Microeconomics Practice Exam 1
Questions with Detailed Answers
Economics is the social science that studies how individuals, institutions, and
societies make choices under conditions of scarcity - -true
-Macroeconomic analysis is concerned with the economic activity of specific
firms or markets - -false
-The economic perspective views individuals as making purposeful choices
based on the marginal analysis of costs and benefits of decisions - -true
-Because of scarcity, "there is no such thing as a free lunch." - -true
-Microeconomics deal mostly with:
a. the causes and consequences of inflation
b. individual product markets and participants in these markets
c. finding policies to reduce the unemployment below 6%
d. ways the government can redistribute income in a more equitable way
e. all of the above - -B) individual product markets and participants in these
markets
-When we say that 2 things are directly or positively related (like the price of
a good and the quantity supplied) it means:
a. the two things are desirable or beneficial
b. when one thing changes the other remains the same
c. the two things move or change in the same direction
d. the two things move or change in opposite directions - -C) the two things
move or change in the same direction
-Which of the following is an example of a capital good:
a. a Dupont chemical plant
b. a power drill
c. a bakery delivery truck
d. all of the above are capital goods
e. none of the above: capital refers only to money or stock or bonds - -D) all
of the above are capital goods
-Arriving late to our economics class will automatically lower your course
grade by one letter grade. As a result of this policy, the class is seldom
interrupted by latecomers. This best illustrates which one of the principles of
economics:
a. voluntary exchange makes everyone better off
b. incentives influence our behavior and choices
, c. decision making at the margin
d. markets are an efficient way to allocate resources - -B) incentives
influence our behavior and choices
-Which of the following is most closely related to the economic principle that
sometimes government intervention is necessary to improve market
outcomes:
a. limiting the increase in the price of gas caused by the disruptive effects of
hurricanes in the Gulf of Mexico
b. making people who do not now have health insurance purchase such
policies
c. controlling the emission of green house gases and climate change caused
by these gases
d. reducing the high cost of rent in cities and towns with a large university -
-C) controlling the emission of green house gases and climate change caused
by these gases
-Because resources are not equally efficient toward the production of every
good, the PPC:
a. depicts limited outcome combinations
b. slopes downward
c. is bowed outward
d. all of the above - -C) is bowed outward (law of increasing opportunity
cost: as an economy devotes more of its resources to one product, it uses
less efficient means to produce. The curve is flatter at the end points and
more curved in the middle.)
-Which of the following is true concerning the construction of a society's
PPC?
a. it assumes the price of the two goods are equal
b. it assumes resources are scarce
c. it assumes people prefer one of the goods more than the other
d. all of the above - -B) it assumes resources are scarce (limited output
possibilities)
-The pursuit of economic self-interest (utility maximization) is the same
thing as selfishness or greediness - -false
-Suppose Henrietta Hen received $20 for her birthday. If she bought a case
of beer with the money, the beer would be at a zero opportunity cost to her
because the money was a gift and she didn't have to do anything to earn it -
-false
-Money is a device for facilitating the exchange of goods and services - -
true
Questions with Detailed Answers
Economics is the social science that studies how individuals, institutions, and
societies make choices under conditions of scarcity - -true
-Macroeconomic analysis is concerned with the economic activity of specific
firms or markets - -false
-The economic perspective views individuals as making purposeful choices
based on the marginal analysis of costs and benefits of decisions - -true
-Because of scarcity, "there is no such thing as a free lunch." - -true
-Microeconomics deal mostly with:
a. the causes and consequences of inflation
b. individual product markets and participants in these markets
c. finding policies to reduce the unemployment below 6%
d. ways the government can redistribute income in a more equitable way
e. all of the above - -B) individual product markets and participants in these
markets
-When we say that 2 things are directly or positively related (like the price of
a good and the quantity supplied) it means:
a. the two things are desirable or beneficial
b. when one thing changes the other remains the same
c. the two things move or change in the same direction
d. the two things move or change in opposite directions - -C) the two things
move or change in the same direction
-Which of the following is an example of a capital good:
a. a Dupont chemical plant
b. a power drill
c. a bakery delivery truck
d. all of the above are capital goods
e. none of the above: capital refers only to money or stock or bonds - -D) all
of the above are capital goods
-Arriving late to our economics class will automatically lower your course
grade by one letter grade. As a result of this policy, the class is seldom
interrupted by latecomers. This best illustrates which one of the principles of
economics:
a. voluntary exchange makes everyone better off
b. incentives influence our behavior and choices
, c. decision making at the margin
d. markets are an efficient way to allocate resources - -B) incentives
influence our behavior and choices
-Which of the following is most closely related to the economic principle that
sometimes government intervention is necessary to improve market
outcomes:
a. limiting the increase in the price of gas caused by the disruptive effects of
hurricanes in the Gulf of Mexico
b. making people who do not now have health insurance purchase such
policies
c. controlling the emission of green house gases and climate change caused
by these gases
d. reducing the high cost of rent in cities and towns with a large university -
-C) controlling the emission of green house gases and climate change caused
by these gases
-Because resources are not equally efficient toward the production of every
good, the PPC:
a. depicts limited outcome combinations
b. slopes downward
c. is bowed outward
d. all of the above - -C) is bowed outward (law of increasing opportunity
cost: as an economy devotes more of its resources to one product, it uses
less efficient means to produce. The curve is flatter at the end points and
more curved in the middle.)
-Which of the following is true concerning the construction of a society's
PPC?
a. it assumes the price of the two goods are equal
b. it assumes resources are scarce
c. it assumes people prefer one of the goods more than the other
d. all of the above - -B) it assumes resources are scarce (limited output
possibilities)
-The pursuit of economic self-interest (utility maximization) is the same
thing as selfishness or greediness - -false
-Suppose Henrietta Hen received $20 for her birthday. If she bought a case
of beer with the money, the beer would be at a zero opportunity cost to her
because the money was a gift and she didn't have to do anything to earn it -
-false
-Money is a device for facilitating the exchange of goods and services - -
true
