Principles of Economics Quiz

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What is the primary focus of economics?

The study of human behavior over scarce resources (correct)

The study of physical resources

The study of historical economic data

The study of governmental policies

People do not face any trade-offs when making decisions.

False

What is the opportunity cost of attending a lecture?

Time, energy, tuition, and potential working hours or enjoyment with others.

The principle that states 'The cost of something is what you give up to get it' is known as the principle of __________.

Opportunity Cost Signup and view all the answers

Match the following concepts with their definitions:

Efficiency = Getting the most from scarce resources Equity = Fair distribution of economic prosperity Opportunity Cost = Cost of the next best alternative Marginal Changes = Small incremental adjustments Signup and view all the answers

Which principle states that 'Rational people think at the margin'?

Principle 3 Signup and view all the answers

An increase in equity always leads to an increase in efficiency.

False Signup and view all the answers

What is the main objective of rational people in economics?

To maximize utility subject to constraints. Signup and view all the answers

What primarily determines a country's standard of living?

Ability to produce goods and services Signup and view all the answers

Inflation occurs when there is a decrease in the overall level of prices in the economy.

False Signup and view all the answers

What is the term used for the irregular fluctuations in economic activity?

Business Cycle Signup and view all the answers

A country's __________ reflects the quantity of goods and services produced from each hour of a worker's time.

productivity Signup and view all the answers

Match the following terms with their definitions:

Microeconomics = Study of individual households and firms Macroeconomics = Study of economy-wide phenomena Positive statements = Descriptive claims about the world Normative statements = Prescriptive claims about how the world should be Signup and view all the answers

Which factor may NOT directly affect a country's productivity?

Weather patterns Signup and view all the answers

Policy advisers focus on normative statements to help improve economic conditions.

True Signup and view all the answers

What condition must be met for a rational person to make a decision according to the principles discussed?

MB > MC Signup and view all the answers

What is the short-run tradeoff that society faces between two economic factors?

Inflation and unemployment Signup and view all the answers

Trade is designed to benefit only one party involved.

False Signup and view all the answers

What does the 'invisible hand' refer to in economic terms?

The unseen forces that move the free market economy. Signup and view all the answers

The principle that emphasizes that 'markets are usually a good way to organize economic activity' is known as ______.

Principle 6 Signup and view all the answers

Match the following economic principles with their corresponding descriptions:

Principle 4 = People respond to incentives Principle 5 = Trade can make everyone better off Principle 6 = Markets organize economic activity Principle 7 = Governments can improve market outcomes Signup and view all the answers

What is a potential outcome when a market fails to allocate resources efficiently?

Market failure Signup and view all the answers

Free markets eliminate the need for government intervention entirely.

False Signup and view all the answers

What role do incentives play in human economic behavior?

Incentives induce individuals to act or make decisions. Signup and view all the answers

What does the principle of comparative advantage state?

Each good should be produced by the country with the lowest opportunity cost. Signup and view all the answers

A perfectly competitive market allows buyers and sellers to set the prices directly.

False Signup and view all the answers

What is the relationship described by the law of demand?

As price rises, quantity demanded falls. Signup and view all the answers

In competitive markets, buyers and sellers are known as ______.

price takers Signup and view all the answers

Which of the following factors does NOT shift the demand curve?

Price of the good Signup and view all the answers

Match the following concepts with their descriptions:

Supply = Amount of a good sellers are willing to sell Demand = Amount of a good buyers are willing to purchase Market Demand = Total demand from all individuals in the market Quantity Supplied = Amount of good that sellers are able to sell at a given price Signup and view all the answers

What is represented by the supply curve?

The relationship between price and quantity supplied. Signup and view all the answers

The equation for Catherine's individual demand curve is Qd = ______.

12 - 2P Signup and view all the answers

What occurs when the quantity supplied is greater than the quantity demanded?

Surplus Signup and view all the answers

Equilibrium price is the price at which quantity demanded exceeds quantity supplied.

False Signup and view all the answers

What does elasticity measure in economics?

The responsiveness of quantity demanded or supplied to one of its determinants. Signup and view all the answers

When demand is inelastic, total revenue (TR) ___ when price increases.

increases Signup and view all the answers

Match the type of elasticity with its description:

Price elasticity of demand = Responsiveness of quantity demanded to price changes Income elasticity of demand = Responsiveness of quantity demanded to income changes Cross price elasticity of demand = Responsiveness of quantity demanded of one good to the price of another good Perfectly inelastic demand = Quantity demanded remains the same regardless of price changes Signup and view all the answers

If income elasticity of demand is less than 0, the good is classified as which type?

Inferior good Signup and view all the answers

A perfectly elastic demand means that consumers will purchase any quantity at any price.

False Signup and view all the answers

What is the formula for total revenue?

TR = P x Q Signup and view all the answers

Principles of Economics Quiz

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Questions and Answers

What is the primary focus of economics?

People do not face any trade-offs when making decisions.

What is the opportunity cost of attending a lecture?

The principle that states 'The cost of something is what you give up to get it' is known as the principle of __________.

Match the following concepts with their definitions:

Which principle states that 'Rational people think at the margin'?

An increase in equity always leads to an increase in efficiency.

What is the main objective of rational people in economics?

What primarily determines a country's standard of living?

Inflation occurs when there is a decrease in the overall level of prices in the economy.

What is the term used for the irregular fluctuations in economic activity?

A country's __________ reflects the quantity of goods and services produced from each hour of a worker's time.

Match the following terms with their definitions:

Which factor may NOT directly affect a country's productivity?

Policy advisers focus on normative statements to help improve economic conditions.

What condition must be met for a rational person to make a decision according to the principles discussed?

What is the short-run tradeoff that society faces between two economic factors?

Trade is designed to benefit only one party involved.

What does the 'invisible hand' refer to in economic terms?

The principle that emphasizes that 'markets are usually a good way to organize economic activity' is known as ______.

Match the following economic principles with their corresponding descriptions:

What is a potential outcome when a market fails to allocate resources efficiently?

Free markets eliminate the need for government intervention entirely.

What role do incentives play in human economic behavior?

What does the principle of comparative advantage state?

A perfectly competitive market allows buyers and sellers to set the prices directly.

What is the relationship described by the law of demand?

In competitive markets, buyers and sellers are known as ______.

Which of the following factors does NOT shift the demand curve?

Match the following concepts with their descriptions:

What is represented by the supply curve?

The equation for Catherine's individual demand curve is Qd = ______.

What occurs when the quantity supplied is greater than the quantity demanded?

Equilibrium price is the price at which quantity demanded exceeds quantity supplied.

What does elasticity measure in economics?

When demand is inelastic, total revenue (TR) ___ when price increases.

Match the type of elasticity with its description:

If income elasticity of demand is less than 0, the good is classified as which type?

A perfectly elastic demand means that consumers will purchase any quantity at any price.

What is the formula for total revenue?

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