Microeconomics And Macroeconomics Concepts! Trivia Quiz
As an economist, you must have a good understanding of some microeconomics and macroeconomics concepts. Studying economics offers one an idea of how economic phenomena occur; how economic performance might improve and the factors affecting the world economies as a whole. Test your knowledge on the said concepts by taking up this test and be on the lookout for others like it!
- 1.
Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that
- A.
Trade can make everyone better off
- B.
People respond to incentives
- C.
Rational people think at the margin
- D.
People face tradeoffs and opportunity costs.
Correct Answer
D. People face tradeoffs and opportunity costs.Explanation
This scenario illustrates the concept of tradeoffs and opportunity costs because Mitch has to choose between buying a new amplifier or a new mp3 player. He cannot have both because they both cost $100, so he has to make a decision and give up the opportunity to have the other item. This highlights the idea that making a choice involves considering the alternatives and the potential costs or sacrifices associated with each option.Rate this question:
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- 2.
Economic theory predicts that people make choices in a manner that
- A.
Reflects the fact that resources are unlimited.
- B.
Makes them well liked by others.
- C.
Shows that they do not respond to monetary incentives
- D.
Makes them better off
Correct Answer
D. Makes them better offExplanation
Economic theory predicts that people make choices in a manner that makes them better off. This means that individuals tend to make decisions that they believe will improve their own well-being or increase their satisfaction. This concept is based on the assumption that individuals are rational and seek to maximize their own utility or happiness. By making choices that they perceive as beneficial, individuals aim to improve their overall welfare or standard of living.Rate this question:
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- 3.
The rationality assumption says that
- A.
People do not respond to incentives since incentives require scarce resources
- B.
All economic analysis must be normative.
- C.
People do not intentionally make decisions that would leave them worse off
- D.
People never make bad decisions
Correct Answer
C. People do not intentionally make decisions that would leave them worse offExplanation
The rationality assumption states that people do not intentionally make decisions that would leave them worse off. This means that individuals are assumed to make choices that they believe will benefit them or improve their well-being. It implies that people are rational and will not deliberately choose options that they perceive as detrimental to their own interests. This assumption is commonly used in economic analysis to understand and predict human behavior in decision-making processes.Rate this question:
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- 4.
A point inside a production possibilities curve indicates.
- A.
An output combination that is unattainable with the current resource and technology levels.
- B.
Resources are being used very efficiently.
- C.
Opportunity costs are constant.
- D.
Resources are idle.
Correct Answer
D. Resources are idle.Explanation
A point inside a production possibilities curve indicates that resources are idle. This means that the economy is not fully utilizing its available resources to produce goods and services. It suggests that there is unused or underutilized capacity in the economy, which could be due to factors such as unemployment or inefficient allocation of resources.Rate this question:
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- 5.
Microeconomics is the study of
- A.
How money affects the economy
- B.
How individual households and firms make decisions
- C.
How government affects the economy
- D.
How the economy as a whole works
Correct Answer
B. How individual households and firms make decisionsExplanation
Microeconomics focuses on the behavior and decision-making of individual households and firms within the economy. It examines how these economic agents allocate their resources, make choices, and interact in markets to satisfy their needs and maximize their well-being. By studying microeconomics, we gain insights into the factors that influence individual decision-making, such as prices, costs, and incentives. This knowledge helps us understand the functioning of markets and how they determine the allocation of goods and services in the economy.Rate this question:
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- 6.
We know that products G and H are complementary goods, because when the price of G increases
- A.
The quantity of H demanded will move along its demand curve.
- B.
The demand curve for H will shift to the left.
- C.
The demand curve for H will shift to the right
- D.
The demand curve for H will remain unchanged
Correct Answer
B. The demand curve for H will shift to the left.Explanation
When two goods are complementary, they are typically consumed together. In this case, if the price of G increases, it means that G becomes more expensive relative to H. As a result, consumers will likely reduce their demand for G and, consequently, the demand for H will also decrease. This decrease in demand for H will cause the demand curve for H to shift to the left.Rate this question:
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- 7.
Change in quantity demanded.
- A.
Can be either a shift or a movement along the demand curve
- B.
Is caused when there is a change in a ceteris paribus factor
- C.
Is a shift of the demand curve
- D.
Is a movement along the demand curve
Correct Answer
D. Is a movement along the demand curveExplanation
The correct answer is "is a movement along the demand curve." This means that when there is a change in the quantity demanded, it is due to a change in the price of the good or service, while all other factors remain constant. In this case, there is no shift in the entire demand curve, but rather a movement along the curve as the quantity demanded changes in response to a change in price.Rate this question:
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- 8.
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- A.
There would be a surplus of rental housing
- B.
The supply of rental housing would decrease.
- C.
There would be a shortage of rental housing
- D.
The demand for rental housing would increase.
Correct Answer
C. There would be a shortage of rental housingExplanation
If the local government legally mandated rents that were below the market-clearing price, it would create a shortage of rental housing. This is because the market-clearing price is the price at which the quantity of rental housing supplied equals the quantity demanded. By setting rents below this price, the government would discourage landlords from supplying rental housing, as they would not be able to cover their costs or make a profit. At the same time, the lower rents would increase the demand for rental housing, as it would become more affordable for tenants. The result would be an excess of demand over supply, leading to a shortage of rental housing.Rate this question:
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- 9.
Macroeconomics deals with
- A.
Specific sectors within the economy
- B.
The retail industry only
- C.
Decisions made by firms
- D.
Aggregates within the economy
Correct Answer
D. Aggregates within the economyExplanation
Macroeconomics is the branch of economics that focuses on the overall performance and behavior of the entire economy. It analyzes aggregates such as national income, employment, inflation, and economic growth. Macroeconomists study the interrelationships and dynamics between different sectors of the economy, such as households, businesses, and the government. Therefore, the correct answer is "aggregates within the economy".Rate this question:
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- 10.
Suppose that a new study finds that eating more peanut butter will improve a person's health. As a result
- A.
The demand for peanut butter will fall
- B.
The price of peanut butter will fall
- C.
A smaller amount of peanut butter will be purchased
- D.
The demand for peanut butter will rise
Correct Answer
D. The demand for peanut butter will riseExplanation
The correct answer is that the demand for peanut butter will rise. This is because the new study suggests that eating more peanut butter will improve a person's health, which can lead to an increased desire for peanut butter among consumers. When the demand for a product increases, it typically results in a higher quantity of the product being purchased.Rate this question:
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