Question 1

Which of the following best describes the first principle of economics?

Accepted Answer

People try to optimize; they attempt to choose the best available option.

Question 2

What is meant by 'equilibrium' in economics?

Accepted Answer

A situation in which no agent would benefit by changing his or her own behaviour.

Question 3

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

Accepted Answer

Choosing to spend more time studying instead of going out with friends.

Question 4

Suppose you have a budget of $$100. You can buy either 5 books at 20 $$each or 2 shirts at $50 each. What does this scenario illustrate?

Accepted Answer

A budget constraint.

Question 5

If a government spends money on building a new hospital, what is the opportunity cost of this decision?

Accepted Answer

The best alternative use of the resources, such as building a school or improving roads.

Question 6

Which of the following statements is an example of positive economics?

Accepted Answer

Raising the minimum wage will increase the income of low-wage workers.

Question 7

What is the main difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics focuses on individual agents and their choices; macroeconomics studies the entire economy and policy effects.

Question 8

Which of the following best illustrates the concept of empiricism in economics?

Accepted Answer

Using data to test theories and determine causality.

Question 9

A city is deciding whether to spend money on electric buses or hospitals. What economic concept does this scenario best illustrate?

Accepted Answer

Trade-offs and opportunity cost.

Question 10

Which equation represents a budget constraint for a consumer who can buy apples at $$2 each and oranges at 3 $$each with a budget of $12?

Accepted Answer

$$2x + 3y = 12$$

Question 11

Which of the following is NOT an example of a scarce resource?

Accepted Answer

Unlimited supply of sunlight.

Question 12

If a country increases its annual GDP by 1%, by how much do its emissions typically rise, according to the study materials?

Accepted Answer

By 0.7%.

Question 13

Which of the following is a real-world example of the free rider problem?

Accepted Answer

Individuals benefiting from national defense without directly paying for it.

Question 14

Which statement about equilibrium is correct?

Accepted Answer

Equilibrium is a situation that persists because no agent has an incentive to change their behaviour.

Question 15

What is the opportunity cost of taking a year off to travel before attending university?

Accepted Answer

The best alternative use of that year, such as starting university or working.

Question 16

Which of the following is a normative statement?

Accepted Answer

The government should reduce unemployment.

Question 17

If correlation does not imply causality, which of the following is a correct application in economics?

Accepted Answer

Using econometric methods to test whether one variable causes another.

Question 18

Which of the following best describes the role of econometrics in economics?

Accepted Answer

Econometrics uses statistical methods to test and potentially refute economic theories.

Question 19

A city government must choose between spending $1 million on a new park or on road repairs. If the park is chosen, what is the opportunity cost?

Accepted Answer

The road repairs that will not be completed.

Question 20

Which of the following equations best represents the concept of opportunity cost in a simple two-choice scenario?

Accepted Answer

$$OC = B_{next\ best\ alternative}$$

ECN104 Lecture 1

Study Guide - Practice Questions