Exam 1: Microeconomics

1. Which of the following is not a resource?

a. Land

b. Labor

c. Money

d. Capital

e. All of the above are resources

2. Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost of his decision?

a. The amount he spent, $10.

b. Nothing, since he got his preferred choice.

c. The Batman T-shirt.

d. The X-Men T-shirt.

e. There is no opportunity cost in this case.

3. The problem of scarcity

a. is found only in the United States.

b. is found only in poor countries.

c. means that we must make choices.

d. can be solved by government.

e. is a result of unlimited resources

4. Of factors which affect any economy’s production potential, the best two listed below are

a. resources and technology.

b. prices and outputs.

c. wages and prices.

d. taxes and prices.

e. money and prices.

5. In the short run, which of the following is a fixed expense in a family budget?

a. Gasoline

b. Food

c. Clothing

d. Entertainment

e. Home mortgage

6. Workers in the United States enjoy a high standard of living because

a. unions keep overall wages in the U.S. high.

b. we have protected domestic industries from foreign competition.

c. Congress has established a high minimum wage.

d. workers in the U.S. are highly productive.

e. the lack of capital resources in the U.S. has increased the demand for workers.

7. A change in demand cannot be caused by a change in

a. tastes.

b. population.

c. income.

d. expectations of future prices.

e. the price of the good itself.

8. There is a technological advance in the production of digital watches. This will cause:

a. demand to increase.

b. supply to increase.

c. demand to decrease.

d. supply to decrease.

e. none of the above.

9. If a hurricane in Florida kills 1/3 of the orange trees, we might expect the following in the orange juice market:

a. A decrease in the demand for orange juice.

b. An increase in the demand for orange juice.

c. An increase in the supply of orange juice.

d. A decrease in the supply of orange juice.

e. It is impossible to know from this information.

10. If a new study shows pizza is the ultimate health food, what will happen to the equilibrium price and quantity of pizza in the market.

Price Quantity

a. Increase Increase

b. Increase Decrease

c. Decrease No change

d. Decrease Increase

e. Decrease Decrease

11. Which of the following would generate positive externalities?

a. Flu vaccinations.

b. Farmers’ use of pesticides that harm groundwater.

c. Cigarette smoking in elevators.

d. Litter left at the beach.

e. An unkept front yard.

12. Suppose Ford, GM and Dodge make all the pick-up trucks sold in the United States. If they all sell for approximately the same price, and Ford offers a $3,000 cash rebate on new truck sales, what can Ford expect to see?

a. an unprecedented decrease in truck sales

b. an immediate response by GM and Dodge offering cash rebates on trucks

c. a visit from the antitrust authorities of the government

d. a revolution from Ford stockholders

e. announcements by GM and Dodge that plans are underway to produce a much cheaper pickup truck in six years

13. A farm is able to produce 10,000 bushels of peanuts per season on 10 acres. Assume it adds one more acre and is able to produce 12,000 bushels per season. The marginal product of the additional acre of land for this farm is

a. 10,000 bushels per acre per year.

b. 1,200 bushels per acre per year.

c. 2,000 bushels per acre per year.

d. 12,000 bushels per acre per year.

e. 1,000 bushels per acre per year.

14. If a profit maximizing firm is producing at an output level where marginal revenue is less than marginal cost, it

a. is earning economic profits.

b. is earning normal profits.

c. should increase its production.

d. should decrease its production.

e. should shut down.

15. The primary goal of the business firm is

a. to make a quality product.

b. to increase market share.

c. different for each firm.

d. to maximize profits.

e. to promote job satisfaction for its workers.

Answers:

1-C
2-C
3-C
4-A
5-E
6-D
7-E
8-B
9-D
10-A
11-A
12-B
13-C
14-D
15-D