Econ 252- Micro Exam 1 Questions with Correct Answers (Grade A+)
Question 1: Economic reasoning allows economic agents to make decisions________.
Answer: by comparing the costs and benefits of various options.
Question 2: The net benefit of a particular alternative equals __________.
Answer: the benefits received from the alternative minus the costs incurred when choosing the alternative.
Question 3: Empiricism is analysis that uses ________ to test theories.
Answer: data
Question 4: Which of the following is NOT a key principle of economics?
A) Empiricism
B) Optimization
C) Substitution
D) Equilibrium
Answer: Substitution
Question 5: Who among the following is an example of a free rider?
A) An individual who sneaks into a music concert
B) A club member who makes voluntary contributions to the club
C) A consumer who buys her groceries from a nearby store
D) A taxpayer who exercises in the public park near his house
Answer: An individual who sneaks into a music concert.
Question 6: A consumer has $20 that he wants to spend on two goods: pens priced at $2 each and
pencils priced at $1 each. Which of the following correctly represents his budget constraint?
Answer: $20 = ($2 × Quantity of pens) + ($1 × Quantity of pencils)
Question 7: Positive economics is descriptive because ________.
Answer: it explains what has happened or predicts what will happen.
Page 1
,Question 8: Which of the following is an example of a positive economic statement?
A) The government should ideally work as a welfare state.
B) Economics is the most useful social science.
C) An increase in income causes an increase in savings.
D) Eliminating poverty is more important than reducing inflation.
Answer: C) An increase in income causes an increase in savings.
Question 9: When the market for a commodity is in equilibrium, ________.
Answer: no economic agent will want to change his or her behavior
Question 10: Which of the following is a feature of a good theory?
A) A good theory is free from approximations.
B) A good theory closely predicts actual behavior.
C) A good theory cannot be tested with data.
D) A good theory does not rely on data.
Answer: B) A good theory closely predicts actual behavior.
Question 11: Which of the following is an example of a normative economic statement?
A) A cut in the tax rate will lead to an increase in consumption.
B) An increase in subsidies to farmers will boost agricultural production.
C) An increase in social security benefits will increase the welfare of all economic agents.
D) Relaxation of import duties will encourage imports.
Answer: C) An increase in social security benefits will increase the welfare of all economic agents.
Question 12: Which of the following best describes equilibrium?
A) A situation where only one individual or firm makes an optimal decision
B) A situation where economic agents do not optimize as they do not have perfect information
C) A situation where no economic agent would benefit by changing his or her behavior
D) A situation where the government intervenes to allocate resources
Answer: C) A situation where no economic agent would benefit by changing his or her behavior.
Question 13: Which of the following is a topic studied by macroeconomists?
A) The savings of a single household
B) Price determination in a market
C) The total output of an economy D) The productivity of an agricultural farm
Answer: C) The total output of an economy
Page 2
,Question 14: Which of the following statements is true of optimization?
A) Economic agents who optimize attempt to choose the best feasible option, given the information that they
have.
B) Individuals who optimize do not consider costs when choosing the most feasible alternative.
C) Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits.
D) Optimization analysis only relates to the financial budget of an economic agent.
Answer: A) Economic agents who optimize attempt to choose the best feasible option, given the
information that they have.
Question 15: Which of the following statements is true?
A) Economics is more of a theoretical subject with limited applications in the real world.
B) Testing with data is essential to developing a good theory.
C) Cost-benefit analysis can be applied only to limited economic decisions.
D) The knowledge of economics complicates decision making.
Answer: B) Testing with data is essential to developing a good theory.
Question 16: If a job pays a wage of $50 per hour, but has a non-wage cost valued at $20 per hour, the
net benefit of taking the job equals ________.
Answer: B) $30 per hour
Question 17: Economics is primarily the study of ________.
Answer: how agents choose to allocate scarce resources and how these choices affect society.
Question 18: Which of the following statements is true?
A) A budget constraint is a function of the income of the consumer and not of the prices of the goods and
services available for consumption.
B) A budget constraint quantifies the trade-offs that economic agents face while making decisions.
C) A budget constraint is based on the minimum amount of money that an economic agent can spend on goods
and services.
D) A budget constraint remains the same for a consumer at all levels of income.
Answer: B) A budget constraint quantifies the trade-offs that economic agents face while making decisions.
Question 19: Which of the following statements is true?
A) An individual does not require information to make optimal decisions.
B) The principle of optimization is only accurate when it comes to making monetary decisions.
C) Rational economic agents maximize more than just monetary income.
D) It is not necessary to consider the risks of alternatives while making an optimal decision.
Answer: C) Rational economic agents maximize more than just monetary income.
Page 3
, Question 20: A decision or choice that is made after optimization analysis ________.
Answer: is not necessarily risk free.
Question 21: The impact of carbon taxes on the energy usage of individual households and firms is
studied under ________.
Answer: microeconomics.
Question 22: Feasible options are options that are ________.
Answer: available and affordable.
Question 23: Cost-benefit analysis requires ________.
Answer: that all costs and benefits be measured in the same unit.
Question 24: Which of the following is a topic studied by microeconomists?
A) National income calculations
B) Measures to combat inflation
C) Interest rate determination
D) Price determination by a firm
Answer: D) Price determination by a firm
Question 25: Maria has to choose between driving and taking a train to destination A. Traveling by
train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required
amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario
above. Maria should choose to ________.
Answer: drive, as it will save her $120.
Question 26: Which of the following statements is true of economic reasoning?
A) Economic reasoning helps people make the best use of scarce resources.
B) Economic reasoning can only be used with normative choices.
C) Economic reasoning hampers optimal decision making.
D) Economic reasoning implies that leisure time is free and costless.
Answer: A) Economic reasoning helps people make the best use of scarce resources.
Question 27: The best alternative use of a resource is referred to as its ________.
Answer: opportunity cost
Page 4
Question 1: Economic reasoning allows economic agents to make decisions________.
Answer: by comparing the costs and benefits of various options.
Question 2: The net benefit of a particular alternative equals __________.
Answer: the benefits received from the alternative minus the costs incurred when choosing the alternative.
Question 3: Empiricism is analysis that uses ________ to test theories.
Answer: data
Question 4: Which of the following is NOT a key principle of economics?
A) Empiricism
B) Optimization
C) Substitution
D) Equilibrium
Answer: Substitution
Question 5: Who among the following is an example of a free rider?
A) An individual who sneaks into a music concert
B) A club member who makes voluntary contributions to the club
C) A consumer who buys her groceries from a nearby store
D) A taxpayer who exercises in the public park near his house
Answer: An individual who sneaks into a music concert.
Question 6: A consumer has $20 that he wants to spend on two goods: pens priced at $2 each and
pencils priced at $1 each. Which of the following correctly represents his budget constraint?
Answer: $20 = ($2 × Quantity of pens) + ($1 × Quantity of pencils)
Question 7: Positive economics is descriptive because ________.
Answer: it explains what has happened or predicts what will happen.
Page 1
,Question 8: Which of the following is an example of a positive economic statement?
A) The government should ideally work as a welfare state.
B) Economics is the most useful social science.
C) An increase in income causes an increase in savings.
D) Eliminating poverty is more important than reducing inflation.
Answer: C) An increase in income causes an increase in savings.
Question 9: When the market for a commodity is in equilibrium, ________.
Answer: no economic agent will want to change his or her behavior
Question 10: Which of the following is a feature of a good theory?
A) A good theory is free from approximations.
B) A good theory closely predicts actual behavior.
C) A good theory cannot be tested with data.
D) A good theory does not rely on data.
Answer: B) A good theory closely predicts actual behavior.
Question 11: Which of the following is an example of a normative economic statement?
A) A cut in the tax rate will lead to an increase in consumption.
B) An increase in subsidies to farmers will boost agricultural production.
C) An increase in social security benefits will increase the welfare of all economic agents.
D) Relaxation of import duties will encourage imports.
Answer: C) An increase in social security benefits will increase the welfare of all economic agents.
Question 12: Which of the following best describes equilibrium?
A) A situation where only one individual or firm makes an optimal decision
B) A situation where economic agents do not optimize as they do not have perfect information
C) A situation where no economic agent would benefit by changing his or her behavior
D) A situation where the government intervenes to allocate resources
Answer: C) A situation where no economic agent would benefit by changing his or her behavior.
Question 13: Which of the following is a topic studied by macroeconomists?
A) The savings of a single household
B) Price determination in a market
C) The total output of an economy D) The productivity of an agricultural farm
Answer: C) The total output of an economy
Page 2
,Question 14: Which of the following statements is true of optimization?
A) Economic agents who optimize attempt to choose the best feasible option, given the information that they
have.
B) Individuals who optimize do not consider costs when choosing the most feasible alternative.
C) Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits.
D) Optimization analysis only relates to the financial budget of an economic agent.
Answer: A) Economic agents who optimize attempt to choose the best feasible option, given the
information that they have.
Question 15: Which of the following statements is true?
A) Economics is more of a theoretical subject with limited applications in the real world.
B) Testing with data is essential to developing a good theory.
C) Cost-benefit analysis can be applied only to limited economic decisions.
D) The knowledge of economics complicates decision making.
Answer: B) Testing with data is essential to developing a good theory.
Question 16: If a job pays a wage of $50 per hour, but has a non-wage cost valued at $20 per hour, the
net benefit of taking the job equals ________.
Answer: B) $30 per hour
Question 17: Economics is primarily the study of ________.
Answer: how agents choose to allocate scarce resources and how these choices affect society.
Question 18: Which of the following statements is true?
A) A budget constraint is a function of the income of the consumer and not of the prices of the goods and
services available for consumption.
B) A budget constraint quantifies the trade-offs that economic agents face while making decisions.
C) A budget constraint is based on the minimum amount of money that an economic agent can spend on goods
and services.
D) A budget constraint remains the same for a consumer at all levels of income.
Answer: B) A budget constraint quantifies the trade-offs that economic agents face while making decisions.
Question 19: Which of the following statements is true?
A) An individual does not require information to make optimal decisions.
B) The principle of optimization is only accurate when it comes to making monetary decisions.
C) Rational economic agents maximize more than just monetary income.
D) It is not necessary to consider the risks of alternatives while making an optimal decision.
Answer: C) Rational economic agents maximize more than just monetary income.
Page 3
, Question 20: A decision or choice that is made after optimization analysis ________.
Answer: is not necessarily risk free.
Question 21: The impact of carbon taxes on the energy usage of individual households and firms is
studied under ________.
Answer: microeconomics.
Question 22: Feasible options are options that are ________.
Answer: available and affordable.
Question 23: Cost-benefit analysis requires ________.
Answer: that all costs and benefits be measured in the same unit.
Question 24: Which of the following is a topic studied by microeconomists?
A) National income calculations
B) Measures to combat inflation
C) Interest rate determination
D) Price determination by a firm
Answer: D) Price determination by a firm
Question 25: Maria has to choose between driving and taking a train to destination A. Traveling by
train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required
amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario
above. Maria should choose to ________.
Answer: drive, as it will save her $120.
Question 26: Which of the following statements is true of economic reasoning?
A) Economic reasoning helps people make the best use of scarce resources.
B) Economic reasoning can only be used with normative choices.
C) Economic reasoning hampers optimal decision making.
D) Economic reasoning implies that leisure time is free and costless.
Answer: A) Economic reasoning helps people make the best use of scarce resources.
Question 27: The best alternative use of a resource is referred to as its ________.
Answer: opportunity cost
Page 4
