Microeconomics Exam 30 questions

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1. Economics is a:

	a. social science that studies goods with no alternative uses.
	b. natural science that studies goods with no alternative uses.

	c. social science concerned chiefly with how people choose among alternatives.
	d. social science concerned chiefly with reasons why society has unlimited resources.

2. Scarcity exists when:

	a. a choice must be made among two or more alternatives.
	b. we face the notion of "all other things unchanged."

	c. countries and people find themselves facing poverty.
	d. the notions of normative economics come into play.

3. A free good is:

	a. also a scarce good.
	b. a relatively abundant good.

	c. a good with no opportunity cost.
	d. a good with relatively low opportunity cost.

4. Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of:

	a. How will each good be produced?
	b. For whom shall the goods be produced?

	c. Why will the resources be used to produce goods?
	d. What goods and services should a society produce?

5. A factor of production that has been produced for use in the production of other goods and services is:

	a. labor.
	b. money.

	c. capital.
	d. natural resources.

6. The textbook classifies technology as _______ and entrepreneurs as _______ .

	a. knowledge; persons who seek profit by finding new ways to organize factors of production
	b. capital; labor

	c. labor skills; capital
	d. a factor of production; a factor of production

7. The production possibilities curve represents the fact that:

	a. the economy will automatically end up at full employment.
	b. an economy's productive capacity increases proportionally with its population.

	c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
	d. economic production possibilities have no limit.

8. An economy is said to have a comparative advantage in producing a particular good if it:

	a. can produce more of all goods than another economy.
	b. can produce less of all goods than another economy.

	c. has the highest cost for producing that good.
	d. has the lowest cost for producing that good.

9. A negative relationship between the quantity demanded and price is called the law of ______.

	a. demand
	b. diminishing marginal returns

	c. market clearing
	d. supply

10. If people demand more of product A when the price of B falls, then A and B are:

	a. not related.
	b. substitutes.

	c. complements.
	d. inferior.

11. The primary difference between a change in demand and a change in the quantity demanded is:

	a. a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve.
	b. a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.

	c. both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions.
	d. both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.

12. For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as:

	a. inferior goods.
	b. direct goods.

	c. normal goods.
	d. luxury goods.

13. A supply curve that is upward sloping means that:

	a. demand is being ignored.
	b. consumers will buy less at lower prices.

	c. suppliers will want to sell more at higher prices.
	d. suppliers will want to sell less at higher prices.

14. The demand curve for stocks shows that:

	a. at lower prices, less stock will be purchased.
	b. at lower prices, more people calculate that the expected value of the firm's future earnings justify the stock's purchase.

	c. at lower prices, more stock will be offered on the market.
	d. A and B are true.

15. The equilibrium price in a market is established subject to the all other things unchanged condition and, therefore, very well may change due to:

	a. a change in the price of the good.
	b. a change in the quantity of the good.

	c. a change in the price of resource inputs used to produce the good.
	d. any of the above.

16. Price controls:

	a. always increase economic efficiency.
	b. always lead to more equitable results.

	c. can result in inequitable outcomes.
	d. all of the above statements are true.

17. A market price support policy establishes price ________ the market equilibrium.

	a. floors below
	b. floors above

	c. ceilings below
	d. ceilings above

18. Elasticity is:

	a. the change in a dependent variable divided by the change in an independent variable.
	b. the ratio of the percentage change in a dependent variable to the percentage change in an independent variable.

	c. the price of a good divided by its quantity.
	d. the quantity of a good divided by its price.

19. Assuming the law of demand holds for a good, its price elasticity of demand is:

	a. positive.
	b. greater than 1.

	c. equal to 1.
	d. negative.

20. If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

	a. 0.
	b. -0.5.

c. -1.

d. -2.

21. The price elasticity of demand between points A and B is:

	a. elastic, since total revenue falls when price falls from $8 to $6.
	b. elastic, since total revenue increases when price falls from $8 to $6.
	c. inelastic, since the percentage change in quantity is less than the percentage change in price when price falls from $8 to $6.
	d. positive, because the slope is negative.

22. Economists assume that consumers seek to maximize:

	a. usefulness.
	b. profit.

	c. utility.
	d. time.

23. According to the marginal decision rule, if marginal benefit:

	a. exceeds marginal cost, an activity should be reduced.
	b. is less than marginal cost, an activity should be reduced.

	c. is equal to marginal cost, an activity should be reduced.
	d. exceeds marginal cost, net benefit is maximized.

24. In order to maximize net benefit, consumers and firms evaluate each activity at the:

	a. average.
	b. top.

	c. margin.
	d. end.

25. Suppose that the expected exam scores from studying economics for 0, 1, 2, or 3 hours are 65, 80, 90, and 95 points, respectively, while the expected exam scores for studying 0, 1, 2, or 3 hours of accounting are 50, 65, 70, and 70 points, respectively. With 3 total hours of study time, your combined scores can reach a maximum of _______ points.

	a.145
	b. 150

	c. 155
	d.165

26. An allocation of resources that achieves the maximum net benefit from all activities is:

	a. inefficient.
	b. external.

	c. internal.
	d. efficient.

27. The ability of a good to satisfy a want refers to its:

	a. utility.
	b. usefulness.

	c. worthiness.
	d. necessity.

28. Marginal utility is best computed as the:

	a. change in total utility from an additional unit consumed.
	b. total utility divided by the total quantity consumed.

	c. change in total utility divided by the total quantity consumed.
	d. total utility divided by the change in quantity consumed.

29. If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

	a. law of diminishing marginal utility.
	b. minimization of utility.

	c. law of consumer equilibrium.
	d. law of diminishing consumer surplus.

30. A change in the ability to purchase a good because its price has increased is most closely related to the:

	a. output effect.
	b. income effect.

	c. nominal effect.
	d. substitution effect.