Untitled Flashcards Set

Economics Active Recall Quiz (Chapters 1-5)

Chapter 1: Welcome to Economics!

Multiple Choice

1. What is the primary focus of economics?
   a) Money and finance
   b) Decision-making in the face of scarcity
   c) Business and trade only
   d) Government regulations
   
   

2. Which of the following best describes microeconomics?
   a) The study of national economies and policies
   b) The study of individual decision-making and markets
   c) The study of economic history
   d) The study of government spending
   
   

True or False
3. The division and specialization of labor improve efficiency in production. (True/False)

4. Scarcity means that human wants exceed available resources. (True/False)

Fill in the Blank
5. _________ is the study of how individuals and societies allocate their limited resources to satisfy their nearly unlimited wants.

Short Answer
6. Explain why opportunity cost is an important concept in economics.

Chapter 2: Choice in a World of Scarcity

Multiple Choice
7. The production possibilities frontier (PPF) illustrates:
a) The relationship between supply and demand
b) The trade-offs between two goods given limited resources
c) How markets set prices
d) How inflation impacts an economy

8. A rational decision-maker should:
   a) Ignore opportunity costs
   b) Compare marginal benefits to marginal costs
   c) Always choose the most expensive option
   d) Rely solely on past decisions

True or False
9. A point inside the PPF indicates full efficiency of resources. (True/False)

10. Budget constraints represent the limited income available for spending. (True/False)

Fill in the Blank
11. _________ cost refers to the value of the next best alternative forgone when making a choice.

Short Answer
12. How does the concept of trade-offs relate to economic decision-making?

Chapter 3: Demand and Supply

Multiple Choice
13. What happens when there is an increase in demand, all else held constant?
a) Equilibrium price falls
b) Equilibrium price rises
c) Supply increases
d) Quantity supplied decreases

14. Which of the following does NOT shift the supply curve?
    a) Changes in production technology
    b) Changes in consumer income
    c) Changes in the cost of raw materials
    d) Government taxes and subsidies

True or False
15. A surplus occurs when quantity demanded exceeds quantity supplied. (True/False)

16. If the price of a good increases, the quantity demanded generally decreases. (True/False)

Fill in the Blank
17. The point where quantity demanded equals quantity supplied is called the _________.

Short Answer
18. Explain how an increase in the price of a substitute good affects the demand for a product.

Chapter 4: Labor and Financial Markets

Multiple Choice
19. In labor markets, firms are:
a) Demanders of labor
b) Suppliers of labor
c) Price makers
d) Government regulators

20. A minimum wage set above the equilibrium wage creates:
    a) A labor shortage
    b) A labor surplus
    c) No effect
    d) A new equilibrium

True or False
21. Financial markets allocate resources by channeling funds from savers to borrowers. (True/False)

22. A decrease in the interest rate generally encourages more borrowing. (True/False)

Fill in the Blank
23. The _________ is the price of borrowing money, usually expressed as a percentage.

Short Answer
24. How does an increase in the interest rate affect borrowing and saving behavior?

End of Quiz

Chapter 1: Welcome to Economics!

Multiple Choice

1. b) Decision-making in the face of scarcity
   Scarcity is the fundamental problem in economics, leading to choices about resource allocation (Chapter 1.1).

2. b) The study of individual decision-making and markets
   Microeconomics focuses on individuals and firms, whereas macroeconomics studies the whole economy (Chapter 1.2).

True or False
3. True
Adam Smith emphasized specialization and division of labor in "The Wealth of Nations" as a way to increase productivity (Chapter 1.1).

4. True
   Scarcity exists because resources are limited while human wants are unlimited (Chapter 1.1).

Fill in the Blank
5. Economics
Economics is the study of resource allocation given scarcity (Chapter 1.1).

Short Answer
6. Opportunity cost is the value of the next best alternative forgone when making a decision. It helps individuals and societies make rational choices by considering what must be sacrificed to obtain something else (Chapter 1.1).

Chapter 2: Choice in a World of Scarcity

Multiple Choice
7. b) The trade-offs between two goods given limited resources
The PPF shows all possible combinations of goods an economy can produce efficiently (Chapter 2.2).

8. b) Compare marginal benefits to marginal costs
   Rational decision-makers continue an activity if the marginal benefit exceeds the marginal cost (Chapter 2.1).

True or False
9. False
A point inside the PPF represents inefficiency or underutilization of resources (Chapter 2.2).

10. True
    A budget constraint represents all possible combinations of goods and services that can be purchased with a given income (Chapter 2.1).

Fill in the Blank
11. Opportunity
Opportunity cost is a key concept in decision-making (Chapter 2.1).

Short Answer
12. Trade-offs occur when choosing one option means giving up another. Every decision involves a trade-off due to scarcity (Chapter 2.2).

Chapter 3: Demand and Supply

Multiple Choice
13. b) Equilibrium price rises
An increase in demand shifts the demand curve right, raising equilibrium price (Chapter 3.1).

14. b) Changes in consumer income
    Consumer income affects demand, not supply (Chapter 3.2).

True or False
15. False
A surplus occurs when quantity supplied exceeds quantity demanded (Chapter 3.3).

16. True
    The law of demand states that price and quantity demanded are inversely related (Chapter 3.1).

Fill in the Blank
17. Equilibrium
Equilibrium is the price at which quantity demanded equals quantity supplied (Chapter 3.1).

Short Answer
18. If the price of a substitute good increases, consumers switch to the original good, increasing its demand (Chapter 3.2).

Chapter 4: Labor and Financial Markets

Multiple Choice
19. a) Demanders of labor
Firms demand labor, while households supply it (Chapter 4.1).

20. b) A labor surplus
    A minimum wage above equilibrium creates excess supply of labor (unemployment) (Chapter 4.1).

True or False
21. True
Financial markets connect savers and borrowers (Chapter 4.2).

22. True
    Lower interest rates make borrowing cheaper, encouraging borrowing and spending (Chapter 4.2).

Fill in the Blank
23. Interest rate
Interest rate is the cost of borrowing money (Chapter 4.2).

Short Answer
24. An increase in interest rates discourages borrowing (due to higher costs) and encourages saving (due to higher returns) (Chapter 4.2).