Q: Which formula correctly calculates the percentage change in an economic variable?

$\text{Percentage change} = \left( \frac{\text{Value in the second period} - \text{Value in the first period}}{\text{Value in the first period}} \right) \times 100$

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, which results in less funding for cancer research. What economic concept does this scenario illustrate?

Accepted Answer

Opportunity cost

Question 3

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 4

Suppose the price of pizza decreases from $14 to $12, and the quantity of pizza demanded increases from 55 to 65 per week. What is the slope of the demand curve between these two points?

Accepted Answer

$\frac{\Delta y}{\Delta x} = \frac{-2}{10} = -0.2$

Question 5

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

Accepted Answer

Market economies promote productive and allocative efficiency through competition and voluntary exchange.

Question 6

A firm can produce its product using either more labor or more machines. If the cost of labor rises, what is the most likely response according to economic theory?

Accepted Answer

The firm will substitute machines for labor to minimize costs.

Question 7

Which of the following is NOT a step in building an economic model?

Accepted Answer

Ignoring all available data to avoid bias.

Question 8

If a government policy unintentionally gives colleges an incentive to increase tuition, this is an example of:

Accepted Answer

Unintended consequences of changing economic incentives.

Question 9

Which formula correctly calculates the percentage change in an economic variable?

Accepted Answer

$	ext{Percentage change} = \left( \frac{	ext{Value in the second period} - 	ext{Value in the first period}}{	ext{Value in the first period}} ight) 	imes 100$

Question 10

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 11

A voluntary exchange in a market will:

Accepted Answer

Make both the buyer and the seller better off, according to economic theory.

Question 12

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

Accepted Answer

The government should provide free healthcare to all citizens.

Question 13

If the area of a rectangle represents a firm's total revenue, and the firm sells 125,000 bottles at $2.00 each, what is the total revenue?

Accepted Answer

$250,000$

Question 14

Which of the following best describes the trade-off between efficiency and equity?

Accepted Answer

Policies that increase equity may reduce efficiency, and vice versa.

Question 15

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

Accepted Answer

Consumers maximize their well-being and firms maximize their profits.

Question 16

If the area of a triangle on a graph has a base of 25,000 and a height of $0.50, what is the area?

Accepted Answer

$\frac{1}{2} 	imes 25,000 	imes 0.50 = 6,250$

Question 17

Which of the following is a reason why economists use models?

Accepted Answer

To simplify reality and focus on essential relationships.

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 equal to the marginal cost.

Question 19

Which of the following best describes the role of statistical analysis in economics?

Accepted Answer

It is used to test hypotheses and determine if relationships between variables are causal.

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

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