benefits.
D) Economic agents who optimize attempt to choose the best feasible option, given the information that
they have.
Answer: D
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The First Principle of Economics: Optimization
2) Feasible options are options that are ________.
A) available and affordable
B) available but not affordable
C) affordable but not available
D) optimal for an economic agent
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The First Principle of Economics: Optimization
3) A consumer has $40 that he wants to spend. He faces four choices: a camera that costs $60, a cell phone
that costs $150, a book that costs $10, and a Bluetooth speaker that costs $45. Which of the following is a
feasible option for the consumer?
A) The book
B) The camera
C) The cell phone
D) The Bluetooth speaker
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The First Principle of Economics: Optimization
12
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4) A decision or choice that is made after optimization analysis ________.
A) has zero opportunity cost
B) is not necessarily risk free
C) is the same for all individuals
D) cannot be justified using normative analysis
Answer: B
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The First Principle of Economics: Optimization
5) Which of the following statements is true?
A) Optimization requires individuals to foresee the future perfectly.
B) An optimizing individual need not consider the risks involved in various choices.
C) An optimizing individual is also likely to exhibit rationality.
D) The less information that is available, the easier it is to make optimal decisions.
Answer: C
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The First Principle of Economics: Optimization
6) Which of the following statements is true?
A) Rational economic agents maximize more than just monetary income.
B) An individual does not require information to make optimal decisions.
C) The principle of optimization is only accurate when it comes to making monetary decisions.
D) It is not necessary to consider the risks of alternatives while making an optimal decision.
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The First Principle of Economics: Optimization
7) Which of the following correctly identifies the trade‐off that a budget constraint represents?
A) The amount of income that must be given up to obtain an additional unit of a good
B) The maximum amount of two goods that a consumer can purchase given his income
C) The optimum combination of goods that a consumer with a given income should purchase
D) The amount of one good that has to be given up to purchase an additional unit of the other good