Question 1

Which of the following best describes the economic problem of scarcity?

Accepted Answer

Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

Which of the following is NOT considered one of the four key resources used to produce goods and services?

Accepted Answer

Money

Question 3

A city government introduces a new tax incentive to encourage electric vehicle purchases, leading to a rise in electric vehicle adoption. However, this also causes a significant increase in demand for electricity, resulting in frequent power outages. What is the increase in power outages an example of?

Accepted Answer

An unintended consequence

Question 4

Suppose a company is considering producing 300,000 more smartphones. According to economic theory, what should the company compare to make the optimal decision?

Accepted Answer

The marginal benefit and the marginal cost of producing the additional smartphones

Question 5

If the marginal benefit (MB) of producing one more unit of a good is $$10 and the marginal cost (MC) is 12$$, what should a rational firm do?

Accepted Answer

Reduce production, because $$MB \u003c MC$$

Question 6

Which of the following best defines opportunity cost?

Accepted Answer

The value of the next best alternative that must be given up to engage in an activity

Question 7

Demi has three options after graduation: (A) get a job earning $$50,000 a year, (B) get paid 20$$,000 to travel, or (C) earn $0 and go back to graduate school. If Demi chooses to go to graduate school, what is her opportunity cost?

Accepted Answer

$$50,000, because it is the highest valued alternative forgone$$

Question 8

Which of the following is a fundamental question every society must answer due to scarcity?

Accepted Answer

What goods and services will be produced?

Question 9

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

Accepted Answer

Consumers and firms through their choices in markets

Question 10

Which of the following statements about market economies is correct?

Accepted Answer

Market economies tend to be more efficient than centrally planned economies because of competition and voluntary exchange.

Question 11

A government introduces a policy to redistribute income by taxing the wealthy and providing benefits to the poor. This policy is primarily aimed at increasing:

Accepted Answer

Equity

Question 12

Which of the following best describes a mixed economy?

Accepted Answer

An economy in which most decisions result from the interaction of buyers and sellers in markets, but the government plays a significant role in the allocation of resources.

Question 13

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

Accepted Answer

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

Question 14

Suppose a new law requires all factories to reduce pollution. Which type of economic efficiency is most directly affected by this law?

Accepted Answer

Allocative efficiency, because resources are being reallocated to reflect societal preferences for a cleaner environment.

Question 15

Which of the following best explains why opportunity cost is important in decision-making?

Accepted Answer

It represents the value of the next best alternative forgone, ensuring that scarce resources are allocated efficiently.

Question 16

A firm is deciding whether to hire more workers or invest in new machines. This is an example of which type of trade-off?

Accepted Answer

A trade-off between labor and capital in the production process.

Question 17

Which of the following is a key assumption made in most economic models?

Accepted Answer

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

Question 18

If a hypothesis in an economic model is not supported by data, what should economists do?

Accepted Answer

Revise the model or hypothesis to better explain the data.

Question 19

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies how households and firms make choices and interact in markets, while macroeconomics studies the economy as a whole.

Microeconomics Foundations and Models: Study Notes

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