Question 1

The additional or incremental benefit associated with a choice is known as
A)the marginal cost
B)the marginal benefit
C)opportunity cost
D)ceteris paribus

Accepted Answer

The additional or incremental benefit associated with a choice is known as marginal benefit. It is important to consider marginal benefit when making choices in order to maximize overall satisfaction or utility.

Question 2

This type of cost is irrelevant when making decisions at the margin.
A)Marginal cost
B)Diminishing cost
C)Sunk cost
D)Incremental cost

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered, therefore they should not be considered when making decisions at the margin. Marginal cost, diminishing cost, and incremental cost, however, are all important factors to consider when making decisions at the margin.

Question 3

Each of the following is an economic resource except
A)land
B)labor
C)capital
D)rent

Accepted Answer

Rent is not an economic resource. It is a payment made by a tenant to a landlord for the use of property. The economic resources are land, labor, capital, and entrepreneurship.

Question 4

________________ is a synonym for satisfaction or happiness.
A)Marginal cost
B)Opportunity cost
C)Utility
D)Scarcity

Accepted Answer

Utility refers to the amount of satisfaction or happiness a person derives from consuming a certain quantity of goods or services. Marginal cost refers to the additional cost required to produce one more unit of a good or service. Opportunity cost refers to the value of the next best alternative that was foregone as a result of choosing a particular course of action. Scarcity refers to the limited availability of resources to meet unlimited wants and needs.

Question 5

The additional or incremental cost associated with a choice is known as
A)the marginal cost
B)the marginal benefit
C)marginal utility
D)utility

Accepted Answer

The additional or incremental cost associated with a choice is known as the marginal cost. Therefore, it is important to consider the marginal cost when making a decision in order to determine the most efficient and effective choice.

Question 6

Which of the following is true?
A)Net benefit = total benefit - total cost
B)Net benefit = total cost - total benefit
C)Net benefit = total cost + total benefit
D)Net benefit = total benefit/total cost

Accepted Answer

Net benefit is the difference between total benefit and total cost. Therefore, option A is correct as it correctly represents the formula for net benefit.

Question 7

The difference between the earnings that a firm receives from selling its good or service and the costs of production for the good or service is the
A)marginal benefit
B)opportunity cost
C)utility
D)profit

Accepted Answer

The difference between earnings and costs of production is known as profit.

Question 8

The study of how prices for a good is determined is an example of
A)macroeconomics
B)microeconomics
C)economic growth
D)diminishing marginal returns

Accepted Answer

Microeconomics focuses on the study of individual behavior and decision-making in markets, including how prices for goods are determined.

Question 9

Engaging in an activity until marginal benefits equal marginal costs is known as
A)the diminishing marginal returns
B)the diminishing marginal utility
C)the marginal decision rule
D)the marginal utility rule

Accepted Answer

The Marginal decision rule states that if the marginal benefit of an activity is greater than or equal to its marginal cost, you should engage in it. If the marginal cost is greater than the marginal benefit, you should not. This allows individuals and firms to make rational decisions about how to allocate their resources effectively. Option A, diminishing marginal returns, refers to the decrease in output or production as more and more units are added to a fixed input. Option B, diminishing marginal utility, refers to the decrease in satisfaction or usefulness as more and more units of a good are consumed. Option D, the marginal utility rule, is not a commonly used economic concept.

Question 10

Your second glass of water on a hot summer day will
A)increase total utility and decrease marginal utility
B)decrease total utility and decrease marginal utility
C)increase total utility and increase marginal utility
D)decrease total utility and increase marginal utility

Accepted Answer

The second glass of water on a hot summer day will increase the total utility because it adds to the satisfaction received from consuming water. However, it will decrease the marginal utility because the additional satisfaction gained from consuming the second glass is less than the satisfaction gained from the first glass, reflecting the law of diminishing marginal utility.

Question 11

Ceteris paribus, as more and more of an activity is done, the additional benefits derived from the activity decreases represents
A)the law of increasing marginal costs
B)the law of diminishing marginal costs
C)the law of increasing marginal benefits
D)the law of diminishing marginal benefits

Accepted Answer

This is known as the law of diminishing marginal benefits, which states that as more and more of an activity is done, the additional benefits derived from that activity will eventually decrease. This is due to the fact that the satisfaction, utility or happiness that is derived from each additional unit or increment of the activity decreases over time, resulting in diminishing marginal benefits.

Question 12

Economics is
A)the study of production
B)the study of unemployment and inflation
C)the study of choices
D)the study of Gross Domestic Product

Accepted Answer

Economics is primarily focused on the study of choices, particularly the allocation of scarce resources among competing uses. While production, unemployment, inflation, and GDP can be important components of economic analysis, they are ultimately secondary to the choices that individuals, firms, and governments make about how to use limited resources.

Question 13

Which of the following would be a focus of macroeconomics?
A)The study of how individuals make a decision.
B)The study of how businesses make a profit.
C)The study of how the price for a product is determined.
D)The study of changes of price levels in an economy

Accepted Answer

Macroeconomics focuses on the analysis of the economy as a whole, including topics such as inflation, economic growth, and employment levels. The study of changes in price levels in an economy is a key topic of macroeconomics.

Question 14

Because of the concept of scarcity
A)choices need to be made
B)marginal benefits increases
C)marginal costs decrease
D)total returns of benefit remains unchanged

Accepted Answer

Scarcity means that there are limited resources and unlimited wants, which leads to the need to make choices. Therefore, choice letter A is the best answer. Marginal benefits and costs may change depending on the specific situation, and the total returns of benefit may also increase or decrease based on the choices made.

Question 15

Decisions made "at the margin" require
A)comparing the benefits and costs of the next, or incremental, of consuming a good or service
B)comparing the total benefits and costs of a consuming a good
C)comparing the total benefits and the net costs of consuming a good
D)comparing the net benefits and total costs of consuming a good

Accepted Answer

Decisions made "at the margin" involve considering the costs and benefits of the next increment of consuming a good or service, rather than the total costs and benefits. Therefore, choice A is the correct answer.

Question 16

The concept of ____________________ is used to isolate important relationships.
A)opportunity cost
B)marginal benefit
C)ceteris paribus
D)diminishing marginal cost

Accepted Answer

Ceteris paribus is the concept that all other variables are held constant while analyzing the relationship between two variables. This allows us to isolate the effect of one variable on the other and identify important relationships. Options A, B, and D are economic concepts that are not directly related to isolating important relationships between variables.

Question 17

The law of increasing marginal costs states that
A)Ceteris paribus, as more and more of an activity are done; the additional costs of the activity tend to decrease.
B)Ceteris paribus, as more and more of an activity are done; the additional costs of the activity tend to increase.
C)Ceteris paribus, as more and more of an activity are done; the additional benefits of the activity tend to decrease.
D)Ceteris paribus, as more and more of an activity are done; the additional benefits of the activity tend to increase.

Accepted Answer

The law of increasing marginal costs states that as production increases, the additional cost of producing each additional unit tends to increase. This is due to the fact that as production increases, resources become scarcer and more difficult to obtain, which results in higher costs.

Question 18

A _______________ is a cost that, once incurred, cannot be recovered.
A)marginal cost
B)diminishing cost
C)sunk cost
D)incremental cost

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered, regardless of any future actions. Marginal costs refer to the cost of producing one additional unit of a good or service, while diminishing costs refer to a decrease in the marginal output as more units are produced. Incremental costs refer to the increase in costs associated with producing an additional unit or making a small change in the production process.

Question 19

The value of the next-best alternative forgone is the
A)opportunity cost
B)profit
C)utility
D)marginal benefit

Accepted Answer

The value of the next-best alternative forgone is referred to as opportunity cost. Since opportunity cost is the cost of the best alternative given up, it is important to consider it when making decisions. Therefore, A is the correct choice.

Question 20

Which of the following statements is most correct?
A)Scarcity forces us to allocate our scarce resources among the many uses for them.
B)Marginal benefits require greater costs for decisions to be made.
C)Choices arise from trade-offs.
D)Scarcity is not common to all societies.

Accepted Answer

Scarcity forces us to allocate our scarce resources among the many uses for them.

Quiz 1: An Introduction to the Economic Way of Thinking

The additional or incremental benefit associated with a choice is known as

This type of cost is irrelevant when making decisions at the margin.

Each of the following is an economic resource except

________________ is a synonym for satisfaction or happiness.

The additional or incremental cost associated with a choice is known as

Which of the following is true?

The difference between the earnings that a firm receives from selling its good or service and the costs of production for the good or service is the

The study of how prices for a good is determined is an example of

Engaging in an activity until marginal benefits equal marginal costs is known as

Your second glass of water on a hot summer day will

Ceteris paribus, as more and more of an activity is done, the additional benefits derived from the activity decreases represents

Economics is

Which of the following would be a focus of macroeconomics?

Because of the concept of scarcity

Decisions made "at the margin" require

The concept of ____________________ is used to isolate important relationships.

The law of increasing marginal costs states that

A _______________ is a cost that, once incurred, cannot be recovered.

The value of the next-best alternative forgone is the

Which of the following statements is most correct?