PRINCIPLES OF MICROECONOMICS – EXAM
STUDY GUIDE WITH ANSWERS
The statement "Unemployment should be below 6 percent" is - CORRECT
ANSWER ✅✅✅a normative statement.
From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or
the symphony. Suppose that Sam decides to attend the hockey match and
thinks to herself that if she did not go to the match she would go to the
symphony. Then the opportunity cost of attending the hockey match is -
CORRECT ANSWER ✅✅✅going to the symphony.
Resource use is allocatively efficient if the - CORRECT ANSWER
✅✅✅marginal cost of what the resource produces is equal to the marginal
benefit of what is produced.
Most students attending college pay tuition and are unable to hold a full-time
job. For these students, tuition is - CORRECT ANSWER ✅✅✅part of the
opportunity cost of going to college. So are their forgone earnings from not
holding a full-time job.
In economics, positive statements are about - CORRECT ANSWER ✅✅✅the
way things are.
Capital accumulation definitely - CORRECT ANSWER ✅✅✅shifts the
production possibilities frontier outward.
,The most anyone is willing to pay for another purse is $30. Currently the price
of a purse is $40, and the cost of producing another purse is $50. The marginal
benefit of a purse is - CORRECT ANSWER ✅✅✅$30.
Your employer has asked you to start working overtime and has offered to pay
$18 per hour for every hour you work beyond forty hours a week. The wage
rate for each of the first forty hours will continue to be the usual $15 per hour.
In terms of dollars, what is the marginal benefit of working each hour of
overtime? - CORRECT ANSWER ✅✅✅$18.00
Which of the following describes comparative advantage? - CORRECT ANSWER
✅✅✅To produce a bushel of wheat Farmer John must give up 2 bushels of
corn whereas Farmer Ben must give up 3 bushels of corn.
The principle of decreasing marginal benefit means that as the quantity of a
good consumed - CORRECT ANSWER ✅✅✅increases, its marginal benefit
decreases.
According to economists, - CORRECT ANSWER ✅✅✅market capitalism is
the best system available and some government intervention and regulation
can either help or harm the social interest.
Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per
year. Washington can produce 12,000 tons of pecans per year or 48,000 tons
of pears per year. Which of the following statements is true? - CORRECT
ANSWER ✅✅✅Washington has an absolute advantage in the production
of both pecans and pears.
Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can
produce 36 sandwiches or 27 pizzas. The concept of comparative advantage
,concludes that - CORRECT ANSWER ✅✅✅Beth should produce pizza and
Joe should produce sandwiches.
Abe can catch 10 pounds of fish an hour or pick 10 pounds of fruit. Zeb can
catch 30 pounds of fish an hour or pick 20 pounds of fruit. The opportunity
cost of fish is ________ for Abe than for Zeb, and the opportunity cost of fruit
is ________ for Abe than for Zeb. - CORRECT ANSWER ✅✅✅higher; lower
A person has a comparative advantage in producing a particular good if that
person - CORRECT ANSWER ✅✅✅can produce it at lower opportunity cost
than anyone else can.
When an economist talks of scarcity, the economist is referring to the -
CORRECT ANSWER ✅✅✅inability of society to satisfy all human wants
because of limited resources.
A good economic model - CORRECT ANSWER ✅✅✅includes only those
features of the world that are needed for the purpose at hand
A positive relationship exists between two variables if - CORRECT ANSWER
✅✅✅a reduction in one variable is associated with a decrease in the other
variable.
The opportunity cost of something you decide to get is - CORRECT ANSWER
✅✅✅the highest valued alternative you give up to get it.
If Taco Bell decides to produce more tacos and fewer burritos, Taco Bell is
answering the ________ part of one of the two big economic questions. -
CORRECT ANSWER ✅✅✅when
, Which of the following is NOT true concerning a society's production
possibilities frontier (PPF)? - CORRECT ANSWER ✅✅✅Consumers will
receive equal benefits from the two goods illustrated in the PPF.
"OPEC should supply more oil so that the world's economies can grow more
rapidly." This is an example of - CORRECT ANSWER ✅✅✅a normative
statement.
Which of the following is NOT a factor of production? - CORRECT ANSWER
✅✅✅175 shares of Microsoft stock
Dell Computers decides to produce PCs and sell them directly over the Internet
and via Best Buy. This is an example of - CORRECT ANSWER ✅✅✅a
microeconomic decision.
Consider a production possibilities frontier with corn on the vertical axis and
cars on the horizontal. Unusually good weather for growing corn shifts -
CORRECT ANSWER ✅✅✅the vertical intercept upward but does not shift
the horizontal intercept.
The opportunity cost of economic growth is - CORRECT ANSWER
✅✅✅present consumption that a nation gives up to accumulate capital.
Increasing opportunity cost implies that - CORRECT ANSWER
✅✅✅producing additional units of one good results in increasing amounts
of lost output of the other good.
Which of the following is a positive statement? - CORRECT ANSWER
✅✅✅An increase in the price of pizza will lead fewer students to buy pizza.
STUDY GUIDE WITH ANSWERS
The statement "Unemployment should be below 6 percent" is - CORRECT
ANSWER ✅✅✅a normative statement.
From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or
the symphony. Suppose that Sam decides to attend the hockey match and
thinks to herself that if she did not go to the match she would go to the
symphony. Then the opportunity cost of attending the hockey match is -
CORRECT ANSWER ✅✅✅going to the symphony.
Resource use is allocatively efficient if the - CORRECT ANSWER
✅✅✅marginal cost of what the resource produces is equal to the marginal
benefit of what is produced.
Most students attending college pay tuition and are unable to hold a full-time
job. For these students, tuition is - CORRECT ANSWER ✅✅✅part of the
opportunity cost of going to college. So are their forgone earnings from not
holding a full-time job.
In economics, positive statements are about - CORRECT ANSWER ✅✅✅the
way things are.
Capital accumulation definitely - CORRECT ANSWER ✅✅✅shifts the
production possibilities frontier outward.
,The most anyone is willing to pay for another purse is $30. Currently the price
of a purse is $40, and the cost of producing another purse is $50. The marginal
benefit of a purse is - CORRECT ANSWER ✅✅✅$30.
Your employer has asked you to start working overtime and has offered to pay
$18 per hour for every hour you work beyond forty hours a week. The wage
rate for each of the first forty hours will continue to be the usual $15 per hour.
In terms of dollars, what is the marginal benefit of working each hour of
overtime? - CORRECT ANSWER ✅✅✅$18.00
Which of the following describes comparative advantage? - CORRECT ANSWER
✅✅✅To produce a bushel of wheat Farmer John must give up 2 bushels of
corn whereas Farmer Ben must give up 3 bushels of corn.
The principle of decreasing marginal benefit means that as the quantity of a
good consumed - CORRECT ANSWER ✅✅✅increases, its marginal benefit
decreases.
According to economists, - CORRECT ANSWER ✅✅✅market capitalism is
the best system available and some government intervention and regulation
can either help or harm the social interest.
Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per
year. Washington can produce 12,000 tons of pecans per year or 48,000 tons
of pears per year. Which of the following statements is true? - CORRECT
ANSWER ✅✅✅Washington has an absolute advantage in the production
of both pecans and pears.
Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can
produce 36 sandwiches or 27 pizzas. The concept of comparative advantage
,concludes that - CORRECT ANSWER ✅✅✅Beth should produce pizza and
Joe should produce sandwiches.
Abe can catch 10 pounds of fish an hour or pick 10 pounds of fruit. Zeb can
catch 30 pounds of fish an hour or pick 20 pounds of fruit. The opportunity
cost of fish is ________ for Abe than for Zeb, and the opportunity cost of fruit
is ________ for Abe than for Zeb. - CORRECT ANSWER ✅✅✅higher; lower
A person has a comparative advantage in producing a particular good if that
person - CORRECT ANSWER ✅✅✅can produce it at lower opportunity cost
than anyone else can.
When an economist talks of scarcity, the economist is referring to the -
CORRECT ANSWER ✅✅✅inability of society to satisfy all human wants
because of limited resources.
A good economic model - CORRECT ANSWER ✅✅✅includes only those
features of the world that are needed for the purpose at hand
A positive relationship exists between two variables if - CORRECT ANSWER
✅✅✅a reduction in one variable is associated with a decrease in the other
variable.
The opportunity cost of something you decide to get is - CORRECT ANSWER
✅✅✅the highest valued alternative you give up to get it.
If Taco Bell decides to produce more tacos and fewer burritos, Taco Bell is
answering the ________ part of one of the two big economic questions. -
CORRECT ANSWER ✅✅✅when
, Which of the following is NOT true concerning a society's production
possibilities frontier (PPF)? - CORRECT ANSWER ✅✅✅Consumers will
receive equal benefits from the two goods illustrated in the PPF.
"OPEC should supply more oil so that the world's economies can grow more
rapidly." This is an example of - CORRECT ANSWER ✅✅✅a normative
statement.
Which of the following is NOT a factor of production? - CORRECT ANSWER
✅✅✅175 shares of Microsoft stock
Dell Computers decides to produce PCs and sell them directly over the Internet
and via Best Buy. This is an example of - CORRECT ANSWER ✅✅✅a
microeconomic decision.
Consider a production possibilities frontier with corn on the vertical axis and
cars on the horizontal. Unusually good weather for growing corn shifts -
CORRECT ANSWER ✅✅✅the vertical intercept upward but does not shift
the horizontal intercept.
The opportunity cost of economic growth is - CORRECT ANSWER
✅✅✅present consumption that a nation gives up to accumulate capital.
Increasing opportunity cost implies that - CORRECT ANSWER
✅✅✅producing additional units of one good results in increasing amounts
of lost output of the other good.
Which of the following is a positive statement? - CORRECT ANSWER
✅✅✅An increase in the price of pizza will lead fewer students to buy pizza.
