ECON 102 Midterm 1

10) Scarcity requires that people must A) make choices. B) compete. C) cooperate. D) trade.

a

9) Macroeconomics is concerned with A) economy-wide variables. B) government decision making concerning farm price supports. C) the effects on Ford Motor of a strike by the United Auto Workers. D) individual consumers.

a

A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker dependson the A) total amount paid to ONLYthe new worker. B) the additional revenue created by having an additional worker minus the cost of hiring the worker. C) the total amount paid to ALLthe workers, both the new one and the previously hired workers. D) total amount paid to all PREVIOUSLYhired workers.

a

An economic model includes A) only details considered essential. B) no use of marginal concepts. C) only normative statements. D) all known details in order to increase its accuracy.

a

Jill, an economics student, has already spent 5 hours cleaning her room. In deciding whether or not to continue cleaning for another hour, she applies the economic principle of A) choosing at the margin. B) scarcity. C) ceteris paribus. D) productivity.

a

Suppose that for the past two months, you have studied economics one hour a day. You now decide to study economics two hours a day. For the past two months A) your marginal benefit from studying economics an hour must have been greater than its marginal cost. B) the opportunity cost of studying economics must have risen. C) your marginal cost of studying economics for an hour must have exceeded its marginal benefit. D) the marginal cost of studying economics must have fallen.

a

The statement "An increase in the price of gasoline will lead to a decrease in the amount purchased" is A) a positive statement. B) a normative statement. C) a scientific statement. D) a political statement.

a

When a country decides to produce fewer bombers and more public housing projects, it is answering the ________ part of one of the two big economic questions. A) "what" B) "defense" C) "how" D) "for whom"

a

Which of the following is NOTa factor of production? A) 100 shares of Microsoft stock B) an apartment building C) mineral resources D) a university professor

a

You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip is A) working OR doing fix-up projects, depending on which you would have done otherwise. B) working, because you would be giving up income. C) working AND doing fix-up projects. D) nothing because you will enjoy the trip to Florida.

a

11) The term human capital refers to A) labor resources used to make capital equipment. B) people's knowledge and skill. C) buildings and machinery. D) entrepreneurship and risk-taking.

b

12) The Occupy Wall Street movement advocates A) following the teachings of Adam Smith. B) a shift away from market capitalism. C) a shift towards more market capitalism. D) centrally planned socialism.

b

8) Which of the following questions is a macroeconomic issue? A) How many more pounds of cookies will a consumer purchase if the price of cookies decreases? B) What is the future growth prospect for an economy? C) What effect would a cure for Mad Cow Disease have on the market for beef? D) How many workers should the owner of a business hire?

b

A student is studying for an exam 2 hours a day and is debating whether to study an extra hour. The student's marginal benefit A) is the benefit the student receives from studying all 3 hours. B) is the benefit the student receives from studying the extra hour. C) depends on the grade the student earns on the exam. D) is greater than the student's marginal cost.

b

Marginal cost is the A) cost of all forgone alternatives. B) cost of an increase in an activity. C) total cost of an activity. D) cost of an activity minus the benefits of the activity.

b

Opportunity cost is defined as the A) cost of not doing all of the things you would like to do. B) highest-valued alternative given up. C) lowest-valued alternative given up. D) total value of all the alternatives given up.

b

Positive economic statements A) prescribe what should be. B) can be tested against the facts. C) are related only to microeconomics. D) cannot be tested against the facts.

b

Suppose that the government of New York state promises to decrease taxes to a firm if it decides to stay in New York instead of moving to another state. This policy on the part of the stateconstitutes ________, to make the ________ of the firm remaining in New York. A) a command; marginal benefit exceed the marginal cost B) an incentive; marginal benefit exceed the marginal cost C) a command; marginal cost exceed the marginal benefit D) an incentive; marginal cost exceed the marginal benefit

b

The marginal benefit is the A) additional cost from one more unit of an activity. B) additional gain from one more unit of an activity. C) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. D) loss of the highest-valued alternative.

b

The statement "Managers with a collegeeducation earn $18 an hour while ski instructors who did not complete college earn $10" is A) an ethical statement. B) a positive statement. C) a normative statement. D) a political statement.

b

When a California farmer decides to harvest lettuce using machines instead of by migrant workers, the farmer is answering the ________ part of one of the two big economic questions. A) "scarcity" B) "how" C) "for whom" D) "what"

b

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? A) $3.00 B) $18.00 C) zero D) $15.00

b

13) Factors of production include all of the following EXCEPT A) machines made in past years. B) entrepreneurship. C) money. D) a wheat field that is not irrigated.

c

3) Studying the determination of prices in individual markets is primarily a concern of A) macroeconomics. B) negative economics. C) microeconomics. D) positive economics.

c

4) Economics is best defined as the science of choice and how people cope with A) differences in needs. B) differences in wants .C) scarcity. D) different economic systems.

c

6) Economics can be defined as the social science that explains the A) choices made by households. B) choices we make when we trade in markets. C) choices that we make as we cope with scarcity. D) choices made by politicians.

c

7) Economics is the study of A) ways to reduce wants to eliminate the problem of scarcity. B) affluence in a morally bankrupt world. C) the choices we make because of scarcity. D) the distribution of surplus goods to those in need.

c

Human capital is A) all capital owned by individuals or corporations, but not by governments. B) all capital owned by individuals, but not by corporations or governments. C) the skill and knowledge of workers. D) machinery that meets or exceeds federal safety standards for use by humans.

c

In economics, positive statements are about A) macroeconomics, not microeconomics. B) the way things ought to be. C) the way things are. D) microeconomics, not macroeconomics.

c

In every economic system, choices must be made because resources are ________ and our wants are ________. A) unlimited; unlimited B) unlimited; limited C) limited; unlimited D) limited; limited

c

John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John? A) answering his e-mail B) attending a movie, studying for an economics exam, and answering his e-mail C) attending a movie D) studying for an economics exam

c

Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the extra revenue from selling a few additional printers to the average cost of producing the additional printers. B) the total revenue from sales of printers to the total cost of producing all the printers. C) the extra revenue from selling a few additional printers to the extra costs of producing the printers. D) HP's printers to printers from competing companies, such as Lexmark.

c

The opportunity cost of something you decide to get is A) the amount of money you pay to get it. B) all the possible alternatives that you give up to get it. C) the highest valued alternative you give up to get it. D) the value of the item minus the cost you paid for it.

c

Today, Julie attended her 12:30 Economics class. If she hadn't gone to class, Julie would have gone out to lunch with friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the A) income from working, lunch, and sleep she gave up. B) sleep she gave up. C) lunch she gave up. D) income from working she gave up.

c

When Al makes the statement, "The cost of living has increased 10 percent over the past 10 years," he is A) making a normative statement. B) facing the standard of living tradeoff. C) making a positive statement. D) testing an economic model.

c

Which of the following is NOTan example of an opportunity cost? A) By choosing to attend college, Jean was not able to continue working as an electrician; as a result, she gave up more than$85,000 in earnings while she was in college. B) Because David used all of his vacation time to paint his house, he was unable to visit the Caribbean last year. C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment. D) By spending Thursday night studying for an economics exam, a student was unable to complete a homework assignment for calculus class.

c

Which of the following is a normative statement? A) The unemployment rate rose last month. B) Forty percent of the public believes that the unemployment rate is too high. C) The unemployment rate is too high. D) None of the above are normative statements.

c

Which of the following is a positive statement? A) Owners of apartment buildings ought to be free to charge whatever rent they want. B) Low rents are good because they make apartments more affordable. C) Low rents decrease the amount of housing landlords make available for rent. D) Housing costs too much.

c

Which of the following is a positive statement? A) Unemployment is a more important problem than inflation .B) An unemployment rate of 9 percent is a national disgrace. C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent. D) Unemployment and inflation are equally important problems.

c

Which of the following statements are CORRECT?I.The "highest-valued alternative given up to get something" is the opportunity cost.II.Wealthy economies don't experience opportunity costs.III.Scarcity creates opportunity costs. A) I only B) I and II C) I and III D) I, II, and III

c

You have the choice of going to Hawaii for a week, staying at work for the week, or spending the week skiing. If you decide to go to Hawaii, the opportunity cost is A) working, because you would be giving up a week's pay. B) the value of working and skiing. C) the value of working or skiing, depending on which you would have done rather than go to Hawaii. D) none of the above if you enjoy the time spent in Hawaii.

c

5) All economic questions are about A) what to produce. B) how to satisfy all our wants. C) how to make money. D) how to cope with scarcity.

d

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. A) "scarcity" B) "when" C) "why" D) "what"

d

Marginal benefit is the benefit A) that your activity provides to someone else. B) that arises from the secondary effects of an activity. C) of an activity that exceeds its cost. D) that arises from an increase in an activity.

d

Normative economic statements A) deal with economic hypotheses that are not well-established laws. B) describe what is rather than what ought to be .C) describe the process of economic policy-making. D) describe what ought to be.

d

The loss of the highest-valued alternative defines the concept of A) scarcity. B) entrepreneurship. C) marginal benefit. D) opportunity cost.

d

The opportunity cost of any action is A) the benefit from the action minus the cost of the action B) all the possible alternatives given up. C) the dollars the action cost. D) the highest-valued alternative given up.

d

When a farmer decides to raise hogs instead of cattle, the farmer is answering the ________ part of one of the two big economic questions. A) "how" B) "why" C) "for whom" D) "what"

d

Which of the following is a microeconomic topic? A) how a trade agreement between the United States and Mexico affects both nations' unemployment rates B) how a tax rate increase will impact total production C) comparing inflation rates across countries D) how rent ceilings impact the supply of apartments

d

he 2010 Patient Protection and Affordable Care Act (Obamacare) contains a provision that may require individuals to either purchase private health insurance or pay a tax. This is an example of A) the invisible hand. B) centrally planned socialism. C) market capitalism. D) a mixed economy.

d