Question 1

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

Accepted Answer

Scarcity refers to the limited nature of society's resources, given unlimited wants.

Question 2

Which of the following is an example of opportunity cost?

Accepted Answer

The value of the next best alternative you give up when making a choice.

Question 3

Suppose a country can produce either 10 cars or 20 computers with its resources. What is the opportunity cost of producing one car?

Accepted Answer

$$2$$ computers

Question 4

Which of the following statements is a positive economic statement?

Accepted Answer

Raising taxes will reduce consumer spending.

Question 5

If the price of coffee increases and, as a result, the demand for tea increases, what is the relationship between coffee and tea?

Accepted Answer

They are substitute goods.

Question 6

Which of the following best illustrates the law of increasing opportunity cost?

Accepted Answer

As more resources are devoted to producing one good, the opportunity cost of producing additional units increases.

Question 7

In the circular flow diagram, which of the following best describes the flow of goods and services?

Accepted Answer

From firms to households in exchange for money.

Question 8

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 9

If the demand for a normal good increases as income rises, which of the following is also true?

Accepted Answer

The good is a normal good.

Question 10

Suppose the market price is above the equilibrium price. What will likely occur?

Accepted Answer

A surplus (excess supply) will occur.

Question 11

Which of the following best describes marginalism in economics?

Accepted Answer

Making decisions based on incremental changes in costs and benefits.

Question 12

If two countries can produce the same goods, but one has a lower opportunity cost for producing a good, this is known as:

Accepted Answer

Comparative advantage

Question 13

Which of the following is an example of ceteris paribus in economic analysis?

Accepted Answer

Assuming all other factors remain constant when analyzing the effect of price on quantity demanded.

Question 14

If the price of peanut butter falls and the demand for jelly increases, what does this indicate?

Accepted Answer

Peanut butter and jelly are complement goods.

Question 15

Which of the following equations represents the marginal rate of transformation (MRT) between two goods, $$X$$ and $$Y$$?

Accepted Answer

$$ MRT = -\frac{\Delta X}{\Delta Y} $$

Question 16

Which of the following is NOT a goal of economic policy?

Accepted Answer

Unlimited resources

Question 17

Which of the following best describes empirical economics?

Accepted Answer

Economics that uses data and observation to test theories.

Question 18

If the quantity supplied of a good increases when its price increases, this illustrates:

Accepted Answer

The law of supply

Question 19

Which of the following scenarios best illustrates the difference between 'demand' and 'quantity demanded'?

Accepted Answer

A change in consumer income shifts the demand curve.

Question 20

Suppose a new technology reduces the cost of producing smartphones. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Essential Microeconomics Vocabulary and Concepts

Study Guide - Practice Questions