Q: Which formula correctly calculates the percentage change in a variable from one period to the next?

$$\frac{\text{Value in the second period} - \text{Value in the first period}}{\text{Value in the first period}} \times 100$$

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

A government decides to increase funding for space exploration. According to economic theory, what is the opportunity cost of this decision?

Accepted Answer

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

Question 3

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

Accepted Answer

Raising the minimum wage will increase unemployment among teenagers.

Question 4

Suppose a firm can produce a product using either more labor and less machinery, or more machinery and less labor. What economic concept does this scenario illustrate?

Accepted Answer

Trade-offs in the method of production.

Question 5

Which of the following best defines a market economy?

Accepted Answer

An economy in which the decisions of households and firms interacting in markets allocate resources.

Question 6

A student is deciding whether to study for an extra hour or watch TV. According to marginal analysis, the student should:

Accepted Answer

Study for the extra hour if the marginal benefit exceeds the marginal cost.

Question 7

Which formula correctly calculates the percentage change in a variable from one period to the next?

Accepted Answer

$$\frac{	ext{Value in the second period} - 	ext{Value in the first period}}{	ext{Value in the first period}} 	imes 100$$

Question 8

Which of the following is a key source of productive efficiency in a market economy?

Accepted Answer

Competition among firms.

Question 9

If the marginal benefit of producing a good is less than the marginal cost, what should a firm do to maximize efficiency?

Accepted Answer

Produce less of the good.

Question 10

A government introduces a new student loan program that reduces monthly payments for borrowers. According to economic incentives, what is a possible unintended consequence?

Accepted Answer

Colleges may increase tuition, knowing students can borrow more.

Question 11

Which of the following best describes voluntary exchange in a market economy?

Accepted Answer

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

Question 12

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

Accepted Answer

The government should provide free healthcare for all citizens.

Question 13

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

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

Question 14

Which of the following is NOT a reason why market economies may fail to achieve full efficiency?

Accepted Answer

All buyers and sellers always have perfect information.

Question 15

In the context of economic models, what is the primary purpose of making assumptions?

Accepted Answer

To simplify reality and make models useful for analysis.

Question 16

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

Accepted Answer

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

Question 17

A firm’s total revenue can be represented graphically as:

Accepted Answer

The area of a rectangle with base equal to quantity and height equal to price.

Question 18

Which of the following is an example of allocative efficiency?

Accepted Answer

Producing goods up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Question 19

If a time-series graph of a company’s sales is truncated on the vertical axis, what is a likely effect?

Accepted Answer

Fluctuations in sales will appear smaller than they actually are.

Microeconomics: Foundations and Models – Chapter 1 Study Notes

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