Question 1

Explain the term "economics."

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Question 2

Suppose a town can earn an additional $10,000 per year in revenue if it installs a red-light camera at its busiest intersection.At what additional cost would installing this camera not be considered economically rational?

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Question 3

What is scarcity,and why is it a fundamental concept in economics?

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Question 4

Explain the economic assumption that "people are rational."

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Question 5

Explain the economic idea that "people respond to incentives."

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Question 6

Assume that a city can earn an additional $100,000 of revenue each year from using drones to catch speeding drivers.What must the additional cost of using drones to catch speeders be to make this economically rational?

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Question 7

Society faces a trade-off in all of the following situations except
A) when deciding who will receive the goods and services produced.
B) when deciding what goods and services will be produced.
C) when deciding how goods and services will be produced.
D) when some previously unemployed workers find jobs.

Accepted Answer

When previously unemployed workers find jobs, there is no trade-off being made. This is a positive outcome for society as it results in increased production and a reduction in the need for government assistance programs. In all other situations, society must make trade-offs between competing goals, such as between producing more goods and services and protecting the environment, or between providing more benefits to some groups and raising taxes on others.

Question 8

What is an economic model?

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Question 9

Describe what has happened to state obesity rates in the United States since 1994.

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Question 10

The idea that because of scarcity,producing more of one good or service means producing less of another good or service refers to the economic concept of
A) optimization.
B) efficiency.
C) a trade-off.
D) equity.

Accepted Answer

The concept of trade-off states that due to limited resources, producing more of one good or service requires sacrificing the production of another good or service. This is a fundamental economic concept that arises due to scarcity. Optimization, efficiency, and equity are important concepts in economics, but they do not specifically refer to the idea of trade-offs.

Question 11

What does the word "marginal" mean in economics? What is a marginal benefit? What is a marginal cost? What is marginal analysis?

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Question 12

Which of the following statements is true?
A) Any time you have to decide which action to take you are experiencing economic equity.
B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale.
C) Every individual, no matter how rich or poor, is faced with situations that require trade-offs.
D) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited.

Accepted Answer

Every individual, no matter how rich or poor, is faced with situations that require trade-offs. This statement is true. Option A is incorrect because economic equity pertains to fairness and equality in the distribution of resources and income. Option B is incorrect because trade-offs always apply, regardless of excess supply. Option D is incorrect because economics studies the allocation of scarce resources, not unlimited resources.

Question 13

The three fundamental questions that any economy must address are
A) What will be the prices of goods and services; how will these goods and services be produced; and who will receive them?
B) What goods and services to produce; how will these goods and services be produced; and who receives them?
C) Who gets jobs; what wages do workers earn; and who owns what property?
D) How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

Accepted Answer

The three fundamental questions that any economy must address are what goods and services to produce, how will they be produced, and who will receive them. This is known as the problem of allocation of resources. Option A is incorrect because prices are determined by supply and demand and are not one of the fundamental questions that an economy has to address. Option C is incorrect because while these may be important questions, they are not fundamental questions that an economy must address. Option D is incorrect because while saving is an important part of an economy, it is not one of the fundamental questions that an economy must address.

Question 14

Assume that an additional $50,000 in benefits will be received each year if a town hires an additional police officer whose only job would be to catch drivers who drive over the speed limit on its only street.What must the additional cost of this additional police officer be to make this hiring economically rational?

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Question 15

What is a marginal cost?

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Question 16

Which of the following is not an example of an economic trade-off that a firm has to face?
A) whether it is cheaper to produce with more machines or with more workers
B) whether it is to outsource the production of a good or service
C) whether or not consumers will buy its products
D) whether it should produce more of its product

Accepted Answer

Consumers buying the product is not an economic trade-off that a firm has to face. It is a factor that affects the demand for the product and the overall success of the firm, but it is not a trade-off decision that the firm can make. The other options all involve trade-offs between different factors such as cost, efficiency, and production levels.

Question 17

What is an economic market?

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Question 18

Suppose the extra annual cost to a nation to enact a mandatory seat belt law for motorcycles is $850.Then,the nation should enact this seat belt law if doing so results in an additional benefit of $850 or more each year.

Accepted Answer

If the additional benefit of enacting the seat belt law is $850 or more annually, it matches or exceeds the extra annual cost, making it economically justifiable to enact the law.

Question 19

What is meant by the statement that "optimal decisions are made at the margin"?

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Question 20

What is a marginal benefit?

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Quiz 1: Economics: Foundations and Models