Test Your Knowledge: Economics Basics Quiz

Question 1

A local coffee shop notices that when they raise the price of their lattes from $4 to $5, the quantity demanded drops from 200 cups per day to 120 cups per day. What is the price elasticity of demand for their lattes?

Accepted Answer

1.6 (elastic)

Question 2

Maria has 4 hours of free time and can either study for her economics exam (which would improve her grade) or work a shift at her part-time job earning $15 per hour. If she chooses to study, what is her opportunity cost?

Accepted Answer

$60, because that's the income she forgoes by not working

Question 3

In a perfectly competitive market, a wheat farmer is currently producing at a level where marginal cost equals $4 per bushel and the market price is $6 per bushel. To maximize profit, the farmer should:

Accepted Answer

Increase production until marginal cost equals $6

Question 4

Country X reports the following economic data for 2024:
- Consumer spending: $800 billion
- Business investment: $200 billion
- Government purchases: $250 billion
- Exports: $150 billion
- Imports: $180 billion

What is Country X's GDP using the expenditure approach?

Accepted Answer

$1,220 billion

Question 5

The Consumer Price Index (CPI) was 248 in 2023 and 260 in 2024. A worker's nominal wage increased from $50,000 in 2023 to $52,000 in 2024. What happened to the worker's real wage (purchasing power)?

Accepted Answer

Real wage decreased by approximately 0.8%