Principles of Microeconomics Exam
Questions and Answers Graded A+
2025 New Update
When government policies such as the welfare system try to help the most needy
members of society, it increases the productivity of the needy in the society - Answer-
False
When the government redistributes income from the rich to the poor, people work less
and produce fewer goods and services - Answer- True
In economics, the cost of something is the dollar amount of obtaining it - Answer- False
The opportunity cost of going to college is the value of the best opportunity a student
gives up to attend college - Answer- True
For most students, the largest single cost of a college education is the wages given up
to attend school - Answer- True
Mallory decides to spend 3 hours working overtime rather than watching a video with
her friends. She earns $8 an hour. Her opportunity cost of working is the $24 she earns
working - Answer- False
Russell spends an hour studying instead of playing tennis. The opportunity cost to him
of studying is the enjoyment and exercise he would have received had he played tennis
- Answer- True
People make decisions at the margin by following tradition - Answer- False
After much consideration, you have chosen Cancun over Ft. Lauderdale for your Spring
Break trip this year. For this decision to change, the marginal benefit of Cancun must
increase - Answer- False
A rational decision maker takes an action only if the marginal benefit is less than the
marginal cost - Answer- False
Suppose your management professor has been offered a corporate job with a 30% pay
increase. He has decided to take the job. For him, the marginal cost of leaving was
greater than the marginal benefit - Answer- False
Prices direct economic activity in a market economy by reducing scarcity of the goods
and services produced - Answer- False
, An example of market power is a fast food restaurant in a college town - Answer- False
An example of a firm with market power is a cable TV provider in St. Louis - Answer-
True
The "invisible hand" directs economic activity through advertising - Answer- False
Both The Wealth of Nations and the Declaration of Independence share the point of
view that individuals are best left to their own devices without the government guiding
their actions - Answer- True
A primary function of prices in a market economy is to provide participants with
spending limits - Answer- False
Causes of market failure include externalities and market power - Answer- True
An externality is the impact of a person's actions on that person's well-being - Answer-
False
An example of an externality is the impact of pollution from a factory on the health of
people in the vicinity of the factory - Answer- True
The income of a typical worker in a country is most closely linked to productivity -
Answer- True
If the government wanted to enact a policy to increase living standards in the country, it
might allow corporate tax write-offs for money spent on worker safety - Answer- False
The forces that make market economies work are price and quantity - Answer- False
In a free market, suppliers determine how much of a good will be sold and the price at
which it is sold - Answer- False
Scarcity exists when there is less than an infinite amount of a resource or good -
Answer- False
Approximately 75 percentage of the world's economies experience scarcity. - Answer-
False
Economics is the study of how society manages its scarce resources. - Answer- True
In most societies resources are allocated by a single central planner - Answer- False
Economists use the phrase "There is no such thing as a free lunch," to illustrate how
inflation increases prices - Answer- False
Questions and Answers Graded A+
2025 New Update
When government policies such as the welfare system try to help the most needy
members of society, it increases the productivity of the needy in the society - Answer-
False
When the government redistributes income from the rich to the poor, people work less
and produce fewer goods and services - Answer- True
In economics, the cost of something is the dollar amount of obtaining it - Answer- False
The opportunity cost of going to college is the value of the best opportunity a student
gives up to attend college - Answer- True
For most students, the largest single cost of a college education is the wages given up
to attend school - Answer- True
Mallory decides to spend 3 hours working overtime rather than watching a video with
her friends. She earns $8 an hour. Her opportunity cost of working is the $24 she earns
working - Answer- False
Russell spends an hour studying instead of playing tennis. The opportunity cost to him
of studying is the enjoyment and exercise he would have received had he played tennis
- Answer- True
People make decisions at the margin by following tradition - Answer- False
After much consideration, you have chosen Cancun over Ft. Lauderdale for your Spring
Break trip this year. For this decision to change, the marginal benefit of Cancun must
increase - Answer- False
A rational decision maker takes an action only if the marginal benefit is less than the
marginal cost - Answer- False
Suppose your management professor has been offered a corporate job with a 30% pay
increase. He has decided to take the job. For him, the marginal cost of leaving was
greater than the marginal benefit - Answer- False
Prices direct economic activity in a market economy by reducing scarcity of the goods
and services produced - Answer- False
, An example of market power is a fast food restaurant in a college town - Answer- False
An example of a firm with market power is a cable TV provider in St. Louis - Answer-
True
The "invisible hand" directs economic activity through advertising - Answer- False
Both The Wealth of Nations and the Declaration of Independence share the point of
view that individuals are best left to their own devices without the government guiding
their actions - Answer- True
A primary function of prices in a market economy is to provide participants with
spending limits - Answer- False
Causes of market failure include externalities and market power - Answer- True
An externality is the impact of a person's actions on that person's well-being - Answer-
False
An example of an externality is the impact of pollution from a factory on the health of
people in the vicinity of the factory - Answer- True
The income of a typical worker in a country is most closely linked to productivity -
Answer- True
If the government wanted to enact a policy to increase living standards in the country, it
might allow corporate tax write-offs for money spent on worker safety - Answer- False
The forces that make market economies work are price and quantity - Answer- False
In a free market, suppliers determine how much of a good will be sold and the price at
which it is sold - Answer- False
Scarcity exists when there is less than an infinite amount of a resource or good -
Answer- False
Approximately 75 percentage of the world's economies experience scarcity. - Answer-
False
Economics is the study of how society manages its scarce resources. - Answer- True
In most societies resources are allocated by a single central planner - Answer- False
Economists use the phrase "There is no such thing as a free lunch," to illustrate how
inflation increases prices - Answer- False
