Question 1

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

Accepted Answer

Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

A student decides to spend an hour working at a part-time job instead of studying for an exam. What is the opportunity cost of this decision?

Accepted Answer

The grade improvement the student could have achieved by studying.

Question 3

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

Accepted Answer

Choosing to produce more consumer electronics means producing fewer agricultural products.

Question 4

According to economic theory, optimal decisions are made at the margin. This means:

Accepted Answer

Decisions are made by comparing marginal benefit (MB) and marginal cost (MC), and continuing an activity until $MB = MC$.

Question 5

Which of the following is an unintended consequence of a government policy?

Accepted Answer

A company introduces new productivity software that improves employee efficiency but also leads to increased work hours and burnout.

Question 6

Which of the following is NOT one of the four key resources used to produce goods and services?

Accepted Answer

Technology

Question 7

In a market economy, who primarily decides what goods and services will be produced?

Accepted Answer

Consumers and firms interacting in markets

Question 8

Which of the following statements is a positive economic statement?

Accepted Answer

The U.S. minimum wage increased in 2009.

Question 9

A company produces 100 units of a product using the fewest resources and at the lowest possible cost. This scenario best illustrates:

Accepted Answer

Productive efficiency

Question 10

Allocative efficiency is achieved when:

Accepted Answer

The production of goods is in line with consumer preferences, meaning the marginal benefit to consumers equals the marginal cost of production ($MB = MC$).

Question 11

Which of the following is a characteristic of a centrally planned economy?

Accepted Answer

Government ownership or control of resources and means of production.

Question 12

Which of the following best describes the main trade-off governments face when designing economic policies?

Accepted Answer

Efficiency versus equity

Question 13

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

Accepted Answer

The government should provide free healthcare to all citizens.

Question 14

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

Accepted Answer

Ignore assumptions and simplifications.

Question 15

Suppose a government introduces a rent control policy to make housing more affordable. Which of the following could be an unintended consequence of this policy?

Accepted Answer

A decrease in the quality and quantity of available rental housing.

Question 16

Which of the following best illustrates the concept of voluntary exchange?

Accepted Answer

A buyer and a seller agree to trade a product, and both are made better off by the transaction.

Question 17

Which of the following topics would be studied in microeconomics rather than macroeconomics?

Accepted Answer

The effect of a new tax on the supply and demand for a particular product.

Question 18

A hypothesis in an economic model is:

Accepted Answer

A statement about an economic variable that may be either correct or incorrect.

Question 19

Which of the following is a reason why market economies may not always result in fully efficient outcomes?

Accepted Answer

All of the above.

Question 20

If Demi has three choices after school: (1) get a job earning $50,000 a year, (2) get paid $20,000 to travel, or (3) earn $0 and go back to graduate school, what is the opportunity cost of choosing to go to graduate school?

Accepted Answer

$50,000

Economics: Foundations and Models – Study Notes

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