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

According to economic theory, what is the optimal point for making decisions at the margin?

Accepted Answer

When marginal benefit equals marginal cost, $$MB = MC.$$

Question 3

Which of the following is NOT one of the three fundamental economic questions all societies must answer?

Accepted Answer

How will technology be developed?

Question 4

A Canadian bank decides not to invest in expensive security measures because the expected loss from robbery is much less than the cost of security. This is an example of:

Accepted Answer

People responding to economic incentives.

Question 5

Which statement is an example of positive analysis?

Accepted Answer

When the price of gasoline increases, the quantity of gasoline demanded barely changes.

Question 6

In a market economy, who primarily determines what goods and services are produced?

Accepted Answer

Households and firms interacting in markets.

Question 7

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

Accepted Answer

A student spends an hour studying instead of watching a movie; the opportunity cost is the enjoyment missed from the movie.

Question 8

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

Accepted Answer

The government decides what mix of goods and services to produce.

Question 9

Suppose a firm is considering whether to produce one more unit of a good. The marginal benefit of producing the unit is $$\10$, and the marginal cost is $$\$$8. $$What should the firm do according to marginal analysis?

Accepted Answer

Produce the additional unit, since $$MB \u003e MC.$$

Question 10

Which of the following best describes allocative efficiency?

Accepted Answer

A state of the economy in which production is in accordance with consumer preferences, and every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.

Question 11

Which of the following is an example of voluntary exchange?

Accepted Answer

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

Question 12

Which of the following is a normative statement?

Accepted Answer

Taxes on fossil fuels should be increased.

Question 13

Which of the following is NOT a key idea in economic thinking?

Accepted Answer

People always make perfect decisions.

Question 14

A mixed economy is best described as:

Accepted Answer

An economy in which most decisions result from the interaction of buyers and sellers in markets, but the government plays a significant role in the allocation of some resources.

Question 15

Which of the following is an example of marginal analysis?

Accepted Answer

Comparing the benefit and cost of watching one more episode of a TV series before going to bed.

Question 16

Which of the following is a concern about market economies mentioned in the study materials?

Accepted Answer

Income is very luck-dependent, both good and bad luck.

Question 17

Which of the following is the correct sequence of steps in developing an economic model?

Accepted Answer

Decide on assumptions, formulate a testable hypothesis, use economic data to test the hypothesis, revise the model if necessary, retain the revised model.

Question 18

Which of the following best describes productive efficiency?

Accepted Answer

A situation in which a good or service is produced at the lowest possible cost.

Question 19

Suppose a government is debating whether to redistribute income more equally. This debate is primarily concerned with which economic concept?

Accepted Answer

Equity.

Question 20

Which of the following is the main focus of microeconomics?

Accepted Answer

The study of how individual agents such as households and firms make choices and interact in markets.

Foundations of Microeconomics: Key Concepts and Economic Systems

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