Micro Economics Mid Term

Which of the following sentences is the best example of scarcity of time? a. Peter buys a hamburger. b. John-Michael wants to spend his money on a new hover board. c. Alexander is doing homework instead of going to the movies with his friends. d. Amanda, a geography teacher, is retired.e.Bill is unemployed.

C. Alexander is doing homework instead of going to the movies with his friends.

Suppose a consumer can choose to consume either apples or oranges. Which of the following results when the price of each fruit increases by 15 percent? a. The consumer substitutes apples for oranges. b. The income effect of this price change is positive. c. The substitution effect of this price change is zero. d. The consumer demands more of both the goods. e. The consumer substitutes oranges for apples.

C. The substitution effect of this price change is zero.

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the value of the price elasticity of demand is: a. −1/3 b. −2 1/3 c. −1/4 d. −3 e. −2/3

a. -1/3

Which of the following provides the best evidence of the specialization of labor? a. A firm that produces a line of related products, such as eight kinds of breakfast cereal b. An architect who is willing to practice in only one geographic area c. A physician who practices in a specialty area such as cardiology or orthopedic surgery d. A family that eats at Wendy's every Thursday night e. A retailer who sells goods but provides no services

a. A firm that produces a line of related products, such as eight kinds of breakfast cereals

Hans can do 4 loads of laundry per hour, and he can type 6 pages per hour. Maria can do 12 loads of laundry per hour, and she can type 8 pages per hour. Hans and Maria would both be better off if: a. Hans specialized in typing and Maria in doing laundry, trading with each other for the other service. b. Hans specialized in doing laundry and Maria in typing, trading with each other for the other service. c. each did their own laundry and typing. d. Maria did all of the typing and all of the laundry. e. Hans did all of the typing and all of the laundry.

a. Hans specialized in typing and Maria in doing laundry, trading with each other for the other service.

John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? a. Harry has a comparative advantage in ironing. b. Harry has a comparative advantage in typing. c. Harry has an absolute advantage in typing. d. Harry has an absolute advantage in ironing. e. Neither can gain from specialization and exchange.

a. Harry has a comparative advantage in ironing

If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours, then: a. Sarah has a comparative advantage in shoemaking. b. Daniel has a comparative advantage in shoemaking. c. Sarah has an absolute and a comparative advantage in shoemaking. d. Daniel has an absolute and a comparative advantage in shoemaking. e. Sarah has an absolute advantage in shoemaking.

a. Sarah has a comparative advantage in shoe making

Which of the following is a reason why government is a participant in a market-oriented economy? a. To enforce contracts and protect private property b. To promote collusion c. To promote the growth of natural monopolies d. To provide more inequality in the distribution of income e. To promote externalities

a. To enforce contracts and protect private property

A country has an absolute advantage in the production of a good if that country: a. can produce the good using fewer resources than another country would require. b. has the lowest opportunity cost of producing the good and can produce it with the fewest resources. c. has the lowest opportunity cost of producing the good, regardless of whether it is produced with the fewest resource d. has the greatest opportunity cost of producing the good, regardless of whether it is produced with the fewest resource e. has the greatest opportunity cost of producing the good and produces it with the fewest resources.

a. can produce the good using fewer resources than another country would require

If demand is price elastic, total revenue is: a. directly related to quantity demanded. b. inversely related to quantity demanded. c. directly related to price. d. directly related to price and inversely related to quantity demanded. e. not related to either price or to quantity demanded.

a. directly related to quantity demanded

Elijah, a basketball fan, reasons that because his favorite team has three superstars on it, the team must be a great team and will win the championship. Elijah is committing the: a. fallacy of composition. b. fallacy that association is causation. c. fallacy of segmentation. d. mistake of ignoring the secondary effects. e. mistake of ignoring the obvious.

a. fallacy of composition

The following table shows tax payments made for various incomes. According to the information in the table below, the tax system is: a. progressive throughout all levels of income. b. progressive between $1,000 and $2,000 of income but regressive above $2,000. c. regressive throughout all levels of income. d. regressive between $1,000 and $2,000 of income but progressive above $2,000. e. proportional throughout all levels of income.

a. progressive throughout all levels of income

Demand is inelastic if: a. the percentage change in price is greater than the percentage change in quantity demanded. b. the percentage change in price is less than the percentage change in quantity demanded. c. the percentage change in price is equal to the percentage change in quantity demanded. d. the value of price elasticity is equal to −1. e. the value of price elasticity is less than −1.

a. the percentage change in price is greater than the percentage change in quantity demanded

If the price elasticity of demand is −0.5, then a: a. 1 percent decrease in quantity demanded leads to a 0.5 percent decrease in price. b. 1 percent decrease in price leads to a 0.5 percent increase in quantity demanded. c. 50 percent decrease in price leads to a 1 percent increase in quantity demanded. d. 50 percent decrease in price leads to a 100 percent increase in quantity demanded. e. 50 percent decrease in quantity demanded leads to a 1 percent decrease in price. ANSWER: B

b. 1 percent decrease in price leads to a 0.5 percent increase in quantity demanded

If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then the value of the price elasticity of supply is: a. 0.38. b. 2. c. 2,67 d. 4 e. 8

b. 2

The figure given below shows the production possibilities frontier for education and food. The opportunity cost of moving from point c to point b is _____. a. 3 units of food b. 22 units of education c. 1 unit of food d. 12 units of education e. 62 units of education

b. 22 unites of education

Which of the following taxes is most clearly based on the benefits-received principle of taxation? a. Corporate income tax b. Gasoline tax c. Personal income tax d. Payroll tax e. Value added tax

b. Gasoline tax

Which of the following is true of progressive tax? a. People who make more money pay less total taxes. b. The marginal tax rate increases as income increases. c. The percentage of income paid out decreases as income increases. d. People who are poor receive the proceeds of the tax. e. The percentage of income paid out increases as income decreases

b. The marginal tax rate increases as income increases

One group of people uses New York City subways only during rush hour to travel to and from work. Another group uses them only in midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare? a. The rush-hour group because its demand for subway service is more elastic than that of the midday group. b. The rush-hour group because its demand for subway service is less elastic than that of the midday group. c. The midday group because its demand for subway service is more elastic than that of the rush- hour group. d. The midday group because its demand for subway service is less elastic than that of the rush- hour group. e. It doesn't matter because both groups have the same elasticity of demand.

b. The rush-hour group because its demand for subway service is less elastic than that of the midday group.

An example of a positive externality is: a. pollution because it affects people not directly involved with producing it. b. a homeowner's maintenance of a beautiful lawn because this creates a benefit for neighbors. c. monopoly creation. d. driving a car that emits pollution. e. cigarette smoking because this imposes an indirect cost on people around the smoker.

b. a homeowner's maintenance of a beautiful lawn

Which of the following statements is not true? a. A perfectly elastic demand curve is a constant-elasticity demand curve. b. A linear demand curve with a slope of −4 is a constant-elasticity demand curve. c. A perfectly inelastic demand curve is a constant-elasticity demand curve. d. Total revenue increases along a unit-elastic demand curve. e. The elasticity value for a perfectly elastic demand curve is zero.

b. a linear demand curve with a slope of -4 is a constant-elasticity demand

Marginal utility is the:

b. additional satisfaction obtained from consuming one more unit of a good.

Consumer tastes and preferences:

b. are relatively stable over time.

The price elasticity of demand is typically negative because: a. as price decreases, quantity demanded decreases. b. as price decreases, quantity demanded increases. c. as price decreases, demand decreases. d. as price decreases, demand increases. e. consumers rarely respond to a change in price.

b. as price decreases, quantity demanded increases

Because people's wants are unlimited but resources are scarce, _____: a.only the rich get everything they want. b.choices must be made. c.there will be more services produced than goods. d.people search for spiritual fulfillment rather than material fulfillment. e.poor people never get anything they want.

b. choices must be made

Externalities are defined as: a. any transaction external to the firm. b. costs or benefits that fall on third parties. c. policies that firms adopt to sell products outside the country. d. managers' dealings with stockholders outside the firm. e. costs of maintaining plant and equipment to avoid the scrutiny of external auditors.

b. costs or benefits that fall on third parties

If real wage decreases, the opportunity cost of working in the home will: a. increase. b. decrease. c. not be affected. d. increase as long as worker productivity also rises. e. increase only if households want to maintain their standard of living.

b. decrease

The income effect of a decrease in the price of potatoes, an inferior good, is a(n): a. increase in the demand for onions. b. decrease in the quantity demanded of potatoes. c. increase in the demand for potatoes. d. increase in the quantity demanded of potatoes. e. decrease in the demand for onions.

b. decrease in the quantity demanded of potatoes

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is: a. perfectly elastic. b. elastic. c. unit elastic. d. inelastic. e. perfectly inelastic.

b. elastic

Alicia makes the statement that every time she eats chocolate, she gets acne. By ignoring the possibility that there may be another factor that causes Alicia to eat chocolate and which also causes her acne, Alicia is committing the: a. fallacy of composition. b. fallacy that association is causation. c. fallacy of segmentation. d. mistake of ignoring secondary effects. e. mistake of looking beyond the obvious.

b. fallacy that association is causation

Households supply four basic types of resources. They include all of the following except: a. natural resources. b. final goods and services. c. capital. d. entrepreneurial ability. e. labor.

b. final goods and services

In a circular-flow model, households supply all of the following except: a. labor. b. goods and services. c. capital. d. entrepreneurial ability. e. natural resources.

b. goods and services

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the demand is: a. elastic. b. inelastic. c. unit elastic. d. perfectly elastic. e. perfectly inelastic.

b. inelastic

The assumption of rational self-interest means that economic decision makers: a. have no concern for the welfare of others. b. make reasonable decisions based on their expectations of results. c. know with certainty which choice will have the best result. d. consider the welfare of others to be more important than their own happiness. e. do not make incorrect decisions or bad choices.

b. make reasonable decisions based on their expectations of results

Despite specialization and comparative advantage, household production still exists because for some households: a. the opportunity cost of production at home is greater than the cost of purchasing the good in the market. b. production at home is less costly than purchasing the good in the market. c. the value of home production exceeds the sunk cost of home production. d. the value of home production is ignored. e. the expenditure on food and clothing represents a small portion of their total budget.

b. production at home is less costly than purchasing the good in the market

Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. This is an example of: a. progressive taxation. b. proportional taxation. c. regressive taxation. d. a property tax. e. a tax based on the benefits-principle of taxation

b. proportional taxation

The law of increasing opportunity cost reflects the fact that: a. the production possibilities frontier is bowed inward. b. resources are not perfectly substitutable. c. resources cannot always be used efficiently. d. an economy will operate at a point inside its production possibilities frontier. e. an economy will operate at a point along its production possibilities frontier.

b. resources are not perfectly substitutable

If all resources are used efficiently to produce goods and services, a nation will find itself producing: a. inside its production possibilities frontier. b. somewhere on its production possibilities frontier. c. outside of its production possibilities frontier. d. at one extreme end of its production possibilities frontier. e. more of one product with no decrease in the production of any other product.

b. somewhere on its production possibilities frontier

The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the price of the good described in the table below is $1.60, then an economist would expect the:

b. the price to decrease to $1.50

The figure below shows the production possibilities frontiers for rice and T-shirts for two countries, Costa Rica and United States. According to the figure below, in Costa Rica, the opportunity cost of 1 ton of rice is: a. 1/2 of a T-shirt. b. 3/4 of a T-shirt. c. 1 T-shirt. d. 11/2 T-shirts. e. 2 T-shirts.

c. 1 T-shirt

Economists classify all of the following as physical capital, except one. Which one is not capital? a. A $20 bill in a firm's petty cash drawer b. The building where an economics class meets c. A plumber's wrench d. A railroad car e. A factory

c. A plumber's wrench

Alan is a retired economist who enjoys building toy trains for his grandkids. He uses a workbench and tools from his garage, lumber he bought from the lumber store for $10, and varnish and paint he had left over from another project last year. Since a retired economist is always an economist, which of the following statements does he make about building toy trains? a. I'm not paying for any resources, so the toy trains I'm building are a good example of free goods. b. I only paid $10 for the lumber, so the toy trains I'm building are a good example of free goods. c. I'm using scarce resources to build the toy trains. d. The resources I'm using to build the toy trains are not scarce. e. If I had used lumber that I cut from the tree in my backyard instead of buying it from the store, then the toy trains I'm building would be a good example of free goods.

c. I'm using scarce resources to build the toy trains

You want to sell your old iPad that you no longer use, and your cousin wants to give you $300 for it. If you decide to sell your iPad to your cousin, you'll have to pay $40 for shipping the iPad to your cousin. As a rational decision maker, you should: a. sell it because the marginal benefit is smaller than the marginal cost. b. not sell it because the marginal benefit is smaller than the marginal cost. c. sell it because the marginal benefit is greater than the marginal cost. d. not sell it because the marginal benefit is greater than the marginal cost. e. sell it because the marginal benefit is equal to the marginal cost.

c. Sell it because the marginal benefit is greater than the marginal cost

Which of the following illustrates the law of diminishing marginal utility?

c. The Marginal Utility of Dianne's second Coke is greater than the marginal utility of her third Coke, other things constant.

Newspaper vending machines illustrate the publishers' belief that the:

c. The Marginal Utility of a second identical newspaper is zero or less

All of the following are advantages of partnerships except one. Which is the exception? a. They are relatively easy to start. b. Their profits are taxed once as personal income. c. Their liability is limited by each partner's share of the business. d. They offer a greater opportunity for specialization by the owners. e. They enable continuation of the firm if one partner dies.

c. Their liability is limited by each partner's share of the business.

Which of the following is the fundamental resource that is the basis of labor? a. Capital b. Natural resources c. Time d. Money e. Entrepreneurial ability

c. Time

The law of demand states that as the price of a good rises, _____. a. buyers purchase more of the good, because they expect prices to be even higher in the future b. buyers purchase less of the good, because they expect prices to fall in the future c. buyers purchase less of the good, because their real income decreases with an increase in price d. buyers purchase more of the good, because the price of a substitute has risen e. buyers purchase more of the good, because the higher price reflects an improvement in product quality

c. buyers purchase less of the good, because their real income decreases with an increase in price

You are more likely to hire a plumber to repair a leaky drainpipe: a. as the tax rate on your earned income rises. b. if you already own the specialized tools required to complete the plumbing repair work. c. following an increase in the opportunity cost of your time. d. the more knowledge and experience in plumbing repair work you possess. e. as the transaction cost of entering into a plumbing contract increases due to government regulations.

c. following an increase in the opportunity cost of your time

Rationality in the household decision-making process means that: a. all households make the same decisions. b. everyone in the household agrees on all decisions. c. households act in their own best interests. d. households want to earn as much income as possible. e. all households would make the same decisions given the same information on product quality and prices.

c. households act in their own best interests.

Two goods are considered substitutes only if a(n): a. decrease in the demand for one good leads to a decrease in the supply of the other. b. increase in the demand for one good leads to a decrease in the supply of the other. c. increase in the price of one good leads to an increase in the demand for the other. d. decrease in the price of one good leads to an increase in the demand for the other. e. decrease in the supply of one good causes producers to switch to production of the other.

c. increase in the price of one good leads to an increase in the demand for the other.

If Good B is a complement to Good A, then a decrease in the price of Good B: a. increases the quantity demanded of Good A. b. decreases the demand for Good A. c. increases the demand for Good A. d. decreases the quantity demanded of Good A. e. will cause the demand for Good B to increase.

c. increases the demand for Good A

The table below shows tax payments made for various incomes. According to the information in the table below, the tax system is: a. progressive at all levels of income. b. proportional. c. regressive. d. based on the benefits received. e. proportional between $5,000 and $10,000.

c. regressive

If Joe says that nothing comes close to a Pepsi, his demand for Pepsi is likely to be: a. relatively price elastic. b. relatively income elastic. c. relatively price inelastic. d. unit elastic. e. perfectly elastic.

c. relatively price inelastic

The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the market price of the good is $1.20, there will be a _____.

c. shortage of 60 units

A university administration's decision to raise tuition in order to increase revenue will be successful if: a. the demand curve slopes downward. b. demand is elastic. c. demand is inelastic. d. supply is elastic. e. supply is inelastic.

c. the demand is inelastic

Which of the following is one of the chief reasons for the increased number of married women in the U.S. workforce? a. The marginal cost of working in the labor force has increased. b. Jobs provide greater independence and self-worth. c. The opportunity cost of household work has increased. d. The sunk cost of household appliances has risen to the point where women must work to make payments on them. e. Women spend more time shopping as a result of the increasing division of labor in household production.

c. the opportunity cost of household work has increased

The law of increasing opportunity cost explains why: a. opportunity cost is constant along the production possibilities frontier. b. the production possibilities frontier is downward sloping. c. the production possibilities frontier is curved. d. efficient points lie along the production possibilities frontier. e. technology remains constant along a production possibilities frontier.

c. the production possibilities frontier is downward sloping

A movement along a demand curve can be attributed to a change in: a. the demand for a good. b. the opportunity cost of producing a good. c. the quantity demanded of a good. d. the substitution effect of consuming a good. e. the income and preference of a consumer.

c. the quantity demanded of a good

Suppose the price elasticity of demand for your economics textbook is −1. If the publisher raises the price by 5 percent: a. revenues will rise by 5 percent. b. quantity demanded will rise by 5 percent. c. total revenue will not change. d. revenues will fall. e. revenues will fall by 5 percent.

c. total revenues will not change

If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the value of the price elasticity of demand for Pepsi-Cola is: a. −0.5. b. −0.25. c. −1. d. −3. e. −2.

d. -3

Table 5.1 shows the change in the quantity demanded for a product as a result of a change in the price of the product. Use the information in the table below to calculate the value of the price elasticity of demand. a. −2/3 b. −1/3 c. −3/5 d. −5/3 e. 0

d. -5/3

The following figure shows the demand curves for baby formula. Which of the following changes is likely to happen if the price of baby formula increases? a. A shift in the demand curve from D1 to D2 b. A movement along demand curve D1 from point a to point b c. A shift in the demand curve from D2 to D1 d. A movement along the demand curve D2 from point d to point c e. A movement from point b on the demand curve D1 to point c on the demand curve D2

d. A movement along the demand curve D2 from point d to point c

Identify a statement that is true about a linear demand curve. a. Along a linear demand curve, both the slope and price elasticity are constant. b. Along a linear demand curve, the price elasticity is constant, but the slope varies. c. Along a linear demand curve, total revenues are constant. d. Along a linear demand curve, the slope is constant, but the price elasticity varies. e. Along a linear demand curve, total revenues are negative.

d. Along a linear demand curve, the slope is constant, but the price elasticity varies.

Jennifer expects the price of CDs to go up by 10 percent next week. Which of these is most likely to result from such an expectation? a. Jennifer's demand for CD players will decrease during this week. b. Jennifer's demand for CDs will decrease during this week. c. Jennifer's demand for CDs will increase during the following week. d. Jennifer's demand for CDs will increase during this week. e. Jennifer's demand for CD players will increase during the following week.

d. Jennifer's demand for CDs will increase during this week

If Robin has an absolute advantage in both gardening and baking when compared to Robert, then: a. Robin cannot benefit by trading with Robert. b. Robin can benefit by specializing in gardening if Robert specializes in baking. c. Robin can benefit by specializing in baking if Robert specializes in gardening. d. Robin and Robert may benefit from trading, but there is insufficient information to determine who should specialize

d. Robin and Robert may benefit from trading, but there is insufficient information to determine who should specialize

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct? a. The model is missing the interaction between firms and the resource market. Therefore, it cannot predict well. b. The model is missing the interaction between households and the product market. Therefore, it cannot predict well. c. The model has too many simplifying assumptions, and it cannot be used to make predictions about the real world. d. The model is a simplification of the real world, and it can be used to make predictions about the real world. e. The model is missing the interaction between firms and the product market. Therefore, it cannot predict well.

d. The model is a simplification of the real world, and it can be used to make predictions about the real world.

Which of the following is assumed to be constant while calculating the price elasticity of demand? a. The price of the product itself b. The quantity demanded of the product c. Total revenue received from the sale of the product d. The price of all other products e. The cost of production

d. The price of all other products

The following figure shows the market for a good. Which of the following is most likely to shift demand from D' to D?

d. a decline in consumers' incomes if it is a normal good

The total revenue curve that corresponds to a downward-sloping linear demand curve: a. slopes downward. b. slopes upward. c. is a horizontal line. d. first rises, then falls. e. first falls, then rises.

d. first rises, then falls

The income effect of a decrease in the price of legal services, a normal good, is a(n): a. decrease in the demand for legal services. b. decrease in the quantity demanded of legal services. c. increase in the quantity supplied of lawyers. d. increase in the quantity demanded of legal services. e. increase in the supply of lawyers.

d. increase in the quantity demanded of legal services

Natural monopolies occur when: a. government antitrust laws are too weak or not enforced. b. negative externalities are present. c. firms collude to set prices and divide the market among themselves. d. one firm can service the market more cheaply than two or more firms can. e. a public good is produced by a private firm.

d. one firm can service the market more cheaply than two or more firms can

The cross-price elasticity of demand between milk and soft drinks is likely to be: a. negative, because the goods are complements. b. positive, because the goods are complements. c. negative, because the goods are substitutes. d. positive, because the goods are substitutes. e. zero, because the goods are not usually consumed by the same person at one time.

d. positive, because the goods are substitutes

If a good is offered free of charge, one would:

d. stop consuming it when its marginal utility has declined to zero

Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy. Harnessing wind power by setting up wind farms had been one alternative proposed and implemented. As it is now known that these wind farms lead to the slicing and dicing of migratory birds and the decimation of the local bat population, we could say that environmentalists have committed the: a. fallacy of composition. b. fallacy that association is causation. c. fallacy of segmentation. d. mistake of ignoring secondary effects. e. mistake of ignoring the obvious.

d. the mistake of ignoring secondary effects

When a surplus arises in the market for swimwear: a. the price of swimwear will increase. b. the production of swimwear will increase. c. the supply of swimwear will increase. d. the price of swimwear at retail outlets will fall. e. the demand for swimwear will increase.

d. the price of swimwear at retail outlets will fall.

Which of the following is most likely to shift the supply curve for a product to the right? a. An increase in the price of a resource used in the good's production b. The expectation of a higher price in the near future c. An increase in the price of the product d. A decrease in the price of an alternative good e. An improvement in the technology for producing the good

e. An improvement in the technology for producing the good

Roxanne and Eileen live in an apartment building with a laundry room in the basement. Roxanne does her laundry at home, spending $4 and 5 hours per week. Eileen sends her laundry out, spending $20 and 15 minutes per week transporting the laundry. On the basis of the information given, which one of the following must be true? a. Roxanne earns more labor income than Eileen. b. Eileen earns more total income than Roxanne. c. Eileen enjoys doing laundry; Roxanne does not. d. Eileen has less laundry than Roxanne. e. Eileen and Roxanne attach different utilities to time spent doing laundry.

e. Eileen and Roxanne attach different utilities to time spent doing laundry

18. A test is scheduled for Monday morning, and you went to a party on Sunday night. If you hadn't attended the party, you could have studied for the test or gone to a movie. Which of the following is true regarding your opportunity cost? a. The opportunity cost of going to the movie is studying for the test. b. The opportunity cost of going to the party is watching the movie. c. The opportunity cost of going to the party is both watching the movie and the study time. d. Because you could go to the party only that night, but could go to a movie any time, the opportunity cost of the part e. From the above information, it's not possible to determine the opportunity cost of attending the party.

e. From the above information, it's not possible to determine the opportunity cost of attending the party.

Benjamin works as an economist for the federal government. Which of the following questions is he trying to answer as part of his job? a.How can I get rich by playing the stock market? b.What are the best ways to reduce people's wants, given the scarcity of resources? c.How can government officials use scarce resources to become richer? d.What is money? e.How do people use limited resources to try to satisfy unlimited wants?

e. How do people use limited resources to try and satisfy unlimited wants

The assumption that individuals act rationally implies that: a. people think only of themselves and disregard the well-being of others. b. people undertake all those activities that yield benefits to themselves. c. people only consider the costs of an activity to decide whether it is worthwhile. d. the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed. e. people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile.

e. People implicitly calculate the costs and benefits of an activity if it is worthwhile

On a given production possibilities frontier, which of the following is not assumed to be fixed? a. The amount of labor available b. The amount of capital available c. The level of technology d. The amount of land and natural resources available e. Production of each item

e. Production of each item

The statement "Households maximize utility" means that households: a. try to be as useful as possible to the economy. b. are only interested in maximizing their earnings. c. are assumed to buy useful things before they buy luxuries. d. are only interested in acquiring material wealth. e. are assumed to do what they think will most increase their satisfaction.

e. are assumed to do what they think will most increase their satisfaction

The term opportunity cost suggests that: a. in any exchange situation where one person gains, someone else must lose. b. not all individuals make the most of life's opportunities. c. executives do not always recognize opportunities for profit as quickly as they should. d. the only factor that is important in decision making is cost. e. because goods are scarce, in order to get some good you must give up some other good in return.

e. because goods are scarce, in order to get some good you must give up some other good in return.

for a given upward-sloping supply curve, a decrease in demand will lead to a(n): a. increase in supply. b. decrease in supply. c. increase in quantity supplied. d. increase in equilibrium price. e. decrease in equilibrium price.

e. decrease in equilibrium price

In the figure given below, a price floor set at $20.00 will:

e. have no impact on equilibrium price

Suppose you have an hour before your next class starts. You can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is: a. the cost of what you eat. b. the value of reading and sleeping. c. the loss of value from not reading or sleeping. d. the net benefit of sleeping for another hour. e. impossible to determine because the most preferred alternative is not known.

e. impossible to determine because the most preferred alternative is not known

As a consumer allocates income between good A and good B, total utility is maximized when:

e. marginal utility of A/price of A = marginal utility of B/price of B

If the production possibilities frontier is a straight line, _____. a. its slope will equal −1 b. resources must not be used efficiently c. resources must be unemployed d. society must not be using the latest technology e. resources must be equally adaptable at producing either product

e. resources must be equally adaptable at producing either product

Sunk costs: a. can only be measured in monetary terms. b. are opportunity costs. c. should influence a person's choice if that person is a marginal decision maker. d. lower the efficiency of production. e. should not be considered when making economic decisions.

e. should not be considered when making economic decisions.

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home. Which of the following is the most likely explanation for her behavior? a. The opportunity cost of her time is very low. b. She doesn't take travel time into consideration. c. She doesn't like to cook or doesn't know how to cook. d. The prices at the more expensive restaurant understate the opportunity cost of eating there. e. The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-price

e. the higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-price