Q: Which formula correctly represents the economic surplus from an action?

$$\text{Economic Surplus} = \text{Benefit} - \text{Cost}$$

Question 1

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

Accepted Answer

Microeconomics studies the behavior of prices and quantities in individual markets, while macroeconomics studies the performance of national economies and government policies.

Question 2

Why are choices necessary in economics?

Accepted Answer

Because resources are scarce and cannot satisfy all wants.

Question 3

Which of the following is the best definition of opportunity cost?

Accepted Answer

The value of the next best alternative that must be forgone to undertake an activity.

Question 4

Suppose you are deciding whether to go skiing. The cost of skiing is $$30, and you would earn 40 if $$you worked instead. The benefit you get from skiing is $50. Should you go skiing?

Accepted Answer

No, because the total cost ($$30 + 40$$ = $$70) is greater than the benefit (50).$$

Question 5

If you dislike your alternative job so much that you would only do it for $$25/day, and skiing costs 30$$, with a benefit of $75, should you go skiing?

Accepted Answer

Yes, because the benefit ($$75) is greater than the total cost (70).$$

Question 6

Which of the following best describes a marginal decision?

Accepted Answer

A decision made at the margin about whether to do a bit more or a bit less of an activity.

Question 7

What is a trade-off in economics?

Accepted Answer

A comparison of the costs and benefits of doing something.

Question 8

Which formula correctly represents the economic surplus from an action?

Accepted Answer

$$	ext{Economic Surplus} = 	ext{Benefit} - 	ext{Cost}$$

Question 9

A friend lends you $10,000 and charges 5% interest per year. If she could have earned 5% by putting the money in the bank, what is the economic justification for charging interest?

Accepted Answer

She is recovering the opportunity cost of her money.

Question 10

Which of the following is NOT a reason why managers and entrepreneurs study microeconomics?

Accepted Answer

To ignore market conditions and focus only on production.

Question 11

Which of the following is an example of an incentive?

Accepted Answer

A penalty for not recycling.

Question 12

If the benefit of an action is $$B(x)$$ and the cost is $$C(x)$$, what is the condition for taking the action?

Accepted Answer

$$B(x) \u003e C(x)$$

Question 13

Which of the following best describes the concept of scarcity?

Accepted Answer

Resources are in short supply and cannot satisfy all the ways society wants to use them.

Question 14

Which of the following is an example of opportunity cost?

Accepted Answer

The value of the best alternative use of your time when you attend a concert.

Question 15

If not incurring a cost is the same as getting a benefit, what is the reciprocal relationship between costs and benefits?

Accepted Answer

Not getting a benefit is the same as incurring a cost.

Question 16

Which of the following is NOT a principle of individual choice?

Accepted Answer

All choices are made without considering alternatives.

Microeconomics: First Principles and Individual Choice

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