Question 1

Which of the following best defines economics?

Accepted Answer

Economics is the social science that studies the choices that individuals, businesses, governments, and societies make as they cope with scarcity and the incentives that influence those choices.

Question 2

What is scarcity in economics?

Accepted Answer

Scarcity is the inability to satisfy all our wants due to limited resources.

Question 3

Which of the following is an example of a microeconomic question?

Accepted Answer

How does a tax on online shopping affect Amazon's sales?

Question 4

A rational choice is one that:

Accepted Answer

Compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.

Question 5

What is the opportunity cost of attending a live concert?

Accepted Answer

The highest-valued alternative that must be given up, including both the money spent and the time used.

Question 6

Which statement about marginal analysis is correct?

Accepted Answer

Marginal analysis compares the additional benefit and additional cost of a small change in an activity.

Question 7

Suppose you are deciding whether to study for one more hour or watch TV. If the marginal benefit of studying exceeds the marginal cost, what should you do according to economic theory?

Accepted Answer

Study for one more hour.

Question 8

Which of the following best describes an incentive?

Accepted Answer

A reward that encourages an action or a penalty that discourages an action.

Question 9

Which of the following is a positive statement?

Accepted Answer

Increasing the minimum wage will lead to higher unemployment among teenagers.

Question 10

An economic model is:

Accepted Answer

A simplified description of some aspect of the economic world that includes only the features needed for the purpose at hand.

Question 11

Which method is NOT commonly used by economists to test models?

Accepted Answer

Random guessing

Question 12

If a government wants to reduce pollution, which economic principle should it consider when designing a policy?

Accepted Answer

The policy should create incentives that encourage less pollution.

Question 13

Which of the following is a normative statement?

Accepted Answer

The government should provide free college education.

Question 14

A student is deciding how to allocate their time between studying economics and working a part-time job. This is an example of:

Accepted Answer

A microeconomic decision.

Question 15

If the marginal cost of producing one more unit of a good is $$10 and the marginal benefit is 8$$, what is the rational decision?

Accepted Answer

Produce fewer units.

Question 16

Which equation best represents the opportunity cost of an action?

Accepted Answer

$$Opportunity\ Cost = Value\ of\ Next\ Best\ Alternative$$

Question 17

A government adviser uses economic models to evaluate the effects of a new tax policy. This is an example of:

Accepted Answer

Economist as a policy adviser.

Question 18

Which of the following best describes a tradeoff?

Accepted Answer

Choosing one thing means giving up something else.

Question 19

Which of the following is NOT a key idea in the economic way of thinking?

Accepted Answer

All choices are made without considering incentives.

Question 20

If a new technology reduces the marginal cost of producing electric cars, what is the likely effect according to economic theory?

Accepted Answer

Producers will make more electric cars.

What is Economics? – Foundations of Microeconomics

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