Question 1

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

Accepted Answer

Scarcity means that resources are limited and cannot satisfy all human wants.

Question 2

Apple chooses to assemble most iPhones in China rather than the United States. Which economic principle does this decision best illustrate?

Accepted Answer

People respond to economic incentives.

Question 3

Suppose the government reduces student loan payments from 10% to 5% of income. What unintended consequence might this policy create for colleges?

Accepted Answer

Colleges may have an incentive to increase tuition, knowing students can borrow more and repay less.

Question 4

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

Accepted Answer

Deciding whether to study one more hour for an exam instead of watching TV.

Question 5

If a government increases funding for space exploration, what is the opportunity cost?

Accepted Answer

The value of the next best alternative forgone, such as funding cancer research.

Question 6

Which of the following best describes a market economy?

Accepted Answer

An economy in which households and firms interacting in markets determine the allocation of resources.

Question 7

What is productive efficiency?

Accepted Answer

A state in which every good or service is produced at the lowest possible cost.

Question 8

Voluntary exchange in markets leads to which type of efficiency?

Accepted Answer

Allocative efficiency, because transactions continue until no further improvement can take place.

Question 9

Which of the following is a trade-off faced by governments when designing tax policies?

Accepted Answer

Balancing efficiency and equity, since taxes may reduce incentives but fund programs for the poor.

Question 10

Which step is NOT part of the process of building and testing an economic model?

Accepted Answer

Ignoring economic data when testing hypotheses.

Question 11

A hypothesis in an economic model is:

Accepted Answer

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

Question 12

Which of the following is an example of positive analysis?

Accepted Answer

Studying the effect of a tariff on the price of imported goods.

Question 13

Microeconomics is primarily concerned with:

Accepted Answer

How households and firms make choices and interact in markets.

Question 14

Which of the following is a key skill gained from studying economics?

Accepted Answer

The ability to analyze choices and their consequences for individuals, businesses, and governments.

Question 15

Suppose the price of pizza decreases from $$14 to 12 $$and the quantity demanded increases from 55 to 65 per week. What is the slope of the demand curve between these two points?

Accepted Answer

$$\frac{\12$$ - \$$14}{65 - 55} = \frac{-2}{10} = -0.2$$

Question 16

If real GDP increased from $$19,610 billion in 2021 to 20$$,018 billion in 2022, what is the percentage change in real GDP?

Accepted Answer

$$\frac{20,018 - 19,610}{19,610} 	imes 100 = \frac{408}{19,610} 	imes 100 \approx 2.08\%$$

Question 17

A firm sells 125,000 bottles of water at $2.00 per bottle. What is its total revenue?

Accepted Answer

$$125,000 	imes \2.00$$ = \$$250,000$$

Question 18

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies individual choices and markets; macroeconomics studies the economy as a whole.

Question 19

Which of the following is a correct formula for the area of a triangle, as used in economic graphs?

Accepted Answer

$$	ext{Area} = \frac{1}{2} 	imes 	ext{Base} 	imes 	ext{Height}$$

Foundations of Microeconomics: Key Concepts, Models, and Methods

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