ECON 2100 Study Guide for Midterm 1 Exam Chapters 1-3, 14-15 Exam date: Wed, February 12th Name: __________________________ Date: _____________ 1. The tradeoff between equity and efficiency occurs because: A) efficient allocation of resources may lead to an outcome that most people consider unfair. B) allocating resources fairly may cause inefficiency. C) to ensure equity someone will be made worse off. D) of all of the above. 2. A choice made _______ is a choice whether to do a little more or a little less of something. A) at the front end B) in the beginning C) at the margin D) after the fact 3. Marginal analysis studies how individuals decide: A) whether to live on the margin of society. B) to do a bit more activity versus a bit less activity. C) to analyze marginal businesses. D) none of the above. 4. Marla will make $10 by tutoring for an additional hour but she will lose an hour of studying for her own economics test. Marla decides to study rather than tutor. Marla's choice indicates that she: A) values an additional hour of studying more than the $10 she would earn tutoring. B) values an hour of studying less than the $10 she would earn tutoring. Page 1
C) does not understand that there is no benefit from studying. D) none of the above 5. Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of: A) marginal analysis. B) scarce resources. C) resources to be used as efficiently as possible to achieve society's goals. D) opportunity costs. 6. Economists use the term equilibrium to describe: A) when individuals are equal. B) when no individual would be better off taking a different action. C) when no individual has an incentive to change his/her behavior. D) both b and c. 7. Market failure occurs when: A) prices of essential goods such as gas become very high. B) individual actions have side-effects that are not properly taken into account. C) mutually beneficial trades take place. D) all of the above occurs. 8. The cost of going to college is: A) tuition and the cost of housing. B) tuition, the cost of housing, and the cost of books. C) tuition, the cost of housing, the cost of books, and forgone income. D) forgone income only. Page 2
9. Scarcity in economics means: A) not having sufficient resources to produce all the goods and services we want. B) the wants of people are limited. C) there must be poor people in rich countries. D) economists are clearly not doing their jobs. 10. Which of the following is NOT one of the four basic principles for understanding individual choice? A) Resources are scarce. B) The real cost of something is the money that you must pay to get it. C)
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