MICRO EXAM REVIEW - Name Class Date ID A Exam 1...

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Name: ________________________ Class: ___________________ Date: __________ ID: A 1 Exam 1 Review (Chapters 1-5) Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. When the government redistributes income from the wealthy to the poor, a. efficiency is improved, but equity is not. b. both wealthy people and poor people benefit directly. c. people work less and produce fewer goods and services. d. wealthy people consume fewer goods, but poor people consume more goods, resulting in no real change. ____ 2. What you give up to obtain an item is called your a. opportunity cost. b. explicit cost. c. true cost. d. direct cost. ____ 3. Making rational decisions "at the margin" means that people a. make those decisions that do not impose a marginal cost. b. evaluate how easily a decision can be reversed if problems arise. c. compare the marginal costs and marginal benefits of each decision. d. always calculate the marginal dollar costs for each decision. ____ 4. For markets to work well, there must be a. market power. b. a central planner. c. property rights. d. abundant, not scarce, resources. ____ 5. Market failure can be caused by a. low consumer demand. b. government intervention and price controls. c. externalities and market power. d. high prices and foreign competition. ____ 6. For an economist, the idea of making assumptions is regarded generally as a a. bad idea, since doing so leads to the omission of important ideas and variables from economic models. b. bad idea, since doing so invariably leads to data-collection problems. c. good idea, since doing so helps to simplify the complex world and make it easier to understand. d. good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand. ____ 7. In the circular-flow diagram, a. firms are buyers in the markets for goods and services. b. households are sellers in the markets for the factors of production. c. firms are sellers in the markets for factors of production and in the markets for goods and services. d. dollars that are spent on goods and services flow directly from firms to households.
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Name: ________________________ ID: A 2 ____ 8. Factors of production are a. used to produce goods and services. b. also called output . c. abundant in most economies. d. assumed to be owned by firms in the circular-flow diagram. ____ 9. In the markets for goods and services, a. households and firms are both buyers. b. households and firms are both sellers. c. households are buyers and firms are sellers. d. households are sellers and firms are buyers. Figure 2-2 ____ 10. Refer to Figure 2-2 . The figure represents a circular-flow diagram. If households are sellers in the markets represented by Box D, then a. Box D must represent the markets for factors of production. b.
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MICRO EXAM REVIEW - Name Class Date ID A Exam 1...

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