Econ 111 Quiz 1

Which of the following sayings best describes opportunity cost?

"There's no such thing as a free lunch."

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

20 percent decrease in quantity demanded

Which of the following is true regarding marginal benefit? I.The marginal benefit curve shows the benefit firms receive by producing another unit of a good. II.Marginal benefit increases as more and more of a good is consumed. III.Marginal benefit is the maximum amount a person is willing to pay to obtain one more unit of a good.

III only

"There can be too much of a good thing." This statement suggests that

a good may be produced to the point where its marginal cost exceeds its marginal benefit.

"The rich face higher income tax rates than the poor, which is not good since it is the rich who provide jobs for the poor." This is an example of

a normative statement

The main functions of markets include

enabling buyers and sellers to get information about each other.

The concept of opportunity cost

implies that because productive resources are scarce, we must give up some of one good to acquire more of another.

The problem of scarcity exists

in all economies

Complete the following sentence. Marginal cost

is the opportunity cost of producing one more unit of a good or service.

During the next hour John can choose one of the following three activities: playing basketball, watching television, or reading a book. The opportunity cost of reading a book

is the value of playing basketball if John prefers that to watching television

Model A is superior to model B if

its predictions correspond more closely to the facts than the predictions of model B.

to describe preferences, economists use the concept of

marginal benefit

The demand curve for a good is the same as the

marginal benefit curve for that good.

The branch of economics that studies the choices of individuals and businesses is

microeconomics

Statements about "what ought to be" are called

normative statements

Marginal benefit from a good or service is the benefit received from consuming ________. It is measured by the most that people are willing to pay for ________.

one more unit of it; an additional unit of it

When a market price allocates a scarce resource

only those who are willing and able to pay get the resource

In a world characterized by scarcity

people must make choices among alternatives.

Which one of the following topics does microeconomics study?

reasons for a fall in the price of orange juice

The fact that human wants cannot be fully satisfied with available resources is called the problem of

scarcity

Which of the following statements are positive? 1. The federal government should increase production of biofuels 2. Air travel has increased since September 11 3. The greatest number of accidents are caused by drunk drivers 4. We ought to have a cure for cancer

statements 2 and 3 are positive

Sally has to decide whether to study for her economics test or her accounting test. If she chooses to study for accounting, her opportunity cost of studying accounting is

studying economics.

What is the definition of marginal benefit?

the benefit that arises from an increase in an activity

Opportunity cost of an action is

the highest-valued alternative forgone.

Which of the following is a microeconomic topic?

the reasons why a consumer buys less honey

Which one of the following is a necessary consequence of scarcity?

the requirement of making choices

The price of oranges rises by 3 percent and quantity of oranges demanded decreases by 3 percent. We conclude that the demand for oranges is

unit elastic

An economic model is

useful if it predicts well, even if its assumptions are not realistic.

The maximum price a consumer is willing to pay for a good is the

value of the good.

A positive statement is

what is currently believed about the way the world operates.