Question 1

Which of the following best defines scarcity in economics?

Accepted Answer

A situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

What is the opportunity cost of a government choosing to fund cancer research instead of space exploration?

Accepted Answer

The highest-valued alternative given up, which is the benefits from space exploration.

Question 3

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

Accepted Answer

A company increases production of cars, resulting in fewer resources for producing trucks.

Question 4

Which question is NOT one of the three key economic questions?

Accepted Answer

How will the government set prices for all goods and services?

Question 5

A firm can produce a product using either more labor or more machines. If the cost of labor increases, what is the likely response according to economic theory?

Accepted Answer

The firm will switch to a production technique that uses more machines and less labor.

Question 6

Which of the following best describes positive analysis in economics?

Accepted Answer

Analysis concerned with what is.

Question 7

Suppose a country must choose between producing more consumer goods or more military goods. This scenario best illustrates which economic concept?

Accepted Answer

Trade-off

Question 8

Which of the following is a step in building an economic model?

Accepted Answer

Formulate a testable hypothesis.

Question 9

If a government changes tax and welfare policies to redistribute income, which economic issue is most directly affected?

Accepted Answer

Equity

Question 10

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics focuses on households and firms, while macroeconomics focuses on inflation, unemployment, and economic growth.

Question 11

A music producer can either hire a great singer or use Auto-Tune with a mediocre singer. This scenario is an example of which economic question?

Accepted Answer

How will the goods and services be produced?

Question 12

Which of the following statements is an example of normative analysis?

Accepted Answer

The government should increase the minimum wage.

Question 13

If a firm moves its factory to a location with cheaper labor, which economic concept is being applied?

Accepted Answer

Efficiency

Question 14

Which of the following is NOT a characteristic of economic models?

Accepted Answer

They always perfectly predict real-world outcomes.

Question 15

Suppose a country increases funding for healthcare by reducing funding for education. What is the opportunity cost of this decision?

Accepted Answer

The benefits that could have been gained from funding education.

Question 16

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

Accepted Answer

Maximizing output with given resources.

Question 17

A policymaker argues that taxes should be increased to reduce income inequality. This is an example of:

Accepted Answer

Normative analysis

Question 18

Which of the following is an example of a real-world trade-off faced by a government?

Accepted Answer

Allocating more funds to national defense at the expense of social welfare programs.

Question 19

If a firm revises its economic model after it fails to explain the data well, which step of the scientific method is this?

Accepted Answer

Revising the model.

Question 20

Which of the following best explains why choices are necessary in economics?

Accepted Answer

Because resources are scarce and wants are unlimited.

Foundations of Microeconomics: Scarcity, Choice, and Economic Models

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