econ practice exam 1

econ practice exam 1 - NAME: Date: EXAM#1 1.Economists use...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
NAME: Date: EXAM#1 1.Economists use the phrase "There is no such thing as a free lunch," to illustrate the principle that a. inflation almost always results in higher prices over time. b. nothing is free in a market economy. c. making decisions requires trading off one goal against another. d. if something looks too good to be true, it probably is not worth pursuing. 2.For a college student who wishes to calculate the true costs of going to college, the costs of room and board a. should be counted in full, regardless of the costs of eating and sleeping elsewhere. b. should be counted only to the extent that they are more expensive at college than elsewhere. c. usually exceed the opportunity cost of going to college. d. plus the cost of tuition, equals the opportunity cost of going to college. 3.Mallory decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is a. the $24 she earns working. b. the $24 minus the enjoyment she would have received from watching the video. c. the enjoyment she would have received had she watched the video. d. nothing, since she would have received less than $24 of enjoyment from the video. 4.A rational decision maker 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. 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. 5.People are willing to pay more for a diamond than for a bottle of water because a. the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. b. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. c. producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. d. water prices are held artificially low by governments, since water is necessary for life. 6.The "invisible hand" directs economic activity through a. advertising. b. prices. c. central planning. d. government regulations. 7.One reason we need government, even in a market economy, is that a. there are insufficient quantities of externalities in the absence of government. b. property rights become too entrenched in the absence of government. c. the invisible hand seldom leads to an efficient allocation of resources in any market. d. the invisible hand, while powerful, is not perfect. 8.An example of an externality is the impact of
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/29/2011 for the course ECON 2103 taught by Professor Staff during the Spring '08 term at Oklahoma State.

Page1 / 8

econ practice exam 1 - NAME: Date: EXAM#1 1.Economists use...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online