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 limited resources.

Question 2

Suppose a government offers a $2,000 tax credit for trading in an old car for a new electric vehicle. Which economic principle does this policy illustrate?

Accepted Answer

People respond to economic incentives.

Question 3

Economists assume that individuals make decisions by comparing:

Accepted Answer

The additional benefits and the additional costs of an activity.

Question 4

Which of the following statements is true regarding the basic economic problem?

Accepted Answer

It has always existed and will continue to exist because resources are limited and wants are unlimited.

Question 5

A student spends $$100 on a concert ticket. The next best alternative was to buy a textbook for 80. $$What is the opportunity cost of attending the concert?

Accepted Answer

$80, the value of the textbook forgone.

Question 6

Which of the following is NOT an assumption economists make about rational behavior?

Accepted Answer

Individuals always act in the interest of society as a whole.

Question 7

Apple assembles most iPhones in China and India because the lower wages earned by workers reduce the costs of assembling iPhones. This is an example of:

Accepted Answer

People respond to economic incentives.

Question 8

Suppose a bank decides not to install expensive security equipment because it believes the cost of robberies is less than the cost of the equipment. This is an example of:

Accepted Answer

Responding to economic incentives.

Question 9

Which of the following best illustrates a marginal decision?

Accepted Answer

A student decides to study one more hour for an exam instead of watching TV.

Question 10

If a firm produces more of a particular good when the selling price rises, this behavior demonstrates that:

Accepted Answer

Firms respond to economic incentives.

Question 11

Which of the following is the correct formula for calculating opportunity cost?

Accepted Answer

$$Opportunity\ Cost = Value\ of\ Next\ Best\ Alternative$$

Question 12

Which of the following statements about scarcity is FALSE?

Accepted Answer

Scarcity will eventually disappear as technology advances.

Question 13

A rational consumer will purchase a product as long as:

Accepted Answer

$$Marginal\ Benefit \geq Marginal\ Cost$$

Question 14

Which of the following is an example of a real-world opportunity cost?

Accepted Answer

A doctor who chooses to attend a medical conference instead of seeing patients loses the income from those missed appointments.

Question 15

Suppose a student is considering whether to take an extra course. The tuition is $$500, and the student values the additional knowledge at 600. $$What should the student do, according to marginal analysis?

Accepted Answer

Take the course, because $$600 \u003e 500.$$

Question 16

Which of the following best describes the economic way of thinking?

Accepted Answer

Making decisions at the margin by comparing additional benefits and additional costs.

Question 17

If a consumer chooses to buy more wireless earbuds when the price falls, this behavior is best explained by:

Accepted Answer

Responding to economic incentives.

Question 18

Which of the following is NOT a result of scarcity?

Accepted Answer

Unlimited resources.

Question 19

Suppose a company is deciding whether to produce one more unit of a product. The marginal cost is $$10, and the marginal benefit is 12. $$What should the company do?

Accepted Answer

Produce the additional unit, because $$12 \u003e 10.$$

Question 20

Which of the following is the best definition of economics?

Accepted Answer

The study of the choices people make to attain their goals, given their scarce resources.

Fundamental Concepts in Microeconomics: Scarcity, Rationality, and Incentives

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