Q: Which of the following is the correct formula for profit?

$$\text{Profit} = \text{Total Revenue} - \text{Total Cost}$$

Question 1

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

Accepted Answer

The best alternative that is forgone when a choice is made.

Question 2

A student decides to attend a concert instead of working a part-time job that pays $$15 per hour. The concert ticket costs 30 $$and lasts 2 hours. What is the total opportunity cost of attending the concert?

Accepted Answer

$$60 + 30$$ = $90

Question 3

Which of the following is an example of a sunk cost?

Accepted Answer

The cost of a non-refundable movie ticket you already purchased.

Question 4

Marginalism in economics refers to:

Accepted Answer

Analyzing the additional or incremental costs or benefits arising from a choice.

Question 5

Suppose you paid $$200 for a season pass to a theme park. After two visits, you are considering whether to go again. The cost of each additional visit is 20 $$for food and transportation. According to marginalism, what cost should you consider in your decision?

Accepted Answer

Only the $20 for food and transportation per visit.

Question 6

Which of the following statements best describes the efficient markets hypothesis?

Accepted Answer

Profit opportunities in markets are eliminated almost instantaneously.

Question 7

A government is considering a policy to increase social welfare. According to economic goals, which of the following is the most appropriate objective for the government?

Accepted Answer

Maximizing social welfare.

Question 8

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

Accepted Answer

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

Question 9

Which of the following best illustrates the fallacy of composition?

Accepted Answer

Assuming that because one person saves money, the entire economy will benefit if everyone saves more.

Question 10

A researcher collects data to test whether a new tax on carbon emissions reduces pollution. This approach is best described as:

Accepted Answer

Empirical economics.

Question 11

Which of the following is the correct formula for profit?

Accepted Answer

$$	ext{Profit} = 	ext{Total Revenue} - 	ext{Total Cost}$$

Question 12

Which of the following best describes the principle of Ockham’s razor in economic modeling?

Accepted Answer

Eliminating irrelevant details to focus on essential relationships.

Question 13

Suppose a study finds that ice cream sales and drowning incidents both increase in the summer. Concluding that ice cream sales cause drowning is an example of which logical error?

Accepted Answer

Post hoc, ergo propter hoc fallacy.

Question 14

Which of the following is NOT typically considered a scarce resource in economics?

Accepted Answer

Free air in an unpolluted environment

Question 15

Which field of economics would most likely study the impact of a new minimum wage law on employment levels?

Accepted Answer

Labor economics

Question 16

A model in economics is best described as:

Accepted Answer

A formal statement of a theory, often using mathematical relationships between variables.

Question 17

Which of the following best describes ceteris paribus?

Accepted Answer

Holding all variables constant except the ones being studied.

Question 18

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

Accepted Answer

"The government should provide free healthcare to all citizens."

Question 19

Which of the following is NOT one of the four main factors that might inform value judgments in economics?

Accepted Answer

Profit maximization

Question 20

A firm is deciding whether to produce one more unit of output. The marginal cost of producing the unit is $$10, and the marginal benefit (revenue) is 12. $$What should the firm do, and why?

Accepted Answer

Produce the unit, because marginal benefit exceeds marginal cost.

Chapter 1: The Scope and Method of Economics – Microeconomics Study Notes

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