Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

A student decides to attend a review session instead of working a part-time job that pays $15 per hour. What is the opportunity cost of attending the review session for two hours?

Accepted Answer

$30, because that is the total wage forgone.

Question 3

Which of the following is an example of an implicit cost?

Accepted Answer

Foregone salary from not working another job.

Question 4

In a command economy, who primarily decides what goods are produced?

Accepted Answer

The central government.

Question 5

Which of the following statements best reflects the economic principle that 'people respond to incentives'?

Accepted Answer

People change their behavior when the costs or benefits of their actions change.

Question 6

Suppose the marginal benefit of attending a fourth training session is $$60, and the marginal cost is 90. $$According to marginal analysis, what should you do?

Accepted Answer

Do not attend the fourth session because the marginal cost exceeds the marginal benefit.

Question 7

Which of the following equations correctly represents the profit-maximizing principle of marginal analysis?

Accepted Answer

$$MB = MC$$

Question 8

A country with long lines for basic goods and little variety is most likely experiencing which type of economy?

Accepted Answer

Command economy.

Question 9

Which of the following is NOT one of the three fundamental economic questions every society must answer?

Accepted Answer

Where to produce?

Question 10

If the marginal benefit of the third unit of a good is $$90 and the marginal cost is 60$$, what should a rational person do?

Accepted Answer

Produce or consume the third unit.

Question 11

Which of the following best describes a mixed economy?

Accepted Answer

An economy with both government intervention and market-based decision making.

Question 12

Which of the following is an example of an unintended consequence of an economic policy?

Accepted Answer

A tax on plastic bags reduces their use but increases sales of thicker garbage bags.

Question 13

If a rational person is deciding whether to consume one more unit of a good, which of the following will they compare?

Accepted Answer

Marginal benefit and marginal cost.

Question 14

Which of the following is a real-world example of an explicit cost?

Accepted Answer

The tuition paid for college.

Question 15

Suppose you are offered two internships: one pays $$2,000 and the other pays 1$$,500 but offers better networking opportunities. If you choose the $1,500 internship, what is your explicit cost?

Accepted Answer

$1,500

Question 16

Which of the following best illustrates the concept of marginal analysis?

Accepted Answer

Deciding whether to take one more hour of overtime based on the additional pay and effort required.

Question 17

If the marginal benefit of the fifth training session is $$50 and the marginal cost is 130$$, what is the optimal number of training sessions to attend?

Accepted Answer

Three, because after the third session, marginal benefit is still greater than or equal to marginal cost.

Question 18

Which of the following is a key assumption economists make about people's behavior?

Accepted Answer

People use available information to achieve their goals.

Question 19

Which of the following is NOT a characteristic of a market economy?

Accepted Answer

The government sets all production targets.

Question 20

Which of the following best explains why long lines formed for basic goods in the USSR?

Accepted Answer

The central government controlled production and distribution, leading to shortages.

Principles of Economics: Foundations and Models

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