Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when making a choice.

Question 2

A city government is deciding whether to build a new public park or expand the local library. If the city chooses to build the park, the opportunity cost is:

Accepted Answer

The benefits that would have been gained from expanding the library.

Question 3

Which of the following scenarios best illustrates the concept of free riding?

Accepted Answer

A person uses a public park without paying taxes that support its maintenance.

Question 4

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

Accepted Answer

Raising taxes will reduce consumer spending.

Question 5

A microeconomist would most likely study which of the following topics?

Accepted Answer

The pricing strategy of a local coffee shop.

Question 6

Suppose a student is deciding between spending an hour studying economics or working at a part-time job that pays $15 per hour. If the student chooses to study, what is the opportunity cost?

Accepted Answer

The $15 the student could have earned by working.

Question 7

Which of the following best describes equilibrium in an economic context?

Accepted Answer

A situation where no individual can be made better off by changing their behavior.

Question 8

A government is considering two policies: Policy A will increase total welfare by $$500,000 but cost 200$$,000 to implement. Policy B will increase total welfare by $$400,000 and cost 100$$,000. Using cost-benefit analysis, which policy should be chosen and why?

Accepted Answer

Either policy, because both have the same net gain of $300,000.

Question 9

Which of the following is an example of empiricism in economics?

Accepted Answer

Using data from past recessions to predict future economic downturns.

Question 10

Suppose a firm is trying to maximize its profit by weighing the costs and benefits of producing an additional unit of output. This behavior is best described as:

Accepted Answer

Optimization.

Question 11

Which of the following statements is normative?

Accepted Answer

The government should provide universal basic income.

Question 12

A group of neighbors shares a community garden. Some neighbors regularly help with maintenance, while others enjoy the produce without contributing. This is an example of:

Accepted Answer

Free riding.

Question 13

If an economist is analyzing the effect of a new tax on the price of soda in a single city, which branch of economics is she practicing?

Accepted Answer

Microeconomics.

Question 14

Which of the following best illustrates the use of cost-benefit analysis?

Accepted Answer

Comparing the total expected benefits and total expected costs of two job offers before deciding.

Question 15

Suppose the following: A student can either attend a concert for $$50 or work a shift earning 60. If $$the student chooses to attend the concert, what is the total opportunity cost?

Accepted Answer

$110, the sum of the ticket price and the wage forgone.

Question 16

Which of the following is NOT a characteristic of equilibrium?

Accepted Answer

There are always unexploited opportunities for gain.

Question 17

A researcher collects data on consumer spending before and after a tax increase. This approach is an example of:

Accepted Answer

Empiricism.

Question 18

Which of the following equations best represents the net benefit in a cost-benefit analysis?

Accepted Answer

$$Net\ Benefit = Total\ Benefit - Total\ Cost$$

Question 19

A student is deciding between two summer internships. Internship A pays $$2,000 and is located in her hometown. Internship B pays 2$$,500 but requires her to pay $700 in travel and living expenses. Using optimization, which internship should she choose?

Accepted Answer

Internship A, because its net gain is $$2,000, which is higher than Internship B's net gain of 1$$,800 ($$2,500 - 700).$$

Question 20

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

Accepted Answer

Positive economics describes what is, while normative economics prescribes what ought to be.

Foundations of Microeconomics: Key Concepts and Definitions

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