Question 1

Which of the following best describes the economic problem of scarcity?

Accepted Answer

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

Question 2

Which of the following is NOT considered one of the four key resources used to produce goods and services?

Accepted Answer

Money

Question 3

A city government introduces a new bike lane policy to promote cycling, which results in an increase in traffic accidents involving cyclists. This is an example of:

Accepted Answer

An unintended consequence

Question 4

According to the concept of marginal analysis, a rational decision-maker will continue an activity up to the point where:

Accepted Answer

$$MB = MC$$

Question 5

Suppose you have three options after graduation: (A) take a job earning $$50,000 per year, (B) get paid 20$$,000 to travel, or (C) earn $0 and go to graduate school. If you choose to go to graduate school, what is your opportunity cost?

Accepted Answer

The $50,000 salary from the job

Question 6

Which of the following is a normative statement?

Accepted Answer

The government should increase the minimum wage to reduce poverty.

Question 7

In a market economy, how are prices for goods and services determined?

Accepted Answer

By the interaction of supply and demand in markets

Question 8

Which of the following best illustrates the concept of trade-offs?

Accepted Answer

A farmer uses land to grow wheat instead of corn.

Question 9

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

Accepted Answer

Raising the gasoline tax by $1 per gallon will reduce gasoline consumption by 10%.

Question 10

Which of the following is a characteristic of a centrally planned economy?

Accepted Answer

Government planners make all major economic decisions.

Question 11

A firm is considering whether to produce 300,000 more smartphones. According to economic theory, what should the firm compare to make the optimal decision?

Accepted Answer

The marginal benefit and marginal cost of producing the additional smartphones

Question 12

Which of the following is NOT a reason why market economies tend to be more efficient than centrally planned economies?

Accepted Answer

Market economies eliminate all government intervention.

Question 13

If a government imposes a tax on carbon emissions to reduce pollution, but this leads to higher energy prices for consumers, the higher prices are an example of:

Accepted Answer

An unintended consequence

Question 14

Which of the following best defines opportunity cost?

Accepted Answer

The value of the next best alternative that must be given up to engage in an activity

Question 15

Which of the following is an example of a transfer payment?

Accepted Answer

A government payment to a retired person through Social Security

Question 16

Which of the following statements about economic models is correct?

Accepted Answer

Economic models use assumptions and simplifications to analyze real-world issues.

Question 17

Suppose a government policy changes the incentive for students to borrow more for college, leading to higher tuition prices. This is an example of:

Accepted Answer

An unintended consequence of changing economic incentives

Question 18

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies individual households and firms, while macroeconomics studies the economy as a whole.

Question 19

Which of the following is a key assumption made by economists about rational behavior?

Accepted Answer

Individuals and firms use all available information to achieve their goals.

Question 20

A government wants to increase equity in the distribution of income. Which of the following policies is most likely to achieve this goal?

Accepted Answer

Increasing taxes on higher incomes to fund transfer payments to the poor

Foundations of Microeconomics: Scarcity, Choice, and Economic Models

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