Micro Economics Exam 1
A good is "scarce" when a. demand is greater than supply. b. quantity demanded is greater than quantity supplied. c. it is very rare. d. there is a shortage. e. something must be given up to get more of it.
e
If England can make 10 umbrellas or 5 smoked fish in a day while Norway can make 5 umbrellas or 5 smoked fish, a. England has the comparative advantage in umbrellas and Norway has it in fish. b. Norway has the comparative advantage in umbrellas and England has it in fish. c. England is better at both umbrellas and fish. d. Norway's fish cost the same amount as England's.
a
If it costs a theater $180,000 to put on four shows, and the cost would rise to $200,000 if the theater adds a fifth show, a. the marginal cost of the fifth show is $20,000. b. the marginal cost of the fifth show is $40,000. c. the marginal cost of the fifth show is $200,000. d. the marginal cost of the fifth show is $50,000.
a
If we as a country decide to dedicate more resources to making meat safe a. there will be less left over to do other desirable things. b. we will have too much safety. c. we are not thinking at the margin. d. we will never face another case of e-coli poisoning.
a
A trade that would make both Bert and Ernie better off is a. 1.5 cars for 1 truck b. 1.5 trucks for 1 car c. 2 cars for 1 truck d. 1 car for 2.5 trucks e. No mutually beneficial trade is possible, because Bert is better at both cars and trucks
a
Good economic decisions are those for which a. marginal benefits exceed marginal costs. b. total benefits exceed total costs. c. marginal costs are declining. d. total costs are as low as they can be.
a
If you paid $25,000 for your car just a short while ago, but the best offer you can get for it now is $12,000. You should only sell the car a. if its worth to you is less than $12,000. b. if its worth to you is less than $25,000. c. if you can get something close to what you paid for it. d. if you value it more than $12,000.
a
If you work an additional hour on your homework a. you give up an hour you could have spent doing something else. b. you don't give up anything, because you are here to go to school c. you give up something only if you could have spent your time on things more important than homework. d. you give up something only if you could have used that hour to make some money
a
If you've bought an $80 sticker to park on campus, and you plan to park on campus eighty times before the semester ends, the marginal cost to you each time you park is a. $0 b. $1 c. $8 d. $80 e. Negative
a
The cost to a ski instructor of taking a day off a. is higher on the weekend when more people ski. b. falls when it snows. c. rises when it rains. d. rises when there are a lot of other instructors around, so competition is intense.
a
The fact that more pedestrians were killed after laws made cars safer demonstrates that a. people respond to incentives. b. laws usually have a bad effect. c. people will always drive badly. d. cars need to be made even safer.
a
A rational decision-maker takes action only if a. the average benefit is greater than the average cost. b. the marginal benefit is greater than the marginal cost. c. the total benefit is positive. d. society will be made better off. e. All of the above
b
Based on the concept of opportunity cost, where would you expect to have the least trouble finding someone to clean your house? a. In a high-income area with low unemployment. b. In a low-income area with high unemployment. c. In a middle class area with medium unemployment. d. In any area, because there's always someone willing to clean house.
b
The idea that "people respond to incentives" would lead us to conclude that single parent births a. will increase if public child support increases. b. should never happen. c. result from complicated social conditions and are thus be unaffected by public assistance. d. depend only on the public assistance offered.
a
The opportunity cost to college athletes on scholarship who stay in school is a. the wages they could make otherwise. b. the value of the scholarship they receive. c. nothing, unless they are good enough to turn professional. d. underestimates the value of a college education.
a
Which of the following are marginal costs associated with studying economics for an extra hour? a. The T.V. program you would otherwise have watched b. The cost of your economics textbook. c. The tuition paid for that economics class d. All of the above.
a
Could you ever have too much environmental protection? a. No, because it is important to protect the environment. b. Yes, if the marginal costs are greater than the marginal benefits. c. No, because a clean environment is a scarce good. d. No, because the benefits of a clean environment outweigh the costs. e. Yes, if the demand for environmental protection is not very important.
b
If Bert can produce 25 cars or 25 trucks with the same resources that Ernie can produce 20 cars or 10 trucks, then a. Bert has the comparative advantage in cars; Ernie in trucks. b. Bert has the comparative advantage in trucks; Ernie in cars. c. Bert has the comparative advantage in both cars and trucks. d. Both a and d.
b
If you are searching for a new pair of skis, it makes sense to keep looking as long as a. you haven't found the lowest price available. b. the shopping time matters less to you than the lower price you expect to get. c. there are stores left that you haven't checked. d. you face no opportunity costs at all. e. All of the above.
b
If you pay $2 for each ride you take on a roller coaster, and you are about to take your tenth and last ride for the day, the marginal cost of that ride is a. 0. b. $2. c. It depends on the benefits you receive. d. $20.00.
b
If you value a good at $25 and you buy it from Ed, who values it at $4, for a price of $10, you have created total gains from trade of a. $15. b. $21. c. $6. d. $25.
b
In a market economy, resources are allocated primarily a. by a single central planner b. through the combined actions of millions of households. c. by a few large corporations. d. by the government Board of Economic Planning in the Department of Commerce
b
Paul decides to spend an hour playing basketball rather than studying. The tradeoff a. is nothing, because he enjoys playing basketball more than studying. b. is the benefit to his knowledge and grades he would get from studying for an hour. c. is the increase in skill he would get from playing basketball for an hour. d. only exists if he had originally planned to study, and then played basketball instead.
b
Suppose you pay $2 for each ride you take on a roller coaster, and you are about to take your tenth and last ride for the day. The marginal cost of that ride is at least a. 0. b. $2. c. It depends on the benefits you receive. d. $20. e. less than $2, because of diminishing marginal returns
b
The costs that influence decisions to supply are always a. average costs. b. marginal costs c. sunk costs. d. total costs.
b
The economic model a. is about how money is made. b. is about how people make choices. c. assumes that people care most about money. d. assumes that people have no choices to make.
b
The idea that "people respond to incentives" would lead us to conclude that the murder rate a. would rise if tougher penalties are enacted. b. would fall if tougher penalties are enacted. c. would be unaffected by changes in penalties, since crimes are committed in moments of passion. d. depends entirely on the level of penalties enacted.
b
Your comparative advantage as a house painter (as opposed to as a student) a. increases during exam week. b. increases during the summer vacation. c. depends only on how good you are with a paintbrush. d. All of the above.
b
A trade that can make both countries better off would be a. 1 umbrella for 2 fish. b. 2 umbrellas for 1 fish. c. 1.5 umbrellas for 1 fish. d. No trade is possible since a smoked fish costs the same amount in each country. e. No trade is possible, because England is at least as good as Norway at producing both umbrellas and fish
c
An article in the newspaper suggests that an Indian tribe should use coal rather than gas power because the tribe owns 114 billion tons of coal reserves. This statement a. is true because if they own the coal, they don't have to pay for it b. is false because coal is more polluting c. is false because it ignores opportunity costs d. none of the above
c
Can you ever have too much safety? a. No, because the more safe you are, the better off you are. b. No, because people respond to incentives. c. Yes, if the marginal benefits of safety are less than the marginal cost. d. Yes, but only if the total benefits of safety are less than the total cost. e. Yes, because people usually don't want to be safer.
c
Economics is a model of a. money. b. buying and selling. c. how people make choices d. how people should behave.
c
Grocery shoppers who are willing to pay high prices at one supermarket in order to avoid long lines at another a. are not rational shoppers. b. would do anything to save money. c. are comparing the benefits and costs of their choice. d. are not comparing the benefits and costs of their choice.
c
I am considering joining a "shopper's club", where I pay $100 membership fee and then get a twenty-five percent discount on all my purchases. In making my decision, I should a. only join if I plan to make at least $100 of purchases b. ignore the membership fee since it is a sunk cost c. only join if I expect to get at least $100 worth of discounts d. only join if they promise to refund my membership fee if I'm not satisfied
c
If you buy a motorcycle for $1000 and then discover that you hate riding it and will never ride it again, the best thing to do is a. keep the motorcycle because you've paid so much for it b. keep the motorcycle unless you can find someone who will pay you at least $1000 for it c. sell the motorcycle for the best offer you can get d. sell the motorcycle for the best offer you can get, as long as it covers most of what you paid for it
c
If you stop studying biology and spend an hour studying economics instead, we can conclude that a. you like studying economics better than studying biology. b. you'd rather spend whatever time you have studying economics than studying biology c. you value one additional hour of studying economics more than one additional hour of studying biology. d. you value studying economics more than studying biology. e. All of the above.
c
If you've purchased an all you can eat ticket to a clam roast for $25, good economic thinking would tell you to take one last plateful if a. the value of that plateful to you is greater than $25 b. the value of that plateful to you is greater than or equal to $1 and you've already taken 24 platefuls that you value at $1 each. c. the value of that plateful to you is greater than zero. d. none of the above
c
Most economists believe that the assumption of rationality a. is how humans behave in all circumstances. b. is the best argument for the economic model. c. is not always a realistic assumption but allows useful predictions to be made nonetheless. d. should be supported by teaching people how to act rationally.
c
Some welfare programs offer assistance to families only if there is no father present in the home. What effect would you expect such programs to have on the number of two-parent, low-income families? a. No effect, since family decisions are based primarily on factors much more important than welfare eligibility. b. The number of two-parent, low-income families is likely to rise. c. The number of two-parent, low-income families is likely to fall. d. It is impossible to form any expectation about this situation.
c
Someone who, when confronted by a choice, says "It's simple: do both!" a. is a high demander. b. is an inefficient supplier. c. doesn't understand opportunity cost. d. is a go-getter.
c
This is a schedule of the marginal benefits and marginal costs for product "X". Quantity: 1, 2, 3, 4, 5 Marginal benefit: $15, $10, $8, $7, $2 Marginal cost: $6, $7, $7, $8, $9 Use the marginal principle to predict how much X will be consumed. a. 5, as you get total benefits of $42 versus a total cost of $37. b. 4, as you get an average benefit of $10 versus an average cost of $7. c. 3 d. 1, as you get a net benefit of $9.
c
This means that dedicating more resources to making meat safer a. is a good idea. b. is a bad idea. c. may be a good or bad idea, depending on the marginal benefits and costs. d. is a rational plan.
c
Which of the following explain my decision to go to the weight room rather than to a movie? a. I value exercising more than movie watching b. I feel better if I work out c. The marginal benefits of working out rather than going to a movie exceed the marginal costs d. I like to exercise more than I like to watch films e. all of the above
c
You miss the last train home on New Year's Eve. After walking for an hour, you spot a taxi. Its driver wants to charge $150 to take you home, though the ride usually costs $30. You are furious, but feel you have no other option and accept the deal. Finding the taxi a. has made you better off and the driver worse off. b. has made you worse off and the driver better off. c. has made both you and the driver better off. d. has made both you and the driver worse off. e. has made the driver better off but left your well-being unchanged.
c
Your company is engaged in two projects, one of which has cost $25 million to date, the other of which has cost $10 million to date. It can only afford to finish one of the projects. The expected benefit from each project is the same. Which project should it finish? a. The $25 million project, because it has already invested so much. b. The $10 million project, because it has cost so little thus far. c. Whichever can be completed at the least additional cost. d. Whichever will result in the lowest cost in total by the end of the project.
c
If those benefits and costs are yours, how much would you be willing to pay for a pass that would let you consume all the X you wanted? a. $8 b. $15 c. $33 d. at least $42.
d
5. You want to purchase two pizzas. The price is $8 per pizza, 2 for $15, 3 for $20. What will be the marginal cost to you of buying a third pizza? a. $20. b. $12. c. $7. d. $5. e. zero, if you don't plan to eat the third pizza (it becomes a sunk cost
d
A good is "scarce", as economists use the term, only when a. there is less than an infinite amount of it available. b. there is less of the good available than there was in the past. c. a shortage exists. d. something has to be given up to get more of it.
d
For which of the following is there a market? a. Orange juice. b. Pedigree dogs. c. Hiking in national forest land. d. All of the above. e. Just a and b.
d
How can I raise the price of coming to class? a. charge an admission fee b. schedule class at inconvenient times c. give extra homework to anyone who shows up d. all of the above e. none of the above
d
If a buyer values a product at $19 and a seller' opportunity cost of selling the product is $14, the gains from trade a. can't be determined without knowledge of the price. b. are $19. c. are $14. d. are $5. e. are $33.
d
If a buyer values a product at $28 and a seller's opportunity cost of providing the product is $12, the gains from trade a. can't be determined without knowledge of the price. b. are $28. c. are $12. d. are $16. e. are $40.
d
If you decide to go to a movie this evening rather than study economics, you thereby demonstrate that a. you don't care about getting good grades b. you hate economics c. you would rather have fun than fulfill your responsibilities d. at the margin, you value two hours of movie watching more than two hours of studying economics e. none of the above.
d
Smith accidentally runs his car off the road into deep snow. Jones happens along in a tow truck, and offers to haul Smith out for the outrageous price of $300. Smith, though angered by the high price, considers he has no choice and pays the $300. Smith's welfare was _________ and Jones' was ________ as a result of Jones passing by. a. enhanced, reduced. b. reduced, enhanced. c. unchanged, enhanced. d. enhanced, enhanced. e. reduced, reduced.
d
Suppose you spend the semester watching TV instead of studying economics (your next best alternative use of time). The cost is a. your hourly wage multiplied by hours of TV watched b. the price of the textbook you paid for but didn't use c. the tuition money you wasted d. the resulting decrease in your economics grade. e. All of the above
d
The concept of opportunity cost suggests that the cost to airlines of allowing employees to fly for free a. depends on the alternatives available to the employees. b. is zero. c. depends on the value employees place on free travel. d. is greater at Christmas than in mid-February.
d
The cost of a college education includes a. tuition paid. b. textbooks purchased. c. a foregone salary at alternative employment. d. All of the above. e. Some but not all of the above.
d
The cost of attending the last class before an exam includes a. whatever tuition you paid. b. payments on the car that you drive to campus if you commute. c. the cost of your dorm room you live in the dorms. d. whatever you miss doing because you go to that class. e. All of the above.
d
The cost of skipping class a. is higher the day of an exam. b. depends on how much you like the class. c. is not affected by the tuition revenue you paid. d. All of the above.
d
The idea that "people respond to incentives" would lead us to conclude that class attendance would rise a. if I take attendance and grade on it. b. if I give lots of surprise quizzes. c. if I offer money to students who come to class. d. All of the above.
d
The real cost of any action a. depends upon the number of suppliers b. is the cost to the consumer plus the cost to the producer c. is greater when demand shifts d. is the value of the alternative sacrificed e. all of the above
d
When airlines increase the number of safety inspections of their engines, a. there is no cost, since more safety benefits everybody. b. there is no cost for society as a whole, since only a few firms are affected. c. there is a cost only if firms are forced to cancel flights. d. there is a cost because firms and consumers must give up something in return.
d
Which of the following costs will you consider when deciding whether it is efficient to take a hike one afternoon? a. The gas it takes to get to the hiking trail. b. The studying you won't be able to do. c. The wear and tear on your hiking boots. d. All of the above. e. Just a and c.
d
Which of the following is a substitute for gasoline? a. ethanol. b. a car pool. c. more fuel efficient cars. d. All of the above
d
Which of the following is an example of a scarce good? a. Big Macs. b. Television sets. c. Oil. d. All are scarce goods.
d
Which of the following is an example of a scarce good? a. Coca Cola b. Insulin c. Diamonds d. All are scarce goods. e. Just b and c
d
Which of the following is true of the statement "All pollution must be stopped"? a. It ignores the importance of comparing marginal benefits and marginal costs b. It does not consider that we may have too much pollution control c. It ignores the fact that to get more of anything, we must give up something else d. all of the above
d
Which the following are marginal benefits associated with studying economics for an extra hour? a. A higher grade in your economics class. b. A higher overall GPA. c. A better chance of getting a good job after graduation. d. All of the above.
d
You are considering whether to take one last ski run before going home. You paid $30 for your lift ticket (which gives you the right to ski all day), and have taken nine runs. It is only efficient for you to take a tenth run if a. your marginal benefit is greater than $30. b. your marginal benefit is greater than $3. c. your total benefit will end up greater than $30. d. your marginal benefit is greater than 0. e. your total benefit ends up greater than your total costs.
d
You see this deal at the supermarket: one frozen pizza for $3.00, two for $5.00. Your marginal cost for the second pizza is a. $5.00 b. $3.00 c. $2.50 d. $2.00 e. zero.
d
If they charge you $12 for an "all you can consume" pass, how many will you consume? a. None, as it is not worth paying that price given the benefits. b. 1 c. 3 d. 4 e. at least 5.
e
If you pay $400 for a season pool pass at a private club, the marginal cost to you of swimming on any given weekday will be a. $400. b. $10 if you swim 40 times. c. $20 if the swim season lasts twenty weeks. d. $3 if the swim season lasts twenty-one weeks and there are seven days in a week e. zero
e
In the absence of trade, what does a smoked fish cost in England? a. $2 per pound. b. There is not enough information to say. c. One of Norway's fish. d. Two of Norway's fish. e. Two umbrellas.
e
Movie-goers who are willing to put up with long lines at a cinema to get a lower price are a. not rational b. haven't evaluated the marginal cost of the time they give up c. would give up any amount of time to save a little money d. all of the above. e. none of the above.
e
Sunk costs are irrelevant to economic decisions because a. they don't involve monetary expenditures, merely opportunity costs. b. opportunity costs rise with the quantity supplied. c. they don't affect a firm's profit. d. they don't reflect what people actually value. e. they cannot be affected by the decision in question.
e
The cost of letting senior citizens into a $5 movie for free a. is higher on a Saturday night then a Monday night. b. is lower if the senior citizen would not have gone to the movie without the free pass. c. is always $5. d. All of the above. e. Just a and b.
e
You are considering renting a car and driving to Seattle for Christmas. Which of the following would be marginal costs that you will consider in making your decision? a. the car rental price b. gasoline c. wear and tear on the car d. All of the above. e. Just a and b.
e
You buy an all-day ski pass for $50, planning on taking 10 runs and getting $100 worth of enjoyment. After four runs, you find you're not enjoying yourself and want to go home. According to the economic model, you should a. take at least one more run to get your money's worth. b. take a fifth run only if the benefit from it is at least $10. c. take more runs unless you've gotten at least $50 worth of enjoyment already. d. keep skiing until you've taken 10 runs. e. go home.
e