Q: Suppose the value of U.S. real GDP increased from $19,610 billion in 2021 to $20,018 billion in 2022. What is the percentage change in real GDP? Use the formula $ \text{Percentage change} = \frac{\text{Value in the second period} - \text{Value in the first period}}{\text{Value in the first period}} \times 100 $.

$ \frac{20,018 - 19,610}{19,610} \times 100 = 2.1\% $

Question 1

Which of the following best defines scarcity in economics?

Accepted Answer

A situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

Which of the following is an example of a trade-off?

Accepted Answer

Choosing to spend more on healthcare means less can be spent on education.

Question 3

What is the opportunity cost of a government increasing funding for space exploration?

Accepted Answer

The highest-valued alternative that must be given up, such as funding for cancer research.

Question 4

Which of the following statements best describes a mixed economy?

Accepted Answer

An economy in which buyers and sellers interact in markets, but the government plays a significant role in resource allocation.

Question 5

Productive efficiency occurs when:

Accepted Answer

Every good or service is produced at the lowest possible cost.

Question 6

Allocative efficiency is achieved when:

Accepted Answer

Production is in accordance with consumer preferences.

Question 7

Which of the following is NOT a key economic idea?

Accepted Answer

People always act altruistically.

Question 8

A voluntary exchange in a market occurs when:

Accepted Answer

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

Question 9

Which of the following best describes marginal analysis?

Accepted Answer

Comparing marginal benefits and marginal costs.

Question 10

Suppose the value of U.S. real GDP increased from $19,610 billion in 2021 to $20,018 billion in 2022. What is the percentage change in real GDP? Use the formula $ 	ext{Percentage change} = \frac{	ext{Value in the second period} - 	ext{Value in the first period}}{	ext{Value in the first period}} 	imes 100 $.

Accepted Answer

$ \frac{20,018 - 19,610}{19,610} 	imes 100 = 2.1\% $

Question 11

Which of the following is an example of positive analysis?

Accepted Answer

Raising the minimum wage will increase unemployment among teenagers.

Question 12

Which of the following is an economic variable?

Accepted Answer

The number of people employed in manufacturing.

Question 13

A centrally planned economy is characterized by:

Accepted Answer

Government decisions on how economic resources will be allocated.

Question 14

Which of the following is a normative statement?

Accepted Answer

The government should provide free healthcare to all citizens.

Question 15

Which of the following is an example of how firms respond to changes in production costs?

Accepted Answer

Switching to more machines and fewer workers as labor costs rise.

Question 16

Which of the following best describes the role of assumptions in economic models?

Accepted Answer

Assumptions simplify reality to make models useful for analysis.

Question 17

If a government increases taxes to fund welfare programs, what is a possible trade-off?

Accepted Answer

People might work less or open fewer businesses.

Question 18

Which of the following is a key difference between microeconomics and macroeconomics?

Accepted Answer

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

Question 19

Which of the following is an example of capital in economics?

Accepted Answer

A factory used to produce automobiles.

Question 20

Which of the following best explains why market economies tend to be more efficient than centrally planned economies?

Accepted Answer

Market economies rely on voluntary exchange and competition, leading to productive and allocative efficiency.

Chapter 1: Economics – Foundations and Models (Study Notes)

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