Question 1

Which of the following best describes the first principle of economics?

Accepted Answer

People try to optimize by choosing the best available option with the information they have.

Question 2

What is meant by 'opportunity cost' in economics?

Accepted Answer

The value of the best alternative that is given up when making a choice.

Question 3

A government must choose between building a new hospital or a new highway. This scenario best illustrates which economic concept?

Accepted Answer

Trade-offs

Question 4

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

Accepted Answer

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

Question 5

Suppose you can buy a book for $$20 at a nearby store or drive 3 miles to buy it for 10. $$According to economic principles, what should determine your choice?

Accepted Answer

Whether the $10 savings is worth the time and cost of driving 3 miles.

Question 6

Which of the following best describes equilibrium in economics?

Accepted Answer

A situation where everyone is optimizing and no one can be better off by changing their behavior.

Question 7

Why is equilibrium not always optimal for society?

Accepted Answer

Because equilibrium can persist even when there are externalities or free-rider problems.

Question 8

Which of the following is an example of a free-rider problem?

Accepted Answer

A person who uses a public park without contributing to its maintenance.

Question 9

Empiricism in economics refers to:

Accepted Answer

Using data to test theories and determine causality.

Question 10

Which of the following statements about correlation and causality is correct?

Accepted Answer

Correlation does not imply causality.

Question 11

A country spends $1 billion on military equipment instead of building schools and hospitals. According to Dwight D. Eisenhower, what is the opportunity cost of this decision?

Accepted Answer

The schools, hospitals, and other public goods that could have been built with the money.

Question 12

Which of the following best illustrates the concept of a budget constraint?

Accepted Answer

A consumer must choose a combination of goods that does not exceed their available income.

Question 13

If a 1% increase in annual GDP generates a 0.7% rise in emissions, what does this relationship illustrate?

Accepted Answer

A negative externality associated with economic growth.

Question 14

Which of the following is NOT a characteristic of microeconomics?

Accepted Answer

It focuses on the overall economy and aggregate outcomes.

Question 15

A city government must choose between funding new electric buses or building a new hospital. What economic principle is most relevant to this decision?

Accepted Answer

Trade-offs and opportunity cost

Question 16

Which of the following best describes normative economics?

Accepted Answer

It prescribes what people or society should do.

Question 17

Which of the following is an example of empiricism in economics?

Accepted Answer

Using survey data to test whether higher minimum wages reduce employment.

Question 18

Which of the following is NOT an example of a scarce resource?

Accepted Answer

Unlimited supply of sunlight in space.

Question 19

Which of the following best describes the role of econometrics in economics?

Accepted Answer

It uses statistical methods to test economic theories using real-world data.

Question 20

A group project in which some members do not contribute but still receive the same grade as others is an example of:

Accepted Answer

Free-rider problem

Principles and Practice of Economics: Microeconomics Study Guide

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