$\frac{\text{Value in the second period} - \text{Value in the first period}}{\text{Value in the first period}} \times 100$

Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

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

Question 2

Apple chooses the price of its iPhones based on expected profitability rather than randomly. This behavior illustrates which key economic idea?

Accepted Answer

People are rational.

Question 3

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

Accepted Answer

Choosing to fund cancer research instead of space exploration.

Question 4

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

Accepted Answer

The highest-valued alternative forgone, such as funding cancer research.

Question 5

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

Accepted Answer

$\frac{	ext{Value in the second period} - 	ext{Value in the first period}}{	ext{Value in the first period}} 	imes 100$

Question 6

A firm is deciding whether to produce more units of a product. Which analysis should it use?

Accepted Answer

Marginal analysis

Question 7

Which of the following 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 8

Productive efficiency is achieved when:

Accepted Answer

Goods and services are produced at the lowest possible cost.

Question 9

Allocative efficiency occurs when:

Accepted Answer

Production is in accordance with consumer preferences and the marginal benefit equals the marginal cost.

Question 10

Which of the following is a caveat about market economies?

Accepted Answer

Governments might interfere with market outcomes.

Question 11

Which of the following is an example of voluntary exchange?

Accepted Answer

A buyer and seller both benefit from a transaction in the market.

Question 12

Which of the following is a normative statement?

Accepted Answer

The government should reduce unemployment.

Question 13

A music producer can make a song sound good by hiring a great singer or using Auto-Tune. This illustrates which economic question?

Accepted Answer

How will the goods and services be produced?

Question 14

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

Accepted Answer

Ignore new information that contradicts the model.

Question 15

If the price of pizza decreases from $14 to $12 and the quantity demanded increases from 55 to 65 per week, what is the slope of the demand line?

Accepted Answer

$\frac{12-14}{65-55}$

Question 16

Which of the following is a positive analysis?

Accepted Answer

Increasing the minimum wage will lead to higher unemployment.

Question 17

Which of the following is a behavioral assumption commonly made in economic models?

Accepted Answer

Consumers will buy goods and services to maximize their well-being.

Question 18

Which of the following is a key skill gained from studying economics?

Accepted Answer

Ability to analyze choices and their consequences.

Question 19

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics focuses on households and firms, while macroeconomics focuses on inflation, unemployment, and growth.

Question 20

If a firm’s total revenue is calculated as the area of a rectangle, which formula should be used?

Accepted Answer

$	ext{Total Revenue} = 	ext{Price} 	imes 	ext{Quantity}$

Foundations and Models in Macroeconomics: Chapter 1 Study Notes

Study Guide - Practice Questions