The Why And Who Of The Economy

Question 1

What is opportunity cost?

Answer 1

The value of the next best alternative that is forgone when making a decision.

Question 2

True or False: Utility refers to the satisfaction or pleasure derived from consuming a good or service.

Answer 2

True

Question 3

Fill in the blank: Rational behavior in economics assumes that individuals make decisions to maximize their _____.

Answer 3

utility

Question 4

What is the primary focus of marginal analysis?

Answer 4

To evaluate the additional benefits and costs of a decision.

Question 5

Multiple choice: Which of the following best describes a consumer in economic terms?

Answer 5

An individual or group that purchases goods and services for personal use.

Question 6

What is the difference between consumer surplus and producer surplus?

Answer 6

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between what producers receive and their minimum acceptable price.

Question 7

True or False: A rational consumer always seeks to maximize consumption.

Answer 7

False

Question 8

What does the term ‘diminishing marginal utility’ refer to?

Answer 8

The decrease in additional satisfaction or utility gained from consuming one more unit of a good or service.

Question 9

Fill in the blank: In economics, a producer is someone who creates goods or services to sell in the _____.

Answer 9

market

Question 10

Multiple choice: Which of the following is an example of a fixed cost?

Answer 10

Rent for a manufacturing facility.

Question 11

What is the formula for calculating marginal cost?

Answer 11

Marginal Cost = Change in Total Cost / Change in Quantity.

Question 12

True or False: Opportunity costs are only monetary.

Answer 12

False

Question 13

What is the law of demand?

Answer 13

As the price of a good decreases, the quantity demanded increases, and vice versa.

Question 14

Fill in the blank: The _____ curve represents the relationship between the price of a good and the quantity supplied.

Answer 14

supply

Question 15

Multiple choice: Which of the following is not considered a factor of production?

Answer 15

Money

Question 16

What is market equilibrium?

Answer 16

The point where the quantity demanded equals the quantity supplied at a particular price.

Question 17

True or False: A price ceiling is a legally established maximum price for a good or service.

Answer 17

True

Question 18

What does ‘elasticity of demand’ measure?

Answer 18

The responsiveness of quantity demanded to a change in price.

Question 19

Fill in the blank: In a perfectly competitive market, firms are price _____.

Answer 19

takers

Question 20

Multiple choice: Which concept describes the trade-off between two goods that a consumer faces?

Answer 20

Budget constraint

Question 21

What is the purpose of consumer choice theory?

Answer 21

To analyze how consumers make decisions to allocate their limited resources among various goods and services.

Question 22

True or False: The production possibilities frontier illustrates the maximum feasible amount of two goods that can be produced with available resources.

Answer 22

True

Question 23

What does ‘marginal benefit’ refer to?

Answer 23

The additional satisfaction or utility gained from consuming one more unit of a good or service.

Question 24

Fill in the blank: The concept of _____ states that resources are limited, and choices must be made about their allocation.

Answer 24

scarcity

Question 25

Multiple choice: Which of the following is an example of a variable cost?

Answer 25

Raw materials used in production.

Question 26

What role do incentives play in economic decision-making?

Answer 26

Incentives motivate individuals and firms to make choices that align with their interests.

Question 28

What is the definition of marginal benefit?

Answer 28

Marginal benefit is the additional satisfaction or utility gained from consuming one more unit of a good or service.

Question 29

What is the definition of marginal cost?

Answer 29

Marginal cost is the additional cost incurred from producing one more unit of a good or service.

Question 30

True or False: If marginal benefit exceeds marginal cost, it is beneficial to increase production.

Answer 30

True

Question 31

Fill in the blank: A rational decision-maker will continue to consume a good until the marginal benefit equals the __________.

Answer 31

marginal cost

Question 32

What does the concept of diminishing marginal returns imply?

Answer 32

Diminishing marginal returns imply that as more of a variable input is added to a fixed input, the additional output produced from each new unit of input will eventually decrease.

Question 33

In microeconomics, what is the relationship between marginal benefit and demand?

Answer 33

The marginal benefit represents the value consumers place on a good, which influences their demand for that good.

Question 34

Multiple Choice: Which of the following is an example of marginal cost? A) The total cost of production B) The cost of resources used for one additional unit C) The fixed costs of a factory

Answer 34

B) The cost of resources used for one additional unit

Question 35

What is the formula for calculating marginal cost?

Answer 35

Marginal cost = Change in total cost / Change in quantity produced

Question 36

True or False: Marginal benefit can be quantified in monetary terms.

Answer 36

True

Question 37

What is the principle of opportunity cost?

Answer 37

Opportunity cost is the value of the next best alternative forgone when making a decision.

Question 38

In macroeconomics, how does the concept of marginal analysis apply to policy decisions?

Answer 38

Marginal analysis helps policymakers evaluate the additional benefits and costs of various policy options to determine the most efficient allocation of resources.

Question 39

Multiple Choice: Which scenario represents a situation where marginal cost is greater than marginal benefit? A) Buying a coffee for $3 when the enjoyment is worth $4 B) Investing in stocks with a potential return of 5% for a cost of 10% C) Eating an extra slice of pizza when you are already full

Answer 39

B) Investing in stocks with a potential return of 5% for a cost of 10%

Question 40

What is the significance of the marginal benefit curve in economics?

Answer 40

The marginal benefit curve shows how the benefit derived from a good decreases as more units are consumed, influencing consumer choices.

Question 41

Fill in the blank: The intersection of the marginal cost and marginal benefit curves indicates the __________ level of production.

Answer 41

optimal

Question 42

What is the role of marginal cost in determining supply in microeconomics?

Answer 42

Marginal cost influences how much of a good producers are willing to supply at various prices.

Question 43

True or False: Marginal benefit is constant regardless of the quantity consumed.

Answer 43

False

Question 44

What does the concept of 'cost-benefit analysis' involve?

Answer 44

Cost-benefit analysis involves comparing the marginal costs and marginal benefits of a decision to determine its feasibility.

Question 45

Multiple Choice: Which of the following best describes the term 'marginal utility'? A) Total satisfaction from consumption B) Additional satisfaction from consuming an extra unit C) The cost of producing goods

Answer 45

B) Additional satisfaction from consuming an extra unit

Question 46

What happens when marginal cost equals marginal benefit?

Answer 46

When marginal cost equals marginal benefit, it indicates an efficient allocation of resources, and no further changes in production or consumption are needed.

Question 48

What is the primary focus of positive economics?

Answer 48

Positive economics focuses on describing and explaining economic phenomena without making judgments.

Question 49

True or False: Normative economics deals with what ought to be.

Answer 49

True

Question 50

Fill in the blank: Positive economics is concerned with ________ and ________ relationships in the economy.

Answer 50

cause, effect

Question 51

Which of the following is an example of a positive economic statement? A) The government should increase the minimum wage. B) Increasing the minimum wage will lead to higher unemployment.

Answer 51

B) Increasing the minimum wage will lead to higher unemployment.

Question 52

What type of questions does normative economics typically address?

Answer 52

Normative economics addresses questions about what should be or what ought to happen.

Question 53

Multiple Choice: Which of the following statements is normative? A) Inflation rates are rising. B) The government should implement policies to reduce inflation.

Answer 53

B) The government should implement policies to reduce inflation.

Question 54

What is a key characteristic that distinguishes positive economics from normative economics?

Answer 54

Positive economics is objective and fact-based, while normative economics is subjective and opinion-based.

Question 55

True or False: Normative economics can be tested and validated like positive economics.

Answer 55

False

Question 56

Short Answer: Name one application of positive economics in policy-making.

Answer 56

Positive economics can be used to analyze the effects of a tax increase on consumer behavior.

Question 57

Fill in the blank: Normative economics often involves ________ and ________ about economic policies.

Answer 57

values, opinions