Micro/Midterm I                                                             Name
Fall 1999                                                                             Choose the best answer.
                                            GOOD LUCK!

                                                back
 
 
1. Which of the following is not one of the three questions that an economic system must answer? 
A. What to produce.
B. How to produce.
C. Why economies produce.
D. For whom to produce.

 
2. The additional cost associated with continuing a given action is called the:
A. marginal benefit.
B. marginal cost.
C. total net loss.
D. total loss.

 
3. The economy is the institutional structure through which:
A. individuals in a society coordinate their wants.
B. the government establishes the laws of a nation.
C. businesses make production plans.
D. political decisions are made in a society.

 
4. If a student is observed dropping a course from her fall semester schedule, an economist is likely to conclude that
A. the marginal benefit of dropping that course must outweigh the marginal cost.
B. the course was the last additional course for which marginal benefit was positive.
C. the additional cost in tuition and class and study time must be less than the additional benefit of that course.
D. the student has now maximized total benefits from her semester's courseload.

 
5. The opportunity cost of obtaining more of a scarce good is:
A. zero.
B. not likely to influence the amount of it purchased.
C. measured by what must be sacrificed to obtain it.
D. always measured accurately by the dollar sum necessary to purchase it.

 
6. During a morning you can choose to play tennis or attend a class. Which of the following is true:
A. Attending class that morning is the benefit of playing tennis.
B. The opportunity cost of playing tennis will be zero.
C. You do not have enough information to say anything about the opportunity cost of playing tennis in the morning.
D. The opportunity cost of playing tennis can be measured by what you sacrificed when you missed your class.

 
7. The invisible hand refers to the:
A. role of government in a free-market economy.
B. price mechanism that guides economic actions.
C. role of social customs in guiding economic actions.
D. method in which output is distributed by government.

 
8. _____________ is primarily concerned with the behavior of individual markets while _____________ focuses on aggregate markets.
A. Macroeconomics, microeconomics.
B. Positive analysis, normative analysis.
C. Microeconomics, normative analysis.
D. Microeconomics, macroeconomics.

 
9. An economic study concludes that requiring employers to provide health insurance to all employees would slow the rate of job creation. This conclusion is an example of:
A. normative analysis.
B. the concept of opportunity cost.
C. a value judgment.
D. positive analysis.

 
10. Deciding how much income should be redistributed from rich households to poor households requires the use of:
A. positive economics.
B. negative economics.
C. objective economics.
D. normative economics.

 
11. The Wealth of Nations was written by: 
A. Adam Smith.
B. J.S. Marshall.
C. Leon Walras.
D. Karl Marx.

 
12. Capitalism is characterized by:
A. private property.
B. government ownership of the means of production.
C. distribution according to need.
D. central planning.

 
13. Which of the following characteristics is descriptive of capitalism rather than Soviet-style socialism ? 
A. Government ownership of the means of production.
B. Labor allocation by individual choice.
C. Capital allocation by government planning
D. Government-determined, rather than market-determined, distribution of income.

 
14. "Welfare capitalism" describes an economic system with:
A. market forces modified by government intervention.
B. capitalists rather than managers making the primary decisions affecting society's welfare.
C. capitalists rather than political pressure groups setting welfare policies.
D. market forces rather than government making the fundamental welfare decisions for society.

 
15. Under capitalism, the decision of what to produce is determined by:
A. what central planners believe to be socially beneficial.
B. what firms believe people want and will make the firm a profit.
C. what people demand from business and government at any price.
D. what society tells the central planners is acceptable.

 
16. Economists believe our diverse wants are coordinated in the marketplace
A. by each being kind to one another.
B. by each pursuing his/her own self-interest.
C. by each both pursuing his own self interest and by being kind.
D. by neither pursuing self interest nor by being kind.

 
17. When shortages develop under capitalism:
A. price falls.
B. price goes up.
C. government must ration.
D. those who need it most must go without.

 
18. According to Adam Smith, economic decisions are made in a laissez-faire economy:
A. by relying on individuals to temper self-interest with concern for the good of society.
B. by relying on the government to temper individual self-interest and direct it to social goals.
C. by assuming that self-interest, will be balanced by both social and political forces.
D. by relying on the market to channel individual self-interest toward the good of society.

 
19. A production possibility curve usually has a negative slope because
A. decisions generally do not have opportunity costs.
B. you can get more of one benefit costlessly.
C. you get more of one benefit only if you get more of another benefit.
D. you get more of one benefit only if you get less of another benefit.

 
20.
R-1 Figure 2-12

Refer to the graph above. Given current resource and technology constraints, this economy cannot produce at point:
A. A
B. B
C. C
D. D


 
21. If an economy is producing inside its production possibilities curve, it is using its resources:
A. efficiently.
B. optimally.
C. wisely.
D. inefficiently.

 
22.
R-2 Figure 2-13

Refer to the graph above. In the production possibility curve, the points which indicate efficient use of all available resources are:
A. Points A and D only.
B. Points A, B and D.
C. Points B and C only.
D. Points B, C and E.


 
23. An improvement in technology will:
A. imply that the law of increasing costs no longer applies.
B. shift the production possibilities curve inward.
C. shift the production possibilities curve outward.
D. have no effect on the production possibilities curve.

 
24. In 11th century Europe, economic decisions were made according to:
A. markets.
B. tradition and the lord of the manor.
C. the lord of the manor exclusively.
D. a central government.

 
25. Karl Marx criticized capitalism because he believed that:
A. a capitalist system ignored traditional class roles.
B. efficient allocation of resources was not a worthwhile goal.
C. the proletariat class exploited the capitalist class, who created all the value inherent in goods.
D. the capitalist class exploited the proletariat class, who created all the value inherent in goods.

 
26. The law of demand claims that there is an inverse relationship between:
A. price and quantity demanded.
B. price and income.
C. income and quantity demanded.
D. price and the number of consumers in a market.

 
27. The curve that best demonstrates the law of demand is a curve that has a(n) 
A. positive slope.
B. negative slope.
C. zero slope.
D. infinite slope.

 
28. If the money price of beef rises and the money price of chicken doesn't rise, individuals will:
A. consume more of both chicken and beef.
B. consume less of both chicken and beef.
C. substitute chicken for beef.
D. substitute beef for chicken.

 
29. The distinction between a change in demand and a change in quantity demanded is best made by saying that: 
A. a change in quantity demanded is caused by a change in price and a change in demand is caused by a change in other factors.
B. a change in demand is caused by a change in price and a change in quantity demanded is caused by a change in other factors.
C. a change in quantity demanded causes a change in demand.
D. a change in both quantity demanded and demand is caused by a change in price.

 
30. The use of the phrase "other things equal" in supply and demand analysis indicates that:
A. an equilibrium price has been reached.
B. an equilibrium quantity has been reached.
C. factors other than the one under consideration are kept constant.
D. we are considering all the changes which might take place in actual markets.

 
31.
R-3 Figure 3-3

Refer to the graph above. If the price is changed from $4.00 to $1.00, how much more is demanded?
A. 2.
B. 4.
C. 6.
D. 8.


 
32.
R-3 Figure 3-3

Refer to the graph above. What is the highest price that people would be willing to pay for 4 cassette rentals?
A. $0.50.
B. $1.00.
C. $2.00.
D. $3.00.


 
33. A market demand curve is constructed from individual demand curves by
A. taking the maximum quantity of the demand curves at each price as the market quantity demanded at that price.
B. adding quantities demanded at each price for each demand curve.
C. taking the demand curve that is the furthest to the right as the market demand curve.
D. multiplying the quantities demanded on each demand at each price.

 
34. According to the law of supply:
A. price and quantity supplied are positively related.
B. quantity supplied tends to increase when there is an improvement in technology.
C. quantity supplied tends to decrease as consumers' incomes increase.
D. price and quantity supplied are inversely related.

 
35. The curve that best demonstrates the law of supply is a curve that has a(n): 
A. infinite slope.
B. zero slope.
C. negative slope.
D. positive slope.

 
36. Which of the following statements is true ? 
A. The quantity supplied is represented graphically by a curve and supply as a point on that curve.
B. Supply is represented graphically by a curve and quantity supplied as a point on that curve
C. The quantity supplied is directly related prices, whereas supply is inversely related to price.
D. The quantity supplied is inversely related prices, whereas supply is directly related to price.

 
37.
R-4 Figure 3-12

Refer to the graph above. The graph (or graphs) which most likely shows a decrease in supply is:
A. C only.
B. A and C.
C. D only.
D. B and D.


 
38. Factors which shift the supply curve to the right include:
A. decreases in the price of the inputs used in production.
B. increases in the price of the inputs used in production.
C. a fall in the price of the good in question.
D. an increase in the price of the good in question.

 
39.
R-5 Figure 3-20

Refer to the graph above. There is a market shortage of 2000 units when the price is:
A. $1.20.
B. $.90.
C. $.60.
D. $.30.


 
40.
R-5 Figure 3-20

Refer to the graph above. There is a market surplus of 2000 units when the price is:
A. $1.20.
B. $.90.
C. $.60.
D. $.30.


 
41.
R-5 Figure 3-20

Refer to the graph above. The market is in equilibrium when the price is:
A. $1.20.
B. $.90.
C. $.60.
D. $.30.


 
42.
R-6 Figure 4-4

Refer to the graph above. A price ceiling set by the government would cause the largest shortage with a price set at:
A. $3.00.
B. $2.50.
C. $2.25.
D. $1.50.


 
43. If a price ceiling below the equilibrium price is imposed on corn, the likely result will be:
A. a lower equilibrium price for corn as the supply curve shifts out.
B. a higher equilibrium price for corn as the demand curve shifts out.
C. a shortage of corn as the price ceiling keeps the market from reaching equilibrium.
D. a surplus of corn as the price ceiling keeps the market from reaching equilibrium.

 
44.
R-6 Figure 4-4

Refer to the graph above. A price floor set by the government would cause the greatest distortion in the market with a price set at:
A. $3.00.
B. $2.50.
C. $2.25.
D. $1.50.


 
45. Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will be:
A. a lower equilibrium price for eggs as the demand curve for eggs shifts left.
B. a higher equilibrium price for eggs as the supply curve for eggs shifts left.
C. a decrease in the quantity of eggs purchased by consumers.
D. an increase in the quantity of eggs purchased by consumers.

 
46. Households supply factors of production to business and are paid by business for doing so in the _______ market.
A. goods
B. factor
C. capital
D. money

 
47. Businesses sell goods and services to households and government in the _________ market.
A. goods
B. factor
C. capital
D. money

 
48. Consumer sovereignty is the principle that:
A. consumers are controlled by the market.
B. the invisible hand equilibrates supply and demand.
C. ultimately consumer determine what is produced.
D. if benefits exceed costs, do it and if costs exceed benefits, don't.

 
49. An entrepreneur might choose to form a corporation rather than a sole proprietorship because a corporation provides:
A. less legal hassle to organize.
B. limited liability.
C. ease of formation.
D. direct control by the owner.

 
50. A cost or benefit that spills over to a third party is called:
A. an externality.
B. a legal indemnity.
C. an illegal indemnity.
D. an internality.

                                                                back

This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test.

MIC1F98
Micro/Midterm I                                                             Name
Fall 1999                                                                             Choose the best answer.
                                            GOOD LUCK!

                                                back
 
 
1. Which of the following is not one of the three questions that an economic system must answer? 
A. What to produce.
B. How to produce.
C. Why economies produce.
D. For whom to produce.

 
2. The additional cost associated with continuing a given action is called the:
A. marginal benefit.
B. marginal cost.
C. total net loss.
D. total loss.

 
3. The economy is the institutional structure through which:
A. individuals in a society coordinate their wants.
B. the government establishes the laws of a nation.
C. businesses make production plans.
D. political decisions are made in a society.

 
4. If a student is observed dropping a course from her fall semester schedule, an economist is likely to conclude that
A. the marginal benefit of dropping that course must outweigh the marginal cost.
B. the course was the last additional course for which marginal benefit was positive.
C. the additional cost in tuition and class and study time must be less than the additional benefit of that course.
D. the student has now maximized total benefits from her semester's courseload.

 
5. The opportunity cost of obtaining more of a scarce good is:
A. zero.
B. not likely to influence the amount of it purchased.
C. measured by what must be sacrificed to obtain it.
D. always measured accurately by the dollar sum necessary to purchase it.

 
6. During a morning you can choose to play tennis or attend a class. Which of the following is true:
A. Attending class that morning is the benefit of playing tennis.
B. The opportunity cost of playing tennis will be zero.
C. You do not have enough information to say anything about the opportunity cost of playing tennis in the morning.
D. The opportunity cost of playing tennis can be measured by what you sacrificed when you missed your class.

 
7. The invisible hand refers to the:
A. role of government in a free-market economy.
B. price mechanism that guides economic actions.
C. role of social customs in guiding economic actions.
D. method in which output is distributed by government.

 
8. _____________ is primarily concerned with the behavior of individual markets while _____________ focuses on aggregate markets.
A. Macroeconomics, microeconomics.
B. Positive analysis, normative analysis.
C. Microeconomics, normative analysis.
D. Microeconomics, macroeconomics.

 
9. An economic study concludes that requiring employers to provide health insurance to all employees would slow the rate of job creation. This conclusion is an example of:
A. normative analysis.
B. the concept of opportunity cost.
C. a value judgment.
D. positive analysis.

 
10. Deciding how much income should be redistributed from rich households to poor households requires the use of:
A. positive economics.
B. negative economics.
C. objective economics.
D. normative economics.

 
11. The Wealth of Nations was written by: 
A. Adam Smith.
B. J.S. Marshall.
C. Leon Walras.
D. Karl Marx.

 
12. Capitalism is characterized by:
A. private property.
B. government ownership of the means of production.
C. distribution according to need.
D. central planning.

 
13. Which of the following characteristics is descriptive of capitalism rather than Soviet-style socialism ? 
A. Government ownership of the means of production.
B. Labor allocation by individual choice.
C. Capital allocation by government planning
D. Government-determined, rather than market-determined, distribution of income.

 
14. "Welfare capitalism" describes an economic system with:
A. market forces modified by government intervention.
B. capitalists rather than managers making the primary decisions affecting society's welfare.
C. capitalists rather than political pressure groups setting welfare policies.
D. market forces rather than government making the fundamental welfare decisions for society.

 
15. Under capitalism, the decision of what to produce is determined by:
A. what central planners believe to be socially beneficial.
B. what firms believe people want and will make the firm a profit.
C. what people demand from business and government at any price.
D. what society tells the central planners is acceptable.

 
16. Economists believe our diverse wants are coordinated in the marketplace
A. by each being kind to one another.
B. by each pursuing his/her own self-interest.
C. by each both pursuing his own self interest and by being kind.
D. by neither pursuing self interest nor by being kind.

 
17. When shortages develop under capitalism:
A. price falls.
B. price goes up.
C. government must ration.
D. those who need it most must go without.

 
18. According to Adam Smith, economic decisions are made in a laissez-faire economy:
A. by relying on individuals to temper self-interest with concern for the good of society.
B. by relying on the government to temper individual self-interest and direct it to social goals.
C. by assuming that self-interest, will be balanced by both social and political forces.
D. by relying on the market to channel individual self-interest toward the good of society.

 
19. A production possibility curve usually has a negative slope because
A. decisions generally do not have opportunity costs.
B. you can get more of one benefit costlessly.
C. you get more of one benefit only if you get more of another benefit.
D. you get more of one benefit only if you get less of another benefit.

 
20.
R-1 Figure 2-12

Refer to the graph above. Given current resource and technology constraints, this economy cannot produce at point:
A. A
B. B
C. C
D. D


 
21. If an economy is producing inside its production possibilities curve, it is using its resources:
A. efficiently.
B. optimally.
C. wisely.
D. inefficiently.

 
22.
R-2 Figure 2-13

Refer to the graph above. In the production possibility curve, the points which indicate efficient use of all available resources are:
A. Points A and D only.
B. Points A, B and D.
C. Points B and C only.
D. Points B, C and E.


 
23. An improvement in technology will:
A. imply that the law of increasing costs no longer applies.
B. shift the production possibilities curve inward.
C. shift the production possibilities curve outward.
D. have no effect on the production possibilities curve.

 
24. In 11th century Europe, economic decisions were made according to:
A. markets.
B. tradition and the lord of the manor.
C. the lord of the manor exclusively.
D. a central government.

 
25. Karl Marx criticized capitalism because he believed that:
A. a capitalist system ignored traditional class roles.
B. efficient allocation of resources was not a worthwhile goal.
C. the proletariat class exploited the capitalist class, who created all the value inherent in goods.
D. the capitalist class exploited the proletariat class, who created all the value inherent in goods.

 
26. The law of demand claims that there is an inverse relationship between:
A. price and quantity demanded.
B. price and income.
C. income and quantity demanded.
D. price and the number of consumers in a market.

 
27. The curve that best demonstrates the law of demand is a curve that has a(n) 
A. positive slope.
B. negative slope.
C. zero slope.
D. infinite slope.

 
28. If the money price of beef rises and the money price of chicken doesn't rise, individuals will:
A. consume more of both chicken and beef.
B. consume less of both chicken and beef.
C. substitute chicken for beef.
D. substitute beef for chicken.

 
29. The distinction between a change in demand and a change in quantity demanded is best made by saying that: 
A. a change in quantity demanded is caused by a change in price and a change in demand is caused by a change in other factors.
B. a change in demand is caused by a change in price and a change in quantity demanded is caused by a change in other factors.
C. a change in quantity demanded causes a change in demand.
D. a change in both quantity demanded and demand is caused by a change in price.

 
30. The use of the phrase "other things equal" in supply and demand analysis indicates that:
A. an equilibrium price has been reached.
B. an equilibrium quantity has been reached.
C. factors other than the one under consideration are kept constant.
D. we are considering all the changes which might take place in actual markets.

 
31.
R-3 Figure 3-3

Refer to the graph above. If the price is changed from $4.00 to $1.00, how much more is demanded?
A. 2.
B. 4.
C. 6.
D. 8.


 
32.
R-3 Figure 3-3

Refer to the graph above. What is the highest price that people would be willing to pay for 4 cassette rentals?
A. $0.50.
B. $1.00.
C. $2.00.
D. $3.00.


 
33. A market demand curve is constructed from individual demand curves by
A. taking the maximum quantity of the demand curves at each price as the market quantity demanded at that price.
B. adding quantities demanded at each price for each demand curve.
C. taking the demand curve that is the furthest to the right as the market demand curve.
D. multiplying the quantities demanded on each demand at each price.

 
34. According to the law of supply:
A. price and quantity supplied are positively related.
B. quantity supplied tends to increase when there is an improvement in technology.
C. quantity supplied tends to decrease as consumers' incomes increase.
D. price and quantity supplied are inversely related.

 
35. The curve that best demonstrates the law of supply is a curve that has a(n): 
A. infinite slope.
B. zero slope.
C. negative slope.
D. positive slope.

 
36. Which of the following statements is true ? 
A. The quantity supplied is represented graphically by a curve and supply as a point on that curve.
B. Supply is represented graphically by a curve and quantity supplied as a point on that curve
C. The quantity supplied is directly related prices, whereas supply is inversely related to price.
D. The quantity supplied is inversely related prices, whereas supply is directly related to price.

 
37.
R-4 Figure 3-12

Refer to the graph above. The graph (or graphs) which most likely shows a decrease in supply is:
A. C only.
B. A and C.
C. D only.
D. B and D.


 
38. Factors which shift the supply curve to the right include:
A. decreases in the price of the inputs used in production.
B. increases in the price of the inputs used in production.
C. a fall in the price of the good in question.
D. an increase in the price of the good in question.

 
39.
R-5 Figure 3-20

Refer to the graph above. There is a market shortage of 2000 units when the price is:
A. $1.20.
B. $.90.
C. $.60.
D. $.30.


 
40.
R-5 Figure 3-20

Refer to the graph above. There is a market surplus of 2000 units when the price is:
A. $1.20.
B. $.90.
C. $.60.
D. $.30.


 
41.
R-5 Figure 3-20

Refer to the graph above. The market is in equilibrium when the price is:
A. $1.20.
B. $.90.
C. $.60.
D. $.30.


 
42.
R-6 Figure 4-4

Refer to the graph above. A price ceiling set by the government would cause the largest shortage with a price set at:
A. $3.00.
B. $2.50.
C. $2.25.
D. $1.50.


 
43. If a price ceiling below the equilibrium price is imposed on corn, the likely result will be:
A. a lower equilibrium price for corn as the supply curve shifts out.
B. a higher equilibrium price for corn as the demand curve shifts out.
C. a shortage of corn as the price ceiling keeps the market from reaching equilibrium.
D. a surplus of corn as the price ceiling keeps the market from reaching equilibrium.

 
44.
R-6 Figure 4-4

Refer to the graph above. A price floor set by the government would cause the greatest distortion in the market with a price set at:
A. $3.00.
B. $2.50.
C. $2.25.
D. $1.50.


 
45. Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will be:
A. a lower equilibrium price for eggs as the demand curve for eggs shifts left.
B. a higher equilibrium price for eggs as the supply curve for eggs shifts left.
C. a decrease in the quantity of eggs purchased by consumers.
D. an increase in the quantity of eggs purchased by consumers.

 
46. Households supply factors of production to business and are paid by business for doing so in the _______ market.
A. goods
B. factor
C. capital
D. money

 
47. Businesses sell goods and services to households and government in the _________ market.
A. goods
B. factor
C. capital
D. money

 
48. Consumer sovereignty is the principle that:
A. consumers are controlled by the market.
B. the invisible hand equilibrates supply and demand.
C. ultimately consumer determine what is produced.
D. if benefits exceed costs, do it and if costs exceed benefits, don't.

 
49. An entrepreneur might choose to form a corporation rather than a sole proprietorship because a corporation provides:
A. less legal hassle to organize.
B. limited liability.
C. ease of formation.
D. direct control by the owner.

 
50. A cost or benefit that spills over to a third party is called:
A. an externality.
B. a legal indemnity.
C. an illegal indemnity.
D. an internality.

                                                                back

This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test.