Question 1

Scarcity is a fundamental concept in economics. Which of the following best explains why scarcity exists?

Accepted Answer

Because resources are limited and wants are unlimited.

Question 2

Suppose a country can produce only two goods: wheat and cars. If the country is operating on its production possibilities boundary (PPB), what does this imply?

Accepted Answer

The country is using all its resources efficiently.

Question 3

Which of the following is an example of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when making a choice.

Question 4

If the price of a normal good falls, what is the expected effect on the quantity demanded, ceteris paribus?

Accepted Answer

Quantity demanded will increase.

Question 5

Suppose the demand for good X is given by $$Q_D = 100 - 2P$$ and the supply is given by $$Q_S = 20 + 3P. $$What is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 6

Which of the following best describes a positive economic statement?

Accepted Answer

If the price of gasoline rises, people will buy less gasoline.

Question 7

If a 10% increase in the price of a product leads to a 20% decrease in quantity demanded, what is the price elasticity of demand?

Accepted Answer

$$2$$

Question 8

Which of the following would cause a movement along the demand curve for coffee?

Accepted Answer

A decrease in the price of coffee.

Question 9

If the cross-price elasticity of demand between two goods is positive, what does this imply?

Accepted Answer

The goods are substitutes.

Question 10

Suppose the government imposes a tax on sellers of gasoline. What is the likely effect on the market equilibrium?

Accepted Answer

The supply curve shifts to the left, increasing equilibrium price.

Question 11

Which of the following is NOT a characteristic of a market economy?

Accepted Answer

Decisions are made by a central authority.

Question 12

If the income elasticity of demand for a good is negative, the good is:

Accepted Answer

An inferior good.

Question 13

Which of the following best describes the relationship between positive and normative statements in economics?

Accepted Answer

Normative statements evaluate the desirability of certain economic changes; positive statements describe what is.

Question 14

A technological improvement in the production of smartphones will likely result in:

Accepted Answer

A rightward shift of the supply curve.

Question 15

If the government sets a price ceiling below the equilibrium price, what is the likely outcome?

Accepted Answer

A shortage of the good.

Question 16

Which of the following is an exogenous variable in an economic model?

Accepted Answer

A variable determined outside the model.

Question 17

Suppose the price elasticity of demand for a product is $$-0.5. If $$the firm increases the price by 10%, what happens to total revenue?

Accepted Answer

Total revenue increases.

Question 18

Which of the following would NOT shift the demand curve for pizza?

Accepted Answer

A change in the price of pizza.

Question 19

If a product has an income elasticity of demand of $$+1.2$$, what does this indicate?

Accepted Answer

The product is a luxury good.

Question 20

Which of the following best illustrates the concept of a sunk cost?

Accepted Answer

Money spent on non-refundable concert tickets.

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