Question 1

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies decision-making by individual households and firms, while macroeconomics studies economy-wide phenomena such as inflation and unemployment.

Question 2

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

Accepted Answer

How will profits be distributed among shareholders?

Question 3

A government decides to set the price of bread and allocate resources for its production. This is an example of which type of economic system?

Accepted Answer

Centralized command and control (central planning)

Question 4

Which of the following statements is an example of positive economics?

Accepted Answer

Increasing the minimum wage will reduce employment opportunities for young people.

Question 5

Suppose the price of a Toyota Tundra truck increases after Dodge lowers the price of their comparable Ram truck. Using the ceteris paribus assumption, what can we conclude?

Accepted Answer

The price increase is solely due to Dodge lowering their price, assuming all other factors remain constant.

Question 6

Which of the following best describes the rationality assumption in economics?

Accepted Answer

Individuals act as if motivated by self-interest and respond predictably to opportunities for gain.

Question 7

Behavioural economics differs from traditional economics primarily because it:

Accepted Answer

Emphasizes psychological limitations and the use of rules of thumb in decision-making.

Question 8

Which of the following is an example of a positive incentive?

Accepted Answer

A $100 debit card given to individuals who receive a COVID-19 vaccination.

Question 9

If a graph shows that as the price of a product increases, the quantity purchased decreases, what type of relationship is this?

Accepted Answer

Inverse relationship

Question 10

Given the following two points on a line: $$(x_1$, y_1$) = (10, 20)$$ and $$(x_2$, y_2$) = (30, 60)$$, what is the slope of the line?

Accepted Answer

$$\frac{60 - 20}{30 - 10} = \frac{40}{20} = 2$$

Question 11

Which of the following best describes the ceteris paribus assumption?

Accepted Answer

Only the factor or factors being studied change, while all other things remain equal.

Question 12

A statement such as 'The government should increase taxes on the wealthy to reduce inequality' is an example of:

Accepted Answer

Normative economics

Question 13

Which of the following is a dependent variable in the context of a graph showing the relationship between price and quantity purchased?

Accepted Answer

Quantity purchased

Question 14

If the slope of a nonlinear curve is zero at a certain point, what does this indicate?

Accepted Answer

The curve is at a maximum or minimum point.

Question 15

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

Accepted Answer

Choosing to spend time studying for an exam instead of going to a concert.

Question 16

Which of the following is NOT an assumption of traditional economic models?

Accepted Answer

Bounded rationality

Question 17

If a line on a graph has a positive slope, which of the following is true?

Accepted Answer

As the independent variable increases, the dependent variable increases.

Question 18

Which of the following best describes the role of incentives in economic decision-making?

Accepted Answer

Incentives alter the cost-benefit analysis and can nudge decisions in a particular direction.

Question 19

Which of the following is an example of a direct relationship between two variables?

Accepted Answer

As the number of hours studied increases, the exam score increases.

Question 20

A firm wants to predict how consumers will respond to a new product price. Which economic approach is most likely to provide accurate predictions?

Accepted Answer

Using empirical evidence and testing models with observed data.

Chapter 1: The Nature of Economics – Microeconomics Study Notes

Study Guide - Practice Questions

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