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 designs its iPhones in the United States but assembles them in China. Which economic concept does this scenario best illustrate?

Accepted Answer

Trade-offs due to scarcity of resources and the search for productive efficiency.

Question 3

Suppose a government introduces a law that taxes firms for the amount of government assistance their workers receive. According to economic reasoning, what is a possible unintended consequence of this policy?

Accepted Answer

Firms may avoid hiring workers who are eligible for government assistance, potentially harming those the law intended to help.

Question 4

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

Accepted Answer

Increasing the minimum wage will lead to higher unemployment among teenagers.

Question 5

What is the opportunity cost of attending college full-time for a year?

Accepted Answer

The highest-valued alternative use of your time, such as the income you could have earned working.

Question 6

A market economy is characterized by which of the following?

Accepted Answer

Decisions of households and firms interacting in markets allocate economic resources.

Question 7

Which of the following best defines productive efficiency?

Accepted Answer

A good or service is produced at the lowest possible cost.

Question 8

Suppose a firm can produce a product using either more labor and less machinery, or more machinery and less labor. If the cost of labor rises, what is the most likely response according to economic theory?

Accepted Answer

The firm will substitute machinery for labor to minimize costs.

Question 9

Which of the following is an example of marginal analysis?

Accepted Answer

Deciding whether to study one more hour for an exam by comparing the additional benefit to the additional cost.

Question 10

Voluntary exchange in a market economy leads to which of the following outcomes?

Accepted Answer

Both the buyer and the seller are made better off by the transaction.

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Production is in accordance with consumer preferences, where the last unit provides a marginal benefit equal to its marginal cost.

Question 12

A government is considering a new tax to fund programs for the poor. Which trade-off does this scenario illustrate?

Accepted Answer

The trade-off between efficiency and equity.

Question 13

Which of the following is NOT a step in the development of an economic model?

Accepted Answer

Making policy recommendations without testing hypotheses.

Question 14

Suppose a new technology allows factories to produce more goods with the same amount of resources. What economic concept does this illustrate?

Accepted Answer

An increase in productive efficiency.

Question 15

Which of the following is a normative statement?

Accepted Answer

The government should provide free healthcare to all citizens.

Question 16

If a country decides to produce more military goods and fewer consumer goods, what is the opportunity cost of this decision?

Accepted Answer

The consumer goods that are not produced.

Question 17

Which of the following best explains why market economies tend to be more efficient than centrally planned economies?

Accepted Answer

Market economies rely on competition and voluntary exchange to allocate resources.

Question 18

A music producer can make a song sound good by hiring a great singer or by using Auto-Tune with a mediocre singer. This scenario is an example of:

Accepted Answer

Different methods of production to achieve the same outcome.

Question 19

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

Accepted Answer

Funding more space exploration means less funding for other research.

Question 20

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

Accepted Answer

Microeconomics studies individual households and firms, while macroeconomics studies the economy as a whole.

Microeconomics Chapter 1: Foundations and Models

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