Q: Which of the following best illustrates the concept of voluntary exchange?

A consumer buys a coffee from a café, and both the consumer and the café are better off.

Q: A market economy is characterized by:

Decisions made by households and firms interacting in markets.

Q: Which of the following is a positive economic statement?

"An increase in the minimum wage will lead to higher unemployment among teenagers."

Q: Which of the following best describes allocative efficiency?

Every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

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 iPhones in China rather than the United States primarily because:

Accepted Answer

It allows Apple to maximize profits by minimizing production costs.

Question 3

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

Accepted Answer

A government increases spending on space exploration, resulting in less funding for cancer research.

Question 4

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

Accepted Answer

The income you could have earned by working instead of attending college.

Question 5

Which of the following statements about economic models is correct?

Accepted Answer

Economic models are simplified versions of reality used to analyze real-world situations.

Question 6

Suppose the marginal benefit (MB) of watching an extra hour of TV is $10, and the marginal cost (MC) is $12. According to marginal analysis, what should you do?

Accepted Answer

Not watch the extra hour of TV, because $MB < MC$

Question 7

Which of the following best illustrates the concept of voluntary exchange?

Accepted Answer

A consumer buys a coffee from a café, and both the consumer and the café are better off.

Question 8

A market economy is characterized by:

Accepted Answer

Decisions made by households and firms interacting in markets.

Question 9

Which of the following is a positive economic statement?

Accepted Answer

"An increase in the minimum wage will lead to higher unemployment among teenagers."

Question 10

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

Accepted Answer

$\frac{-2}{1}$

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Question 12

A government policy that increases equity may reduce efficiency because:

Accepted Answer

Redistribution of income through taxes may reduce incentives to work or invest.

Question 13

Which of the following is an example of a normative statement?

Accepted Answer

"The government should provide free healthcare to all citizens."

Question 14

Suppose a firm's total revenue is represented by the area of a rectangle on a graph. If the price per unit is $\$200$ and the quantity sold is $125,000$, what is the total revenue?

Accepted Answer

$\$25,000,000$

Question 15

If the value of 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

$\frac{20,018 - 19,610}{19,610} 	imes 100 \approx 2.1\%$

Question 16

Which of the following is a key difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies individual markets and decision-makers, while macroeconomics studies the economy as a whole.

Question 17

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

Accepted Answer

Assume all variables are constant and never test the model.

Question 18

A time-series graph is most useful for showing:

Accepted Answer

How a variable changes over time.

Question 19

If a government imposes a tariff on imported goods, economic analysis predicts that:

Accepted Answer

The losses to consumers and the economy generally outweigh the gains to producers and the government.

Microeconomics: Foundations and Models – Chapter 1 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards