Microeconomics: Introduction

Topics in this chapter

• Scope and Economic Problem
• Scarcity, Choice and Opportunity Cost
• Production Possibility Frontier and Efficiency
• Resource Allocation and Economic Systems
• Economic Agents and Production
• Microeconomics, Macroeconomics and Analysis

Cheat sheet

Practice questions

1. Question 1Q-716231

   A town has enough water for only some of the uses its residents desire. Which statement best explains the economic problem faced by the town?

   1. A.Water is scarce in relation to unlimited wants, so choices must be made.
   2. B.Water has no economic value because it is essential for life.
   3. C.The problem exists only because water is not produced in factories.
   4. D.The problem can be eliminated completely by making all water free.
   See the answer and solution
2. Question 2Q-C93736

   Riya has three hours available. She can attend a study workshop, work at a job earning ₹600, or spend the time relaxing. She values the job more than relaxation but chooses the workshop. What is the opportunity cost of her choice?

   1. A.The time spent attending the workshop
   2. B.₹600
   3. C.The benefit received from the workshop
   4. D.The value of both the job and relaxation added together
   See the answer and solution
3. Question 3Q-DCF630

   Which investigation is an example of microeconomic analysis?

   1. A.Studying the factors responsible for a rise in the overall unemployment rate of a country
   2. B.Examining how a rise in the price of electricity affects the output decision of a particular textile firm
   3. C.Analysing changes in the general price level of an economy
   4. D.Estimating the national income growth rate over a decade
   See the answer and solution
4. Question 4Q-575054

   Distinguish between positive economics and normative economics, giving one example of each.

   See the answer and solution
5. Question 5Q-7AEE9C

   An economy must decide whether scarce land should be used to build a hospital or a shopping complex. Which central problem of an economy does this decision primarily address?

   1. A.What to produce
   2. B.How to produce
   3. C.For whom to produce
   4. D.How to eliminate all wants
   See the answer and solution