Question 1

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

Accepted Answer

People try to choose the best available option given their information (optimization).

Question 2

Suppose a city government is deciding whether to build a new public park or invest in road repairs. The value of the next best alternative forgone is known as:

Accepted Answer

Opportunity cost

Question 3

A situation in which no individual can be made better off by changing their own behavior is called:

Accepted Answer

Equilibrium

Question 4

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

Accepted Answer

Choosing to spend more on healthcare means less can be spent on education.

Question 5

If a student spends a year traveling before attending university, what is the opportunity cost?

Accepted Answer

The benefits the student would have received from attending university that year.

Question 6

Which of the following statements is an example of positive economics?

Accepted Answer

Some people took more than one piece of candy and not everyone got a piece.

Question 7

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

Accepted Answer

A consumer can only buy combinations of goods that do not exceed their income.

Question 8

A government is considering whether to spend $1 million on a new hospital or on a new highway. According to cost-benefit analysis, what should be included in their decision?

Accepted Answer

All opportunity costs and benefits of both options.

Question 9

Which of the following is NOT a reason why equilibrium may not be optimal?

Accepted Answer

All agents have perfect information.

Question 10

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

Accepted Answer

People using public roads without paying for their maintenance.

Question 11

Which of the following best describes empiricism in economics?

Accepted Answer

Using data to test theories and determine causality.

Question 12

Suppose you can buy a book for $$20 at a nearby store or drive 3 miles to buy it for 10. $$What is the opportunity cost of driving to the farther store?

Accepted Answer

The value of your time and any other resources used to drive 3 miles.

Question 13

Which of the following is a normative economic statement?

Accepted Answer

Each student should just take one piece of candy so that everyone gets a piece.

Question 14

If a country must choose between building a new school or a new hospital due to limited resources, this situation best illustrates:

Accepted Answer

Scarcity and trade-offs

Question 15

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

Accepted Answer

Microeconomics studies individual and firm choices, while macroeconomics studies the whole economy.

Question 16

Which of the following equations best represents a budget constraint for a consumer who can buy only apples ($$a) $$and bananas ($$b) $$with income $$I$$, where the price of apples is $$P_a$$ and the price of bananas is $$P_b$$?

Accepted Answer

$$P_a a + P_b b \leq I$$

Question 17

A 1% increase in annual GDP generates, on average, a 0.7% rise in emissions. This relationship is an example of:

Accepted Answer

Correlation, not necessarily causation

Question 18

Which of the following is NOT an example of an economic agent?

Accepted Answer

A rock on the side of the road

Question 19

Which of the following best describes the scope of economics?

Accepted Answer

Economics studies how agents make choices among scarce resources and how those choices affect society.

Question 20

Which of the following statements about econometrics is correct?

Accepted Answer

Econometrics uses statistical theory to test economic theories with real-world data.

Principles and Scope of Economics: Foundations for Microeconomics

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