Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

Scarcity is the situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

A rational decision maker will continue to engage in an activity as long as:

Accepted Answer

$$MB \u003e MC$$

Question 3

Which of the following is an example of a tariff?

Accepted Answer

A tax on imported goods coming from other countries.

Question 4

In the context of economic models, what is the primary purpose of using simplified versions of reality?

Accepted Answer

To analyze real-world economic situations more effectively.

Question 5

Which of the following best describes a market?

Accepted Answer

An arrangement between buyers and sellers of a good or service.

Question 6

If the marginal benefit ($$MB) of an $$action is $$10$$ and the marginal cost ($$MC) is$$ $$8$$, what should a rational decision maker do?

Accepted Answer

Do the action because $$MB \u003e MC$$

Question 7

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

Accepted Answer

Choosing to spend time studying instead of going out with friends.

Question 8

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

Accepted Answer

The highest-valued alternative that must be given up, such as income from a full-time job.

Question 9

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

Accepted Answer

Higher minimum wage causes higher drop-out rates.

Question 10

In a centrally planned economy, who makes the majority of economic decisions?

Accepted Answer

A type of authority in the government.

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Resources are allocated where they are valued the most.

Question 12

Suppose a government imposes a tariff on imported steel. What is the most likely immediate effect?

Accepted Answer

The price of imported steel will increase.

Question 13

Which step is NOT part of the scientific method used in building economic models?

Accepted Answer

Ignore historical data and rely only on intuition.

Question 14

Which of the following is a behavioral assumption commonly made in economic models?

Accepted Answer

People buy goods and services to maximize their well-being.

Question 15

Marginal analysis involves comparing:

Accepted Answer

Marginal cost and marginal benefit.

Question 16

Which of the following is an example of a voluntary exchange?

Accepted Answer

A buyer and seller agree to trade a good for money.

Question 17

Which of the following is a normative statement?

Accepted Answer

The government should reduce unemployment.

Question 18

Which of the following is NOT a topic studied in macroeconomics?

Accepted Answer

How households and firms make decisions.

Question 19

If a country moves from a centrally planned economy to a mixed economy, what is a likely change?

Accepted Answer

Most economic decisions will result from the interaction of buyers and sellers, but the government will still play a significant role.

Question 20

Suppose a country achieves productive efficiency in manufacturing cars. What does this mean?

Accepted Answer

Cars are produced at the lowest possible cost.

Foundations of Macroeconomics: Key Concepts and Principles

Study Guide - Practice Questions