Q: Which formula correctly calculates the percentage change in an economic variable?

$$\frac{\text{Value in the second period} - \text{Value in the first period}}{\text{Value in the first period}} \times 100$$

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

A student is deciding whether to spend an extra hour studying or watching TV. According to economic theory, what should the student compare to make an optimal decision?

Accepted Answer

The marginal cost and marginal benefit of studying for one more hour.

Question 3

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

Accepted Answer

A government increases funding for space exploration, resulting in less funding 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 full-time and earning a salary.

Question 5

Which statement best illustrates the concept of voluntary exchange?

Accepted Answer

A buyer and seller agree on a price for a product, and both are made better off by the transaction.

Question 6

In a market economy, what determines the allocation of economic resources?

Accepted Answer

Decisions of households and firms interacting in markets.

Question 7

Which of the following is NOT a key assumption economists make when analyzing markets?

Accepted Answer

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

Question 8

A government policy unintentionally gives colleges an incentive to increase tuition. This is an example of:

Accepted Answer

An unintended consequence resulting from a change in economic incentives.

Question 9

Which formula correctly calculates the percentage change in an economic variable?

Accepted Answer

$$\frac{	ext{Value in the second period} - 	ext{Value in the first period}}{	ext{Value in the first period}} 	imes 100$$

Question 10

Which of the following best describes productive efficiency?

Accepted Answer

Every good or service is produced at the lowest possible cost.

Question 11

Allocative efficiency occurs when:

Accepted Answer

Every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Question 12

Which of the following is an example of positive analysis?

Accepted Answer

Higher minimum wages would lead to a higher GDP.

Question 13

A firm is considering two production methods: one uses more labor, the other uses more machines. What economic concept is most relevant to this decision?

Accepted Answer

Trade-off due to scarcity of resources.

Question 14

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

Accepted Answer

Consumers will buy goods and services to maximize their well-being.

Question 15

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

Accepted Answer

Formulate a testable hypothesis.

Question 16

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

Accepted Answer

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

Question 17

If the price of pizza decreases from $$14 to 12 $$and the quantity demanded increases from 55 to 65 per week, what is the slope of the demand line?

Accepted Answer

$$\frac{55-65}{14-12}$$

Question 18

Which of the following is a caveat about market economies?

Accepted Answer

Market outcomes might ignore the desires of people who are not involved in transactions, such as avoiding pollution.

Question 19

Which of the following best describes equity in economics?

Accepted Answer

The fair distribution of economic benefits.

Question 20

Which of the following is a normative statement?

Accepted Answer

The government should increase taxes to fund social programs.

Microeconomics Chapter 1: Foundations and Models – Structured Study Notes

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