of manufacturing labor by moving its factory to a location with cheaper labor. This is an example of:

Accepted Answer

Changing production methods in response to scarcity and trade-offs

Question 11

Which of the following is a key assumption economists make when analyzing markets?

Accepted Answer

People are rational and use available information to achieve their goals.

Question 12

If the marginal benefit (MB) of an activity is less than the marginal cost (MC), what should a rational decision-maker do?

Accepted Answer

Stop the activity, because the extra unit costs more than it's worth.

Question 13

Which of the following is an example of a positive analysis in economics?

Accepted Answer

Studying the effect of a tax increase on employment rates

Question 14

Which of the following is NOT a step in building an economic model?

Accepted Answer

Ignore the use of data to test the hypothesis

Question 15

Which of the following best describes a centrally planned economy?

Accepted Answer

An economy in which the government decides how economic resources will be allocated

Question 16

A voluntary exchange in a market economy improves the well-being of both the buyer and the seller because:

Accepted Answer

Each transaction makes both parties better off by the transaction

Question 17

Which of the following is a normative statement?

Accepted Answer

The government should increase the minimum wage to improve living standards.

Question 18

Which of the following is a microeconomic topic?

Accepted Answer

How households and firms make choices

Question 19

If a government sets a minimum wage above the equilibrium wage, what is a likely outcome in the labor market?

Accepted Answer

A surplus of labor (unemployment)

Question 20

Which of the following best explains why market economies are generally more efficient than centrally planned economies?

Accepted Answer

Competition among firms leads to productive and allocative efficiency.

Foundations of Microeconomics: Key Concepts, Economic Models, and Market Structures

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