Question 1

Living in a world of scarcity involves trade-offs.

Accepted Answer

Scarcity means that resources are limited and cannot fulfill all our wants and needs. Therefore, individuals and societies have to make choices and trade-offs in terms of how to allocate those resources. For example, if we decide to spend our money on buying a new phone, we may have to give up the opportunity to buy other things we wanted, such as a new laptop or a vacation. So, living in a world of scarcity involves making trade-offs.

Question 2

Microeconomics explores the allocation of scarce resources from the perspective of small economic units such as consumers and firms.

Accepted Answer

Microeconomics focuses on the behavior of individual consumers, firms, and industries when making economic decisions, such as how to allocate scarce resources. Therefore, the statement is true.

Question 3

When people make choices they typically know with certainty which choice is best.

Accepted Answer

When making choices, people often have limited information, face uncertainty, and have multiple options with varying pros and cons, making it difficult to know with certainty which choice is best.

Question 4

Economists believe that most people's actions are rational and purposeful, not random and chaotic.

Accepted Answer

Economists typically assume that individuals make decisions based on rational calculations of costs and benefits, rather than random or chaotic impulses. This assumption is fundamental to many economic theories and models.

Question 5

Economists believe that only a small part of human behavior can be explained and predicted by assuming that most people act as if they are motivated by their own self-interest in an effort to increase their expected personal satisfaction.

Accepted Answer

Economists widely accept that a significant portion of human behavior can be explained and predicted by assuming that individuals act out of self-interest to increase their personal satisfaction, a principle foundational to many economic theories and models.

Question 6

Scarcity applies to decision makers in macroeconomics but not in microeconomics.

Accepted Answer

Scarcity applies to decision makers in both macroeconomics and microeconomics. In microeconomics, scarcity is a fundamental concept that is related to the allocation of resources and the choices that individuals, firms, and households must make in order to satisfy their needs and wants. In macroeconomics, scarcity is a more complex concept that is related to the allocation of resources on a larger scale, including national and global economies, and it is closely linked to the study of economic growth, trade, and international relations.

Question 7

Self-interest could never include benevolence.

Accepted Answer

Self-interest can include benevolence if an individual believes that helping others will ultimately benefit themselves. This can include building a positive reputation, building social connections, or improving the overall well-being of society.

Question 8

Scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value.

Accepted Answer

This statement is true. Scarcity means that resources are limited and therefore we must make choices about how to allocate them. Every time we choose to use a resource in one way, we are giving up the opportunity to use it in another way, and this opportunity cost represents a cost of our choice.

Question 9

Since resources are abundant, we do not have to make choices about their use.

Accepted Answer

Resources are not infinite and thus there are always limitations on their use. Economic decision-making involves making choices about how to allocate scarce resources to meet unlimited wants and needs.

Question 10

A good economic theory is always more useful when it includes detailed facts, even if the facts are not relevant to the questions being investigated.

Accepted Answer

A good economic theory should be relevant and focused on the questions being investigated; including irrelevant facts can make the theory less clear and less useful.

Question 11

Wealthy consumers do not have to make decisions on what to buy or how much to save.

Accepted Answer

Wealthy consumers still have to make decisions on what to buy and how much to save, as they may have different financial goals and priorities. Additionally, managing wealth can involve complex investment strategies and decisions.

Question 12

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

Accepted Answer

Microeconomics is the branch of economics that studies individual decision making units such as households and firms, and their interactions in markets. Macroeconomics, on the other hand, focuses on the economy as a whole, including inflation, unemployment, economic growth, and other aggregate measures.

Question 13

Economics is the study of choices we make among our many wants and desires.

Accepted Answer

Economics is the study of how individuals, businesses, governments, and nations make choices about how to allocate their scarce resources among competing demands. These choices involve trade-offs between different wants and desires, as well as between current consumption and future savings or investments.

Question 14

Economists prefer to look at declared preferences (how they say they behave) rather than revealed preferences (how people actually behave).

Accepted Answer

Economists prefer to look at revealed preferences, which reflect people's actual behavior and choices, rather than relying solely on what people say they would do or prefer.

Question 15

It is possible to completely eliminate scarcity.

Accepted Answer

Scarcity refers to the concept of limited resources relative to unlimited wants and needs. As long as resources remain limited, scarcity will exist. Therefore, it is not possible to completely eliminate scarcity.

Question 16

To an economist, rational self-interest means that individuals try to weigh the expected marginal (additional) benefits and marginal (additional) costs of their decisions.

Accepted Answer

Rational self-interest is a fundamental concept in economics, which assumes that individuals make decisions based on weighing the expected benefits and costs of their actions. People are assumed to act rationally, meaning they try to maximize their own personal outcomes or utility, based on their preferences and constraints.

Question 17

If we choose more work we sacrifice leisure.

Accepted Answer

This statement is true. When we choose to do more work, we have less time for leisure activities. The more time we dedicate to work, the less time we have for leisure, relaxation, and other non-work-related activities.

Question 18

To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their goals.

Accepted Answer

Rational behavior in economics is defined as individuals making choices that maximize their utility or satisfaction while also taking into account the constraints they face. Therefore, individuals are considered to be acting rationally if they are doing their best to achieve their goals within the limits of their available resources.

Question 19

One topic that microeconomics explores is how prices are determined in individual markets, while macroeconomics is concerned with issues such as the economy's overall rate of inflation, economic growth and unemployment.

Accepted Answer

This statement accurately describes the difference between microeconomics and macroeconomics.

Question 20

Economists assume that most individuals act as if they are motivated by self-interest and respond in predictable ways to changing circumstances.

Accepted Answer

This is known as the assumption of rational behavior and it is a fundamental concept in economics. It does not mean that all individuals always act in their own self-interest, but rather that they make decisions based on what they perceive to be in their own best interest. Additionally, economists believe that people respond to incentives and changes in circumstances in predictable ways based on their individual preferences and constraints.

Quiz 1: The Role and Method of Economics