Question 1

Economics does not study correct or incorrect behaviours but rather it assumes that economic agents behave ________,meaning they make the best decisions given their knowledge of the costs and benefits.
A) equitably
B) rationally
C) emotionally
D) selfishly

Accepted Answer

Economics assumes that individuals are rational, meaning they make decisions based on their own self-interest that take into account the costs and benefits of each option available.

Question 2

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets,and therefore choose to invest in foreign markets.By using all available information as they act to achieve their goals,these investors are exemplifying the economic idea that________.
A) people are rational
B) people respond to economic incentives
C) optimal decisions are made at the margin
D) equity is more important than efficiency

Accepted Answer

The investors in this scenario are using all available information to achieve their goals, which is a characteristic of rational decision-making.

Question 3

Economists reason that the optimal decision is to continue any activity up to the point where the________.
A) marginal benefit is zero
B) marginal benefit is greater than the marginal cost
C) marginal cost is zero
D) marginal benefit equals the marginal cost

Accepted Answer

Economists use the principle of marginal analysis to determine the optimal decision. Marginal benefit is the additional benefit gained from doing one more unit of an activity or consuming one more unit of a good. Marginal cost is the additional cost incurred from doing one more unit of an activity or producing one more unit of a good. The optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost. This is because at this point, the additional benefit gained from doing one more unit is exactly equal to the additional cost incurred, meaning there is no net gain or loss from doing one more unit. Therefore, choice D is the best choice.

Question 4

By definition,economics is the study of __________.
A) how to make money in the stock market
B) how to make money in a market economy
C) the choices people make to attain their goals, given their scarce resources
D) supply and demand

Accepted Answer

Economics is the study of how people make choices to allocate their limited resources to satisfy their unlimited wants and needs. It is not solely focused on making money in a market economy or the stock market, although those topics may fall under the broader umbrella of economics. Supply and demand is a fundamental concept in economics but does not encompass the entire field.

Question 5

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.
A) an additional unit
B) the total number of units
C) no units
D) only profitable units

Accepted Answer

Marginal benefit refers to the additional benefit received from the production or sale of one more unit. Therefore, the revenue received from the sale of an additional unit is a marginal benefit to the firm.

Question 6

A grocery store sells a bag of potatoes at a fixed price of $2.30.Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
A) Marginal revenue
B) Gross earnings
C) Pure profit
D) Marginal costs

Accepted Answer

The term used by economists to describe the money received from the sale of an additional unit (in this case, a bag of potatoes) is the marginal revenue. Marginal revenue is the additional revenue that a firm earns from selling one more unit of a product. In this case, it would be the additional money earned from selling one more bag of potatoes at a fixed price of $2.30.

Question 7

What basic economic problem has always existed and will continue to exist?
A) Scarcity
B) Efficiency
C) Inflation
D) Recession

Accepted Answer

Scarcity is the basic economic problem that has always existed and will continue to exist. It refers to the limited availability of resources and unlimited wants and needs of individuals and society. As a result, choices have to be made about how to allocate resources efficiently.

Question 8

Economists assume that rational behaviour is useful in explaining choices people make________.
A) because irrational people do not make economic choices
B) even though people may not behave rationally all the time
C) because individuals act rationally all the time in all circumstances
D) even though people rarely, if ever, behave in a rational manner

Accepted Answer

Economists assume that people behave rationally most of the time, but also acknowledge that people may not always make rational decisions due to various factors such as emotions, limited information or cognitive biases. Therefore, option B is the most accurate choice as it acknowledges both the assumption of rational behaviour and the possibility of irrational behaviour.

Question 9

Economists assume that rational people do all of the following except _________.
A) using all available information as they act to achieve their goals
B) undertaking activities that benefit others and hurt themselves
C) weighing the benefits and costs of all possible alternative actions
D) responding to economic incentives

Accepted Answer

Economists assume that rational people act in their own self-interest and therefore do not undertake activities that benefit others and hurt themselves.

Question 10

In economics,what term means 'additional' or 'extra'?
A) Allocative
B) Marginal
C) Equity
D) Optimal

Accepted Answer

Marginal refers to the additional or extra unit of a good or service that is gained or lost. For example, marginal cost is the cost of producing an additional unit of a good, and marginal benefit is the benefit received from consuming an additional unit of a good.

Question 11

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky,and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals,these teachers are exemplifying the economic idea that________.
A) people are rational
B) people respond to economic incentives
C) optimal decisions are made at the margin
D) equity is more important than efficiency

Accepted Answer

The answer of Suppose that some teachers have decided that...

Question 12

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that________.
A) people with health insurance will be less likely to be overweight than people without health insurance
B) people with health insurance will be more likely to be overweight than people without health insurance
C) people with health insurance will be equally likely to be overweight as people without health insurance
D) there is no correlation between having health insurance and being overweight

Accepted Answer

The answer of Holding all other personal characteristics-such as age,gender,and...

Question 13

Economists assume that individuals________.
A) behave in unpredictable ways
B) will never take action to help others
C) prefer to live in a society that values fairness above all else
D) are rational and respond to incentives

Accepted Answer

Economists generally assume that individuals are rational and will respond to incentives. This means that individuals will make decisions based on the costs and benefits associated with a particular action and will choose the option that offers the best outcome.

Question 14

In economics,choices must be made because we live in a world of __________.
A) unemployment
B) scarcity
C) greed
D) unlimited resources

Accepted Answer

Scarcity is the fundamental economic problem that arises because resources are limited, but people's wants and needs are unlimited. As a result, individuals, businesses, and societies must make choices about how to allocate those scarce resources.

Question 15

Which of the following statements is true about scarcity?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity arises when there is a wide disparity in income distribution.

Accepted Answer

Scarcity refers to the situation in which unlimited wants exceed limited resources. This is a fundamental economic problem faced by individuals, businesses, and societies as a whole, regardless of their level of wealth or population size.

Question 16

Economic agents,such as individuals,firms,and nations,interact with each other________.
A) in public locations monitored by the government
B) in any arena that brings together buyers and sellers
C) in any physical location people where people can physically get together for selling goods, such as shopping malls
D) in any location where transactions can be monitored by consumer groups and taxed by the government

Accepted Answer

Economic interactions between agents can occur in a variety of settings, such as in markets, online platforms, or through intermediaries like brokers. It is not exclusive to public locations or physical shopping malls, and while some transactions may be monitored by consumer groups or taxed by the government, it is not a requirement for economic interactions to take place.

Question 17

What term in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade?
A) Collective
B) Cooperative
C) Market
D) Trade-off

Accepted Answer

A market is a group of buyers and sellers who come together to trade a particular product or service, thus representing the forces of supply and demand.

Question 18

Marginal analysis involves undertaking an activity________.
A) until its marginal costs start declining
B) only when its marginal benefits are positive
C) until its marginal benefits equal marginal costs
D) only if its marginal costs are greater than its marginal benefits

Accepted Answer

Marginal analysis involves comparing the additional benefits of an activity or decision against the additional costs of that activity or decision. The goal is to continue the activity or decision until the marginal benefits equal the marginal costs, which maximizes overall benefit. Therefore, the correct choice is C - until its marginal benefits equal marginal costs.

Question 19

Consider the following statements: 
A.Car owners purchase more petrol from a petrol station that sells petrol at a lower price than other rival petrol stations in the area.
B.Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
C.Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) b only
B) c only
C) a and b
D) a, b, and c

Accepted Answer

All three statements demonstrate economic agents responding to incentives. Statement A shows that car owners are incentivized by lower prices, statement B shows banks weighing the cost and benefit of security measures, and statement C shows firms responding to an incentive in the form of higher profits from raising prices.

Question 20

An economic ________ is a simplified version of some aspect of economic life used to analyse an economic issue.
A) market
B) trade-off
C) variable
D) model

Accepted Answer

A model is a simplified version of reality that is used to analyse economic issues. Models allow economists to isolate specific relationships and make predictions about how changes in variables will affect economic outcomes. By simplifying reality, models make it easier for economists to understand complex economic issues and draw useful conclusions.

Quiz 1: Economics: Foundations and Models

Economics does not study correct or incorrect behaviours but rather it assumes that economic agents behave ________,meaning they make the best decisions given their knowledge of the costs and benefits.

Economists reason that the optimal decision is to continue any activity up to the point where the________.

By definition,economics is the study of __________.

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

A grocery store sells a bag of potatoes at a fixed price of $2.30.Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

What basic economic problem has always existed and will continue to exist?

Economists assume that rational behaviour is useful in explaining choices people make________.

Economists assume that rational people do all of the following except _________.

In economics,what term means 'additional' or 'extra'?

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that________.

Economists assume that individuals________.

In economics,choices must be made because we live in a world of __________.

Which of the following statements is true about scarcity?

Economic agents,such as individuals,firms,and nations,interact with each other________.

What term in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade?

Marginal analysis involves undertaking an activity________.

An economic ________ is a simplified version of some aspect of economic life used to analyse an economic issue.