PracticeMidterm3 - Economics 201(Section 025 Introduction to Microeconomics Practice Midterm Exam 3 Instructor G Lepori Instructions fill in your

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1 Economics 201 (Section 025) – Introduction to Microeconomics Practice Midterm Exam 3 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) The phenomenon of scarcity stems from the fact that a. most economies’ production methods are not very good. b. in most economies, wealthy people consume disproportionate quantities of goods and services. c. governments restricts production of too many goods and services. d. resources are limited. ANS: D 2) The adage, "There is no such thing as a free lunch," is used to illustrate the principle that a. goods are scarce. b. people face tradeoffs. c. income must be earned. d. households face many decisions. ANS: B 3) A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand? a. Yes, because making tables is profitable. b. No, because she may not be able to sell the additional tables. c. It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables. d. It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables. ANS: C 4) A rational decisionmaker a. ignores marginal changes and focuses instead on “the big picture.” b. ignores the likely effects of government policies when he or she makes choices.
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2 c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. d. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. ANS: C 5) In a market economy, economic activity is guided by a. the government. b. labor unions. c. central planners. d. self-interest and prices. ANS: D 6) The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole a. is a basic principle regarding individual decision-making. b. amounts to a denial of the so-called “invisible hand” proposed by Adam Smith. c. supports the idea that the "invisible hand" should guide economic activity. d. was promoted by the economist Adam Smith in a well-known 1776 book. ANS: B 7) One thing economists do to help them understand how the real world works is as follows: a. They make assumptions. b. They ignore the past. c. They try to capture every aspect of the real world in the models they construct. d. All of the above are correct. ANS: A
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This note was uploaded on 03/30/2008 for the course ECON 201 taught by Professor C.liedholm during the Spring '07 term at Michigan State University.

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PracticeMidterm3 - Economics 201(Section 025 Introduction to Microeconomics Practice Midterm Exam 3 Instructor G Lepori Instructions fill in your

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