ECON 252 Midterm Questions with Correct Answers (Grade A+)
Question 1: You are considering staying in college another semester so that you can complete a major
in economics. In deciding whether or not to stay you should: a) compare the total benefits of your
education to the cost of staying one more semester. b) compare the total cost of your education to the
benefits of staying one more semester. c) compare the total cost of your education to the total benefits of
your education. d) compare the cost of staying one more semester to the benefits of staying one more
semester.
Answer: d) compare the cost of staying one more semester to the benefits of staying one more semester.
Question 2: Over the past century, the average income in the United States has risen about: a) eightfold.
b) fivefold. c) twofold. d) tenfold.
Answer: a) eightfold.
Question 3: Suppose that a country that has a high level of output per person agrees to trade with a
country that has a low level of output per person. Which country can benefit? a) both b) only the one
with a low level of output per person. c) neither d) only the one with a high level of output per person.
Answer: a) both
Question 4: The marginal benefit Susie gets from purchasing a third pair of gloves is a) the total benefit
she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two
pairs of gloves. b) the total benefit she gets from purchasing four pairs of gloves minus the total benefit
she gets from purchasing three pairs of gloves. c) the same as the total benefit she gets from purchasing
three pairs of gloves. d) more than the marginal cost of purchasing the third pair of gloves.
Answer: a) the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets
from purchasing two pairs of gloves.
Question 5: Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine
Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city
government announced a plan to build a new landfill on Pine Street just down the street from the house
Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can
go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs
and sell the house as it is for $250,000. She should a) keep the house and live in it. b) move the house
from Pine Street to a more desirable location, regardless of the cost of doing so. c) go ahead with the
$50,000 in repairs and sell the house for $290,000. d) forgo the repairs and sell the house as it is for
$250,000.
Answer: d) forgo the repairs and sell the house as it is for $250,000.
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, Question 6: The famous observation that households and firms interacting in markets act as if they are
guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776
book? a) David Ricardo b) Adam Smith c) Thorstein Veblen d) John Maynard Keynes
Answer: b) Adam Smith
Question 7: Evidence indicates that seat belt laws have led to a) fewer pedestrian deaths. b) fewer
automobile accidents. c) fewer deaths per automobile accident. d) All of the above are correct.
Answer: c) fewer deaths per automobile accident.
Question 8: Which of the following statements best represents the principle represented by the adage,
"There is no such thing as a free lunch"? a) Michelle can attend the concert only if she takes her sister
with her. b) Andrea must repair the tire on her bike before she can ride it to class. c) Dani must decide
between going to Florida or Brazil for spring break. d) Michael is hungry and homeless.
Answer: c) Dani must decide between going to Florida or Brazil for spring break.
Question 9: Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his
camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the
principle that a) people face trade-offs. b) trade can make everyone better off. c) people respond to
incentives. d) rational people think at the margin.
Answer: a) people face trade-offs.
Question 10: Approximately what percentage of the world's economies experience scarcity? a) 40% b)
85% c) 10% d) 100%
Answer: d) 100%
Question 11: According to economist John Maynard Keynes, a great economist must also be a(n) a)
mathematician. b) historian. c) philosopher. d) All of the above are correct.
Answer: d) All of the above are correct.
Question 12: A demand curve shows the relationship between price and a) income. b) production. c)
quantity demanded. d) income and quantity demanded.
Answer: c) quantity demanded.
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Question 1: You are considering staying in college another semester so that you can complete a major
in economics. In deciding whether or not to stay you should: a) compare the total benefits of your
education to the cost of staying one more semester. b) compare the total cost of your education to the
benefits of staying one more semester. c) compare the total cost of your education to the total benefits of
your education. d) compare the cost of staying one more semester to the benefits of staying one more
semester.
Answer: d) compare the cost of staying one more semester to the benefits of staying one more semester.
Question 2: Over the past century, the average income in the United States has risen about: a) eightfold.
b) fivefold. c) twofold. d) tenfold.
Answer: a) eightfold.
Question 3: Suppose that a country that has a high level of output per person agrees to trade with a
country that has a low level of output per person. Which country can benefit? a) both b) only the one
with a low level of output per person. c) neither d) only the one with a high level of output per person.
Answer: a) both
Question 4: The marginal benefit Susie gets from purchasing a third pair of gloves is a) the total benefit
she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two
pairs of gloves. b) the total benefit she gets from purchasing four pairs of gloves minus the total benefit
she gets from purchasing three pairs of gloves. c) the same as the total benefit she gets from purchasing
three pairs of gloves. d) more than the marginal cost of purchasing the third pair of gloves.
Answer: a) the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets
from purchasing two pairs of gloves.
Question 5: Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine
Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city
government announced a plan to build a new landfill on Pine Street just down the street from the house
Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can
go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs
and sell the house as it is for $250,000. She should a) keep the house and live in it. b) move the house
from Pine Street to a more desirable location, regardless of the cost of doing so. c) go ahead with the
$50,000 in repairs and sell the house for $290,000. d) forgo the repairs and sell the house as it is for
$250,000.
Answer: d) forgo the repairs and sell the house as it is for $250,000.
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, Question 6: The famous observation that households and firms interacting in markets act as if they are
guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776
book? a) David Ricardo b) Adam Smith c) Thorstein Veblen d) John Maynard Keynes
Answer: b) Adam Smith
Question 7: Evidence indicates that seat belt laws have led to a) fewer pedestrian deaths. b) fewer
automobile accidents. c) fewer deaths per automobile accident. d) All of the above are correct.
Answer: c) fewer deaths per automobile accident.
Question 8: Which of the following statements best represents the principle represented by the adage,
"There is no such thing as a free lunch"? a) Michelle can attend the concert only if she takes her sister
with her. b) Andrea must repair the tire on her bike before she can ride it to class. c) Dani must decide
between going to Florida or Brazil for spring break. d) Michael is hungry and homeless.
Answer: c) Dani must decide between going to Florida or Brazil for spring break.
Question 9: Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his
camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the
principle that a) people face trade-offs. b) trade can make everyone better off. c) people respond to
incentives. d) rational people think at the margin.
Answer: a) people face trade-offs.
Question 10: Approximately what percentage of the world's economies experience scarcity? a) 40% b)
85% c) 10% d) 100%
Answer: d) 100%
Question 11: According to economist John Maynard Keynes, a great economist must also be a(n) a)
mathematician. b) historian. c) philosopher. d) All of the above are correct.
Answer: d) All of the above are correct.
Question 12: A demand curve shows the relationship between price and a) income. b) production. c)
quantity demanded. d) income and quantity demanded.
Answer: c) quantity demanded.
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