ECON-2301: Midterm #1 Practice Questions

What is the best definition of economics?

• The study of money and banking

• The study of how people allocate scarce resources to satisfy unlimited wants

• The study of business and finance

• The study of how governments create policies

Scarcity is best defined as:

• The inability to satisfy all human wants due to limited resources

• The unlimited availability of resources

• A temporary shortage of a good

• A situation where supply is greater than demand

Opportunity cost refers to:

• The amount of money something costs

• The total resources used in production

• The revenue earned from producing goods

• The next best alternative foregone when making a decision

Which economic system relies on supply and demand to answer the three basic economic questions?

• Command economy

• Traditional economy

• Market economy

• Mixed economy

The difference between microeconomics and macroeconomics is:

• Microeconomics studies individuals and businesses, while macroeconomics studies the economy as a whole

• Microeconomics is about money, and macroeconomics is about politics

• Microeconomics is focused on government spending, while macroeconomics is about consumer behavior

• They are the same field of study

The law of demand states that as price ____, quantity demanded ____.

• Rises; rises

• Falls; falls

• Rises; falls

• Stays constant; rises

A movement along the demand curve occurs due to:

• A change in consumer income

• A change in the price of the good

• A change in consumer preferences

• A change in population size

Which of the following would cause a shift in the supply curve?

• A decrease in production costs

• A decrease in the price of the good

• A change in consumer preferences

• An increase in quantity demanded

The equilibrium price is determined where:

• Supply exceeds demand

• Demand exceeds supply

• The government sets a fixed price

• The quantity supplied equals the quantity demanded

A price ceiling set below equilibrium will lead to:

• A surplus

• A shortage

• No effect on the market

• A new equilibrium