Principles of Microeconomics, Fall 2007 Quiz #1 Name

1 Principles of microeconomics , fall 2007 Quiz #1 Name_____MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on theaccompanying )Economic scarcity arises fromA)limited resources and limitless ) )inefficient )limited wants and limitless )2)Fundamental economic problems basically arise fromA)our wants exceeding our scarce )the fact that society has more than it )the unequal distribution of )turmoil in the stock )3)The study of the decisions of individual units in the economy is known asA) ) )ceteris paribus )the study of )4)The branch of economics that deals with the analysis of the whole economy is calledA) )marginal )ceteris paribus ) )5)Which of the following is correct?

2 Factors of production areA)the inputs used to produce goods and )land, labor, the price system, and )the fundamental source of )only land and )6)Opportunity cost is best defined asA)how much money is paid for something, taking inflation into )how much money is paid for )all the alternatives that are given up to get )the highest-valued alternative that is given up to get )17)After you graduate, you have decided to accept a position working at the Bureau of LaborStatistics for $35, a year. The two other offers you received were working for Wal-Martfor $28,000 and working for Ernst and Young consulting for $32,000. What is the opportunitycost of accepting the position at the Bureau of Labor Statistics?

3 A)the $32,000 you would have been paid working for Ernst and Young and the $28,000 youwould have been paid working for Wal-MartB)the $28,000 you would have been paid working for Wal-MartC)the $35,000 you are paid for working at the Bureau of Labor StatisticsD)the $32,000 you would have been paid working for Ernst and Young7)8)The marginal benefit is theA)additional cost from one more unit of an )forgone )additional gain from one more unit of an )loss of the highest-valued )9)A cost due to an increase in activity is calledA)an incentive )a negative marginal )a marginal )the total )10)A lawn service is deciding whether to add an additional employee to its summer crew. Themarginal cost of hiring this worker depends on theA)the additional revenue created by having an additional )total amount paid to previously hired )total amount paid to the new )the total amount paid to all the workers, both the new one and the previously )11)To decide whether to go to the beach for spring break, you shouldA)not make the fallacy of )unscramble cause and )not make the post hoc )compare marginal cost to the marginal benefit of taking the )12)A positive statement is a statement aboutA)what )what is )what should be but is )what is and what should )213)Normative economic statementsA)deal with economic hypotheses that are not well-established )describe what ought to )

4 Describe what is rather than what ought to )describe the process of economic )14)The statement "Unemployment should be kept at or below a level of 6 percent" isA)a positive )an )a normative )a )15)The term ceteris paribus meansA)all other things remaining )value free and )the study of scarcity and )the greatest good for )16)The fallacy of composition is the false belief thatA)the ceteris paribus condition does not )what is true for each part is also true for the )because event A occurred after event B, event A caused event )because event A occurred before event B, event A caused event )17)The _____ describes the mistake of reasoning that event A causes event B just because eventA occurs prior to event )fallacy of compositionB)fallacy of suppositionC)post hoc fallacyD)ceteris paribus fallacy17)18)The production possibilities frontier representsA)combinations of goods and services among which consumers are )the maximum rate of growth of capital and labor in a )the maximum levels of production that can be )the maximum amount of labor and capital available to )19)Suppose the country of Popcorn produces only jets and corn.

5 If Popcorn cannot produce anymore jets without giving up corn, we say that Popcorn has achievedA)the lowest marginal )the highest opportunity )the highest marginal ) production )320)A reduction in the amount of unemploymentA)moves the economy's point of production closer to the production possibilities )shifts the production possibilities frontier )moves the economy's point of production further away from the production )moves the economy's point of production along the production possibilities )21)Suppose a country, when operating on its PPF, can produce 2 tons of butter and 200 cars OR 3tons of butter and 150 cars. The opportunity cost of 1 ton of butter isA)200 )300 )50 ) )22)The figure above illustrates that if this country wishes to have F2 - F1 additional food bymoving from point A to point B, it willA)require that all the unemployed resources in the country be put to )have to find additional workers, because the country already is operating on itsproduction possibilities )have to sacrifice C1 - C2 clothing in order to free the resources necessary to produce theadditional )be unable to do so until additional technological progress is )23)Increasing opportunity cost while moving along a production possibilities frontier is the resultofA)

6 The fact that it is more difficult to use resources efficiently the more society )firms' needs to produce )the fact that resources are not equally productive in alternative ) )424)The fact of increasing opportunity costs means that a production possibilities frontier willA)bow )shift outward over )reach a maximum and then gradually )be a straight ) production possibilitiesPossibilityPizza(per hour)Soda(cases perhour)A0100B195C280D360E435F5025)In the above table, the opportunity cost of the 2nd pizza isA)95 cases of )80 cases of )0 cases of )15 cases of )5 Answer KeyTestname: MICRO QUIZ 11)ATopic: Scarcity2)ATopic: Scarcity3)BTopic: microeconomics and Macroeconomics4)DTopic: microeconomics and Macroeconomics5)ATopic: Factors of Production6)DTopic: Opportunity Cost7)DTopic: Opportunity Cost8)CTopic: Marginal Benefit9)CTopic: Marginal Cost10)CTopic: Marginal Cost11)DTopic: Marginal Benefit/Marginal Cost12)ATopic: Positive and Normative13)BTopic: Positive and Normative14)CTopic: Positive and Normative15)ATopic: Ceteris Paribus16)BTopic: Fallacy of Composition17)CTopic: Post Hoc Fallacy18)CTopic: production possibilities Frontier19)DTopic: production Efficiency20)ATopic: production Efficiency21)CTopic: Opportunity Cost22)CTopic: Opportunity Cost23)CTopic: Increasing Opportunity Cost24)ATopic: Increasing Opportunity Cost25)DTopic: Opportunity Cost6