Principles of Microeconomics
MIDTERM I PRACTICE
1. The scarcity principle indicates that
A. no matter how much one has, it is never enough.
B. compared to 100 years ago, individuals have less time today.
C. with limited resources, having more of "this" means having less of "that."
D. because tradeoffs must be made, resources are therefore scarce.
2. Choosing to study for an exam until the extra benefit (improved score) equals the extra cost
(mental fatigue) is
A. not rational.
B. an application of the cost-benefit principle.
C. an application of the scarcity principle.
D. the relevant opportunity cost.
3. According to the cost-benefit principle,
A. the lowest cost activity usually gives the lowest benefit.
B. a person should always choose the activity with the lowest cost.
C. a person should always choose the activity with the greatest benefit.
D. the extra costs and benefits of an activity are more important considerations than the total
costs and benefits.
4. Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $45,
respectively. She dislikes both equally and they both take the same amount of time. Janie will
therefore choose to _________because the economic surplus is ________.
A. mow; greater
B. wash; greater
C. mow; smaller
D. wash; smaller
5. Larry was accepted at three different graduate schools, and must choose one. Elite U costs
$50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at
$60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000
scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000
per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at
$15,000 per year.
What is the opportunity cost of attending State College?