Question 1

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

Accepted Answer

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

Question 2

Apple manufactures iPhones in China rather than the United States primarily because:

Accepted Answer

Apple can achieve productive efficiency by minimizing production costs overseas.

Question 3

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

Accepted Answer

A government increases funding for space exploration, which means less funding is available for cancer research.

Question 4

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

Accepted Answer

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

Question 5

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

Accepted Answer

Comparing the additional benefit of studying one more hour to the additional cost of lost sleep.

Question 6

Suppose a government introduces a law requiring firms to pay workers an amount equal to the government assistance they receive. What unintended consequence might occur?

Accepted Answer

Firms may avoid hiring workers who are eligible for government assistance, potentially harming those the law intended to help.

Question 7

Which of the following is a key assumption economists make when analyzing markets?

Accepted Answer

People are rational and use all available information to achieve their goals.

Question 8

A market economy is characterized by:

Accepted Answer

Decisions of households and firms interacting in markets allocating economic resources.

Question 9

Which formula represents the condition for allocative efficiency in a market economy?

Accepted Answer

$$MB = MC$$

Question 10

Productive efficiency occurs when:

Accepted Answer

Goods and services are produced at the lowest possible cost.

Question 11

Voluntary exchange in markets leads to:

Accepted Answer

Both the buyer and seller being better off after the transaction.

Question 12

Which of the following is a reason why market outcomes may not be fully efficient?

Accepted Answer

Market outcomes might ignore the desires of people not involved in transactions, such as those affected by pollution.

Question 13

Equity in economics refers to:

Accepted Answer

The fair distribution of economic benefits.

Question 14

Which of the following is a step in the development of an economic model?

Accepted Answer

Formulate a testable hypothesis.

Question 15

In economic models, what behavioral assumption is typically made about firms?

Accepted Answer

Firms will make decisions to maximize their profits.

Question 16

Which of the following best describes positive analysis in economics?

Accepted Answer

Analysis concerned with what is.

Question 17

Microeconomics is primarily concerned with:

Accepted Answer

How households and firms make choices and interact in markets.

Question 18

Suppose a music producer can make a song sound good by hiring a great singer or by using Auto-Tune with a mediocre singer. This scenario illustrates:

Accepted Answer

Firms can choose among different production techniques to achieve their goals.

Question 19

Which of the following is an example of a normative statement?

Accepted Answer

"The government should increase the minimum wage to improve equity."

Question 20

If the marginal benefit of producing one more unit of a good is $$MB = 10$$ and the marginal cost is $$MC = 8$$, what should a firm do to maximize efficiency?

Accepted Answer

Increase production because $$MB \u003e MC.$$

Foundations of Microeconomics: Key Concepts and Models

Study Guide - Practice Questions

Study Guide - Flashcards