Principles of Economics Quiz

What is the production possibilities frontier?

• A new type of smartphone technology

• A graph that shows the various combinations of output that an economy can produce given the available factors of production and the available production technology.

• A type of flower that grows in the desert

• A method for predicting the stock market

Define opportunity cost and provide an example.

• The opportunity cost of going to college is the cost of tuition and books

• The opportunity cost of going to college is the income that could have been earned by working instead.

• The opportunity cost of going to college is the social activities missed out on

• The opportunity cost of going to college is the time spent studying

Explain the concept of comparative advantage in economics.

• The ability to produce a good or service at a higher opportunity cost than others

• The ability of a country, individual, or company to produce a good or service at a lower opportunity cost than others.

• The concept of producing goods and services at the same opportunity cost as others

• The idea that a country, individual, or company should only produce what they are best at

Differentiate between microeconomics and macroeconomics.

• Microeconomics analyzes the economy as a whole, while macroeconomics studies the behavior of individual consumers.

• Microeconomics is concerned with the economy as a whole, while macroeconomics focuses on specific industries.

• Microeconomics focuses on individual economic agents such as households and firms, while macroeconomics studies the economy as a whole.

• Microeconomics focuses on studying the environment, while macroeconomics studies individual economic agents.

What is the first principle of economics?

• People face trade-offs

• Government controls all economic decisions

• People don't face trade-offs

• There are no scarcity of resources

Explain the principle of incentives.

• Incentives are unrelated to the decision-making process of individuals.

• Incentives are punishments that have no effect on people's choices.

• Incentives are rewards or penalties that influence the choices people make.

• Incentives are only effective for certain individuals and not for the majority.

Discuss the principle of markets.

• Supply and demand

• Inflation and deflation

• Monopoly and competition

• Cost and benefit analysis