Micro Economics-Midterm Help

Question 1 (5 points)

 

Economics deals primarily with the concept of

Question 1 options:

a) Scarcity

 

Question 2 (5 points)

 

Inflation is defined as

Question 2 options:

a) a period of rising productivity in the economy.

b) a period of rising income in the economy.

c) an increase in the overall level of output in the economy.

d) an increase in the overall level of prices in the economy.

Question 3 (5 points)

 

The circular-flow diagram

Question 3 options:

a) is an economic model.

b) incorporates two types of decision makers: households and firms.

c) represents the flows of inputs, outputs, and dollars.

d) All of the above are correct.

Question 4 (5 points)

 

The principle that “people face tradeoffs” applies to

Question 4 options:

a) individuals.

b) families.

c) societies.

d) All of the above are correct.

Question 5 (5 points)

 

Which of the following is an example of something economists study?

Question 5 options:

a) Kate chooses to work overtime to earn extra income for her family.

b) Ryan sells his economics textbook from last semester to his roommate for half the price of a new textbook.

c) The unemployment rate in the United States is at its highest level in over fifty years.

d) All of the above are correct.

Question 6 (5 points)

 

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calcula-tion of your opportunity cost?

Question 6 options:

a) the cost of tuition and books to attend the graduate program

b) the $30,000 salary that you could have earned if you retained your job at the bank

c) the $45,000 salary that you will be able to earn after having completed your graduate program

d) the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Question 7 (5 points)

 

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Question 7 options:

a) Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

b) Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen.

c) Throw the bagels away and produce 8 fewer dozen bagels tomorrow.

d) Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.

Question 8 (5 points)

 

In the circular-flow diagram, which of the following items flows from households to firms through the markets for the factors of production?

Question 8 options:

a) goods and services

b) land, labor, and capital

c) dollars spent on goods and services

d) wages, rent, and profit

Question 9 (5 points)

 

Figure 2-3

Refer to Figure 2-3. This economy has the ability to produce at which point(s)?

Question 9 options:

a) J, K, M, N

b) K, M, N

c) M

Question 10 (5 points)

 

Figure 2-3

 

Refer to Figure 2-3. This economy has the ability to produce at which point(s)?

Question 10 options:

a) J, K, M, N

b) K, M, N

c) M

Question 11 (5 points)

 

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

Question 11 options:

a) a market economy.

b) a strong reliance on prices and individuals’ self-interests.

c) a system of large privately-owned firms.

d) the actions of government central planners.

Question 12 (5 points)

 

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Question 12 options:

a) is more efficient and more equal for society.

b) is more efficient but less equal for society.

c) is more equal but less efficient for society.

d) is less equal and less efficient for society.

Question 13 (5 points)

 

Saved

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Question 13 options:

a) can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas.

b) determines Bridget’s willingness to pay for the third soda.

c) is likely different from the marginal benefit provided to Bridget by the second soda.

d) All of the above are correct.

Question 14 (5 points)

 

The term used to describe a situation in which markets do not allocate resources efficiently is

Question 14 options:

a) economic meltdown.

b) market failure.

c) equilibrium.

d) the effect of the invisible hand.

Question 15 (5 points)

 

Economic models

Question 15 options:

a) are constructed to mirror reality as closely as possible, and in this respect economic models are no different from other scientific models.

b) are constructed to mirror reality as closely as possible, and in this respect economic models are very different from other scientific models.

c) are simplifications of reality, and in this respect economic models are no different from other scientific models.

d) are simplifications of reality, and in this respect economic models are very different from other scientific models.

Question 16 (5 points)

 

High-school athletes who skip college to become professional athletes

Question 16 options:

a) obviously do not understand the value of a college education.

b) usually do so because they cannot get into college.

c) understand that the opportunity cost of attending college is very high.

d) are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

Question 17 (5 points)

 

In the short run, an increase in the money supply is likely to lead to

Question 17 options:

a) lower unemployment and lower inflation.

b) lower unemployment and higher inflation.

c) higher unemployment and lower inflation.

d) higher unemployment and higher inflation.

Question 18 (5 points)

 

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?

Question 18 options:

a) David Ricardo

b) Thorstein Veblen

c) John Maynard Keynes

d) Adam Smith

Question 19 (5 points)

 

The invisible hand works to promote general well-being in the economy primarily through

Question 19 options:

a) government intervention.

b) the political process.

c) people’s pursuit of self-interest.

d) altruism.

Question 20 (5 points)

 

Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that

Question 20 options:

a) they should leave the price at $10.

b) it does not matter if they charge $10 or $15.

c) they would do better charging $15 than $10.

d) they should raise the price even more.

Question 21 (5 points)

 

A circular-flow diagram is a model that

Question 21 options:

a) helps to explain how participants in the economy interact with one another.

b) helps to explain how the economy is organized.

c) incorporates all aspects of the real economy.

d) Both (a) and (b) are correct.

Question 22 (5 points)

 

The invisible hand refers to

Question 22 options:

a) how central planners made economic decisions.

b) how the decisions of households and firms lead to desirable market outcomes.

c) the control that large firms have over the economy.

d) government regulations without which the economy would be less efficient.

Question 23 (5 points)

 

The decisions of firms and households are guided by prices and self-interest in a

Question 23 options:

a) command economy.

b) centrally-planned economy.

c) market economy.

d) All of the above are correct.

Question 24 (5 points)

 

In the early 1920s,

Question 24 options:

a) Germany experienced a very high rate of inflation.

b) the quantity of German money was declining rapidly.

c) the value of German money remained almost constant.

d) All of the above are correct.

Question 25 (5 points)

 

To promote good economic outcomes, policymakers should strive to enact policies that

Question 25 options:

a) enhance productivity.

b) enhance individuals’ market power.

c) result in a rapidly-growing quantity of money.

d) All of the above are correct.

Question 26 (5 points)

 

Efficiency

Question 26 options:

a) and equality both refer to how much a society can produce with its resources.

b) and equality both refer to how fairly the benefits from using resources are distributed between members of a society.

c) refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.

d) refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources

Question 27 (5 points)

 

The income of a typical worker in a country is most closely linked to which of the following?

Question 27 options:

a) population

b) productivity

c) market power

d) government policies

Question 28 (5 points)

 

According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. If Chilean bus drivers are paid by the number of passengers they transport and Colombian bus drivers are paid by the hour, we can conclude that

Question 28 options:

a) Chilean bus drivers likely have a higher standard of living than Colombian bus drivers.

b) Colombian bus drivers likely have a higher standard of living than Chilean bus drivers.

c) Chilean and Colombian bus drivers likely have the same standard of living.

d) Chilean and Colombian bus drivers likely have a higher standard of living than US bus drivers.

Question 29 (5 points)

 

The U.S. president who referred to inflation as “public enemy number one” was

Question 29 options:

a) Richard Nixon.

b) Gerald Ford.

c) Jimmy Carter.

d) Ronald Reagan.

Question 30 (5 points)

 

Economists view positive statements as

Question 30 options:

a) affirmative, justifying existing economic policy.

b) optimistic, putting the best possible interpretation on things.

c) descriptive, making a claim about how the world is.

d) prescriptive, making a claim about how the world ought to be.

Question 31 (5 points)

 

Figure 2-5

 

 

Refer to Figure 2-5 . If this economy devotes one-half of its available resources to the production of soccer balls and the other half to the production of sweaters, it could produce

Question 31 options:

a) 150 sweaters and 100 soccer balls.

b) 150 sweaters and 150 soccer balls.

c) 300 sweaters and 200 soccer balls.

d) We would have to know the details of this economy’s technology in order to determine this.

Question 32 (5 points)

 

Which of the following is an example of an externality?

Question 32 options:

a) Annie purchases a handbag.

b) Bob’s dog barks loudly during the night waking his neighbors.

c) Clark sells a book to Calvin.

d) David watches a scary movie.

Question 33 (5 points)

 

When calculating the cost of college, which of the following should you probably not include?

Question 33 options:

a) The cost of tuition

b) The cost of books required for college classes

c) The income you would have earned had you not gone to college

d) The cost of rent for your off-campus apartment.

Question 34 (5 points)

 

When a society cannot produce all the goods and services people wish to have, it is said that the economy is expe-riencing

Question 34 options:

a) scarcity.

b) surpluses.

c) inefficiencies.

d) inequalities.

Question 35 (5 points)

 

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker

Question 35 options:

a) decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly.

b) increased between 1998 and 2008, so we would expect the standard of living to have increased accordingly.

c) decreased between 1998 and 2008, so we would expect inflation to have decreased accordingly.

d) increased between 1998 and 2008, so we would expect inflation to have increased accordingly.

Question 36 (5 points)

 

Economists view normative statements as

Question 36 options:

a) prescriptive, making a claim about how the world ought to be.

b) descriptive, making a claim about how the world is.

c) statements about the normal condition of the world.

d) pessimistic, putting the worst possible interpretation on things.

Question 37 (5 points)

 

The two loops in the circular-flow diagram represent

Question 37 options:

a) the flow of goods and the flow of services.

b) the flow of dollars and the flow of financial assets.

c) the flow of inputs into production processes and the flow of outputs from production processes.

d) the flows of inputs and outputs and the flow of dollars.

Question 38 (5 points)

 

A positive economic statement such as “Pollution taxes decrease the quantity of pollution generated by firms”

Question 38 options:

a) would likely be made by an economist acting as a policy advisor.

b) would require values and data in order to be evaluated.

c) would require data but not values in order to be evaluated.

d) could not be evaluated by economists acting as scientists.

Question 39 (5 points)

 

Figure 2-3

Refer to Figure 2-3. At which point is this economy producing its maximum possible quantity of pans? 

Question 39 options:

a) J

b) L

c) M

d) N

Question 40 (5 points)

 

When economists make

Question 40 options:

a) positive statements, they are speaking not as policy advisers but as scientists.

b) positive statements, they are speaking not as scientists but as forecasters.

c) normative statements, they are speaking not as policy advisers but as scientists.

d) normative statements, they are speaking not as policy advisers but as model-builders.

 

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