Microeconomics Test 1 (Stapp)
An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper? A) marginal revenue B) gross earnings C) pure profit D) marginal costs E) net benefit
A
Scarcity refers to the situation in which A) unlimited wants exceed limited resources. B) unlimited resources exceed limited wants. C) a country's population is larger than its resource base. D) a nation's poverty level increases faster than its population.
A
The basic economic problem of scarcity A) has always existed and will continue to exist. B) will eventually disappear as technology continues to advance. C) is a problem only in developing economies. D) does not apply to the wealthy in society.
A
The revenue received from the sale of an additional unit of a product A) is a marginal benefit to the firm. B) is called profit. C) is called gross sales. D) is called a net gain.
A
Economics is the study of the ________ people make to attain their goals, given their ________ resources. A) purchases; unlimited B) choices; scarce C) income; available D) decisions; household
B
The study of economics arises due to A) money. B) scarcity. C) greed. D) resources.
B
What does the term "marginal" mean in economics? A) the edge of a market B) an additional or extra C) illegal D) secondary E) trivial
B
Which of the following best describes an assumption economists make about human behavior? A) They assume that individuals act rationally all the time in all circumstances. B) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. C) They assume that people take into account the question of fairness in all decisions they make. D) They assume that individuals act randomly.
B
Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment? A) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations. B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions. D) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions
B
The term "market" in economics refers to A) a place where money changes hands. B) a legal institution where exchange can take place. C) a group of buyers and sellers of a product and the arrangement by which they come together to trade. D) an organization which sells goods and services.
C
________ involves undertaking an activity until its marginal benefits equal marginal costs. A) Scarcity reduction B) Central planning C) Marginal analysis D) Market intervention
C
Consider the following statements: a. Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach. b. Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment. c. Farmers produce more cotton when its selling price falls. Which of the above statements demonstrates that economic agents respond to incentives? A) a only. B) b only. C) c only. D) a and b. E) a, b, and c.
D
Economics promotes which of the following as the way to make the best decision? A) Continue an enjoyable activity as long as you do not have to pay for it. B) Continue an enjoyable activity until it is no longer enjoyable. C) Continue an enjoyable activity until you cannot afford to pursue it. D) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.
D
Economists assume that A) individuals behave in unpredictable ways. B) consumer behavior is explained by the existence of unlimited resources. C) people put other people's interests ahead of their own. D) optimal decisions are made at the margin.
D
Economists assume that rational people A) never use all available information as they act to achieve their goals. B) undertake activities that benefit others and hurt themselves. C) only weigh the benefits and costs of the most desirable alternative actions. D) respond to economic incentives.
D
Technological progress has made it possible for firms such as Apple and Alivecor to develop small electronic devices, including smartwatches, smartphones, and products that can be attached to the smartwatches and smartphones, to serve consumers who have become more health conscious and wish to monitor various health conditions. These firms are reacting to which of the three key economic ideas? A) firms attempt to maximize revenues B) optimal decisions are made at the margin C) people are rational D) people respond to economic incentives
D
What is an economic model? A) It is a description of an economic issue that includes all possible related information. B) It is a description of an economic issue based on official government information. C) It is a detailed version of some aspect of economic life used to analyze an economic issue. D) It is a simplified version of some aspect of economic life used to analyze an economic issue.
D