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 manufacture iPhones in China rather than the United States primarily because:

Accepted Answer

Labor costs are lower in China, allowing Apple to maximize profits.

Question 3

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

Accepted Answer

Allocating more funds to space exploration means 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 working instead of attending college.

Question 5

Which of the following statements best illustrates the concept of marginal analysis?

Accepted Answer

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

Question 6

Suppose the government reduces student loan payments from 10% to 5% of income. What is a possible unintended consequence of this policy?

Accepted Answer

Students may borrow more money, expecting not to repay the full amount.

Question 7

Which of the following best defines a market economy?

Accepted Answer

An economy where decisions of households and firms interacting in markets allocate resources.

Question 8

What is the main difference between productive efficiency and allocative efficiency?

Accepted Answer

Productive efficiency is producing at lowest cost; allocative efficiency is producing according to consumer preferences.

Question 9

Which of the following is an example of a positive economic statement?

Accepted Answer

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

Question 10

A firm is considering two production methods: one uses more labor, the other uses more machines. If the cost of labor rises, what is the likely response according to economic theory?

Accepted Answer

The firm will switch to the method that uses more machines and less labor.

Question 11

Which of the following best describes the role of assumptions in economic models?

Accepted Answer

Assumptions simplify reality to make models useful for analysis.

Question 12

If a government increases taxes to fund welfare programs, what is a possible trade-off?

Accepted Answer

Higher taxes may reduce incentives to work, but can increase equity.

Question 13

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

Accepted Answer

Ignoring all available data.

Question 14

Which of the following is an example of allocative efficiency?

Accepted Answer

Producing electric cars up to the point where the marginal benefit equals the marginal cost.

Question 15

Which of the following best describes a mixed economy?

Accepted Answer

An economy where most decisions are made by markets, but the government plays a significant role.

Question 16

Suppose a new technology reduces the cost of manufacturing. According to the concept of productive efficiency, what should firms do?

Accepted Answer

Adopt the new technology to produce at the lowest possible cost.

Question 17

Which of the following is a normative statement?

Accepted Answer

The government should provide free healthcare to all citizens.

Question 18

If the marginal benefit of producing one more unit of a good is less than the marginal cost, what should a firm do?

Accepted Answer

Produce fewer units of the good.

Question 19

Which of the following is an example of people responding to economic incentives?

Accepted Answer

A decrease in the price of public transportation leads more people to use it.

Question 20

Which of the following best describes microeconomics?

Accepted Answer

The study of how households and firms make choices and interact in markets.

Microeconomics: Foundations and Models – Chapter 1 Study Notes

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