PracticeMidterm1

# PracticeMidterm1 - Economics 201 (Section 025) Introduction...

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1 Economics 201 (Section 025) – Introduction to Microeconomics Practice Midterm Exam 1 Instructor: G. Lepori Instructions: fill in your name and student number both on this sheet and on the attached scantron sheet. For each question circle, fill in ONE bubble on the scantron sheet that you feel is the most appropriate solution to the question. 1) Which of the following products would be considered scarce? a. golf clubs b. Picasso paintings c. apples d. All of the above are correct. ANS: D 2) The adage, "There is no such thing as a free lunch," means a. even people on welfare have to pay for food. b. the cost of living is always increasing. c. to get something we like, we usually have to give up another thing we like. d. all costs are included in the price of a product. ANS: C 3) For most students, the largest single cost of a college education is a. the wages given up to attend school. b. tuition, fees, and books. c. room and board. d. transportation, parking, and entertainment. ANS: A 4) Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of playing tennis. c. the enjoyment and exercise he would have received had he played tennis. d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis. ANS: C

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2 5) Teresa eats three oranges during a particular day. The marginal benefit she enjoys from eating the third orange a. can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges. b. determines Teresa’s willingness to pay for the first, second, and third oranges. c. does not depend on how many oranges Teresa has already eaten. d. All of the above are correct. ANS: A 6) Which of the following statements does not apply to a market economy? a. Firms decide whom to hire and what to produce. b. No one is looking out for the economic well-being of society as a whole. c. Households decide which firms to work for and what to buy with their incomes. d. Government policies are the primary forces that guide the decisions of firms and households. ANS: D 7) Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? a. There is no such thing as a free lunch. b. People buy more when prices are low than when prices are high. c. No matter how much people earn, they tend to spend more than they earn. d. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. ANS: D
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## PracticeMidterm1 - Economics 201 (Section 025) Introduction...

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