Question 1

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

Accepted Answer

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

Question 2

If a student spends an hour studying economics instead of working at a part-time job that pays $15 per hour, what is the opportunity cost of studying?

Accepted Answer

The $15 the student could have earned working.

Question 3

Which of the following is NOT one of the three key economic ideas?

Accepted Answer

All decisions are made by the government.

Question 4

A government decides what goods will be produced, how they will be produced, and who will receive them. This is an example of:

Accepted Answer

A centrally planned economy.

Question 5

Which of the following statements is a positive economic statement?

Accepted Answer

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

Question 6

Suppose a country can produce either 100 units of food or 200 units of clothing with its resources. If it chooses to produce 100 units of food, what is the opportunity cost?

Accepted Answer

200 units of clothing.

Question 7

Which of the following best illustrates a trade-off?

Accepted Answer

A student chooses to spend more time studying and less time working.

Question 8

In a mixed economy, who makes most of the decisions regarding resource allocation?

Accepted Answer

Buyers and sellers in markets, with significant government involvement.

Question 9

Which of the following is an example of making a decision at the margin?

Accepted Answer

Choosing to study one more hour for an exam.

Question 10

A policy increases efficiency but reduces equity. Which of the following best describes this situation?

Accepted Answer

The policy reflects the common trade-off between efficiency and equity.

Question 11

Which of the following is the correct formula for opportunity cost?

Accepted Answer

$$ Opportunity\ Cost = Value\ of\ Next\ Best\ Alternative $$

Question 12

Which of the following is a normative economic statement?

Accepted Answer

"The government should increase the minimum wage."

Question 13

Microeconomics is primarily concerned with:

Accepted Answer

How individual households and firms make choices and interact in markets.

Question 14

Which of the following is NOT a fundamental question every economy must answer?

Accepted Answer

How much profit will firms earn?

Question 15

A simplified version of reality used to analyze real-world economic situations is called:

Accepted Answer

An economic model.

Question 16

Which of the following best describes the difference between positive and normative economics?

Accepted Answer

Positive economics is concerned with 'what is', while normative economics is concerned with 'what ought to be'.

Question 17

Suppose a government introduces a tariff on imported goods. According to economic theory, what is a likely unintended consequence?

Accepted Answer

Domestic consumers may face higher prices.

Question 18

Which of the following best illustrates the concept of marginal analysis?

Accepted Answer

A firm decides whether to produce an additional unit of output by comparing the marginal benefit and marginal cost.

Question 19

Which equation represents the trade-off between efficiency and equity?

Accepted Answer

$$ Efficiency\ vs.\ Equity:\ 	ext{Maximize}\ 	ext{Total}\ 	ext{Surplus}\ 	ext{subject}\ 	ext{to}\ 	ext{Fair}\ 	ext{Distribution} $$

Question 20

Which of the following is a characteristic of a market economy?

Accepted Answer

Decisions are made by households and firms interacting in markets.

Economics: Foundations and Models – Chapter 1 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards