Microeconomics Practice Exam 1
Questions with Verified Solutions
Economics is the social science that studies how individuals, institutions, and societies make choices
under conditions of scarcity - Answer true
Macroeconomic analysis is concerned with the economic activity of specific firms or markets - Answer
false
The economic perspective views individuals as making purposeful choices based on the marginal
analysis of costs and benefits of decisions - Answer true
Because of scarcity, "there is no such thing as a free lunch." - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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.)
Questions with Verified Solutions
Economics is the social science that studies how individuals, institutions, and societies make choices
under conditions of scarcity - Answer true
Macroeconomic analysis is concerned with the economic activity of specific firms or markets - Answer
false
The economic perspective views individuals as making purposeful choices based on the marginal
analysis of costs and benefits of decisions - Answer true
Because of scarcity, "there is no such thing as a free lunch." - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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.)
