Right! Opportunity cost is the value of the next best alternative given up, here her $50 in wages.

Her opportunity cost is the $50 she gave up. Opportunity cost is the value of the best alternative you forgo, even when something has no price tag.

Exactly! Scarcity is the basic gap between limited resources and unlimited wants, and it affects everyone.

Scarcity exists because resources are limited while human wants are not. A temporary shortage in a store is a different thing.

Correct! A change in the good's own price causes a movement along the curve, a change in quantity demanded.

The curve stays put and we move along it. Only factors other than the good's own price, like income or tastes, shift the demand curve.

Yes! Gasoline cars are a substitute, so pricier gas makes electric cars more attractive at every price.

A rise in gasoline prices shifts demand right, because it makes a substitute more expensive. Changes in a good's own price only move along the curve.

Right! A binding price ceiling raises quantity demanded and lowers quantity supplied, causing a shortage.

It causes a shortage. Below equilibrium, more people want apartments while landlords offer fewer.

Correct! A minimum wage is a price floor: a legal minimum price, here for labor.

It's a price floor, a legal minimum price. A ceiling is a legal maximum, like rent control.

Yes! Quantity changed more than price, so demand is elastic, with an elasticity of 3.

Demand is elastic: the 30% drop in quantity is bigger than the 10% price rise. Inelastic demand barely reacts to price.

Right! Goods that are necessities with few substitutes have inelastic demand: people buy them almost regardless of price.

Insulin is essential and has few substitutes, so people keep buying it even when the price rises. That is inelastic demand.

Correct! GDP counts the market value of final goods and services newly produced within a country in a year.

The new house counts. GDP measures new final production, so used goods, stocks, and transfers like gifts are left out.

Yes! Real growth is roughly nominal growth minus inflation: 5% − 3% = 2%.

Real GDP grew about 2%. Real values remove inflation, so 5% nominal growth minus 3% inflation leaves about 2%.

Right! Inflation measures the rise in the overall price level; some prices rise more, some less, some fall.

It means the average price level rose by 4%. Individual prices vary: some rose much more, others fell.

Correct! Printing money without more output caused hyperinflation, with prices doubling in about a day at the peak.

Prices rose out of control in hyperinflation. More money chasing the same goods raises prices instead of making people richer.

Yes! Higher rates make borrowing costlier, cooling spending and easing price pressures.

The Fed raises interest rates. Costlier borrowing slows spending, which brings inflation down; lowering rates does the opposite.

Right! Fiscal policy is government taxing and spending, decided by Congress and the President.

It's fiscal policy: changes in taxes and government spending. Monetary policy is run by the Federal Reserve.

Correct! To be unemployed you must be without a job and actively looking for one.

The laid-off worker applying for jobs is unemployed. People not looking for work, like retirees or most students, are outside the labor force.

Yes! A tariff is a tax collected from domestic importers, and much of it is passed on to domestic buyers as higher prices.

US importers pay it, and they pass much of it on to American buyers. A tariff is a tax on imports collected at home.

Right! Each country should specialize where its opportunity cost is lowest; both can then gain from trading.

Yes, both gain thanks to comparative advantage. What matters is lower opportunity cost, not producing more of everything.

Exactly! The $15 is a sunk cost; only future costs and benefits should guide your choice.

Leave if your time has better uses. The $15 is a sunk cost you can't recover, so it shouldn't affect the decision.

Right! Thinking at the margin means comparing the extra benefit of one more unit with its extra cost.

It compares the extra (marginal) cost with the extra revenue. Decisions are made at the margin, not on totals or past costs.

Correct! Her pay buys less than before: 2% − 5% is a real loss of about 3%.

Her real wage fell by about 3%. Prices outpaced her raise, so she can afford less than before.