Midterm 1 Review

Midterm 1 Review - Name: _ Principles of Macroeconomics...

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Name: _________________________________ Principles of Macroeconomics Midterm #1, Fall 2008 Circle the best response. There is exactly one correct answer per question. There are 34 questions total. 1. 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. 2. A rational decision-maker takes an action if and only if a. the marginal benefit of the action exceeds the marginal cost of the action. b. the marginal cost of the action exceeds the marginal benefit of the action. c. the marginal cost of the action is zero. d. the opportunity cost of the action is zero. 3. To say that government intervenes in the economy to promote efficiency is to say that government is attempting to a. create a more fair distribution of income. b. change the way in which the economic pie is divided. c. enlarge the economic pie. d. All of the above are correct. 4. When society requires that firms reduce pollution, there is a. a tradeoff because of reduced incomes to the firms' owners and workers. b. a tradeoff only if some firms are forced to close. c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. d. no tradeoff, since everyone benefits from reduced pollution.
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5. 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. 6. In the simple circular-flow diagram, the participants in the economy are a. firms and government. b. households and firms. c. households and government. d. elected officials and ordinary citizens. 7. The purpose of the circular-flow diagram was to show that a. government spending has a big impact on the economy. b. imports and exports are very important to the economy. c. that in order for people to make money, other people have to spend money. d. simple models are not very useful for our understanding of how the economy works. 8. Which of the following is the most accurate statement about the production possibilities frontier? a. An economy can produce only on the production possibilities frontier. b. An economy can produce at any point inside or outside a production possibilities frontier.
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This note was uploaded on 06/14/2011 for the course ECON 222 taught by Professor Shimpalee during the Spring '10 term at South Carolina.

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Midterm 1 Review - Name: _ Principles of Macroeconomics...

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