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Microeconomics multiple choice questions with answers
Microeconomics multiple choice questions with answers to enable studen...
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Microeconomics (EPMP 602)
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University of Ghana
Academic year: 2020/2021
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Chapter 1 What is Economics?
Test bank
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
- An incentive A)is the opposite of a tradeoff. B)could be a reward but could not be a penalty. C) could be either a reward or a penalty. D)could be a penalty but could not be a reward.
1)
- The most fundamental economic problem is A)security. B)the fact the United States buys more goods from foreigners than we sell to foreigners. C) health. D)scarcity.
2)
- Economics is best defined as the study of how people, businesses, governments, and societies A)make choices to cope with scarcity. B)attain wealth. C) choose abundance over scarcity. D)use their infinite resources.
3)
- Economists point out that scarcity confronts A)the rich but not the poor. B)the poor but not the rich. C)both the poor and the rich. D)neither the poor nor the rich.
4)
- Scarcity requires that people must A)trade. B)compete. C) cooperate. D)make choices.
5)
- As an economic concept, scarcity applies to A)neither time nor money)both money and time. C) time but not money. D)money but not time.
6)
- Which is the most accurate definition of the study of economics? Economics is the study of A)the distribution of surplus goods to those in need. B)affluence in a morally bankrupt world. C) ways to reduce wants to eliminate the problem of scarcity. D)the choices we make because of scarcity.
7)
- Which of the following is a macroeconomic topic? A)why plumbers earn more than janitors B)the reasons for the rise in average prices C) whether the army should buy more tanks or more rockets D)the reasons for a rise in the price of orange juice
8)
- Which of the following is a microeconomic topic? A)the reasons for a decline in average prices B)the reasons why Kathy buys less orange juice C) the cause of why total employment may decrease D)the effect of the government budget deficit on inflation
9)
- Microeconomics focuses on all of the following EXCEPT A)the effect of increasing the money supply on inflation. B)the purchasing decisions that an individual consumer makes. C) the effect of an increase in the tax on cigarettes on cigarette sales. D)the hiring decisions that a business makes.
10)
- In broad terms the difference between microeconomics and macroeconomics is that A)microeconomics studies the effects of government taxes on the national unemployment rate. B)macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas microeconomics does not. C) they use different sets of tools and ideas. D)microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.
11)
- Studying the determination of prices in individual markets is primarily a concern of A)negative economics. B)microeconomics. C) positive economics. D)macroeconomics.
12)
- The analysis of the behavior of individual decision-making units is the definition of A)microeconomics. B)macroeconomics. C) positive economics. D)normative economics.
13)
- Which of the following topics would be studied in a microeconomics course? A)how a tax rate increase will impact total production B)comparing inflation rates across countries C) how a trade agreement between the United States and Mexico affects both nations' unemployment rates D)how rent ceilings impact the supply of apartments
14)
- Which of the following is a macroeconomic issue? A)how federal government budget deficits affect interest rates B)the cause of a decline in the price of peanut butter C) what determines the amount a firm will produce D)how a rise in the price of sugar affects the market for sodas
15)
- Which of the following is an issue in macroeconomics? A)the purchasing decisions that an individual consumer makes B)the effect of an increase in the tax on cigarettes on cigarette sales C) the hiring decisions that a business makes D)the effect of increasing the money supply on inflation
16)
- Macroeconomic topics include A)the impact of government regulation of markets. B)total, nationwide employment. C) studying what factors influence the price and quantity of automobiles. D)studying the determination of wages and production costs in the software industry.
17)
- Macroeconomics is the branch of economics that studies A)prices of individual goods. B)important, as opposed to trivial, issues. C) the way individual markets work. D)the economy as a whole.
18)
- The fact that people with higher incomes get to consume more goods and services addresses the ________ question. A)"how" B)"where" C) "for whom" D)"when"
30)
- Which of the following is NOT a factor of production? A)the water used to cool a nuclear power plant. B)the wages paid to workers. C) the effort of farmers raising cattle. D)the management skill of a small business owner.
31)
- Which of the following is NOT a factor of production? A)a share of stock issued by a firm. B)a new computer used by a small business owner. C) a tractor used by a wheat farmer. D)the time worked by elementary school teachers.
32)
- An autoworker is considered ________ and earns ________. A)labor; wages B)labor; rent C) capital; rent D)entrepreneurship; wages
33)
- Overtime worked by a JCPenney associate is considered ________ and earns ________. A)entrepreneurship; profit B)labor; profit C) human capital; interest D)labor; wages
34)
- When a university decides to add to the football stadium instead of adding to the baseball stadium, it faces the A)"what" tradeoff. B)"how" tradeoff. C) macroeconomic question. D)"for whom" tradeoff.
35)
- When a farmer decides to increase the amount of acreage devoted to wheat and grow fewer acres of soybeans, the farmer is facing the A)"how" tradeoff. B)microeconomic question. C) "what" tradeoff. D)"for whom" tradeoff.
36)
- When a photographer decides to use a digital camera to take shots versus using film, the photographer is facing the A)"what" tradeoff. B)microeconomic question. C) "for whom" tradeoff. D)"how" tradeoff.
37)
- The "how" tradeoff occurs when A)a firm decides to produce refrigerators instead of dishwashers. B)we answer the macroeconomic question. C) the government increases income taxes paid by the rich. D)a farm uses machinery to pick oranges instead of employing migrant workers.
38)
- When the government decides to provide tax relief for small businesses while placing higher taxes on large corporations, it is facing the A)"for whom" tradeoff. B)"what" tradeoff. C) "how" tradeoff. D)macroeconomic question.
39)
- Because we face scarcity, every choice involves A)the question "what." B)money C) giving up something for nothing. D)an opportunity cost
40)
- The term used to emphasize that making choices in the face of scarcity involves a cost is A)utility cost. B)opportunity cost. C) accounting cost. D)substitution cost.
41)
- The loss of the highest-valued alternative defines the concept of A)entrepreneurship. B)scarcity. C) marginal benefit. D)opportunity cost.
42)
- Opportunity cost means A)the accounting cost minus the marginal benefit. B)the highest-valued alternative forgone. C) the monetary costs of an activity. D)the accounting cost minus the marginal cost.
43)
- The opportunity cost of any action is A)the time required but not the monetary cost. B)all the possible alternatives forgone. C) the highest-valued alternative forgone. D)the monetary cost but not the time required.
44)
- The opportunity cost of something you decide to get is A)the amount of money you pay to get it. B)the highest valued alternative you give up to get it. C) the lowest valued alternative you give up to get it. D)all possible alternatives that you give up to get it.
45)
- The ultimate cost of any choice is A)the dollars expended. B)what someone else would be willing to pay. C) the after-tax cost. D)the highest-valued alternative forgone.
46)
- During the summer you have made the decision to attend summer school, which precludes you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000, books and supplies cost $300, and room and board cost $1,000. The opportunity cost of attending summer school is A)$3,300. B)$4,300. C) $6,000. D)$10,300.
47)
- On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A)working out at the gym, having breakfast with friends, and sleeping late. B)zero because you do not have to pay money to use the library. C) working out at the gym. D)not clear because not enough information is given.
48)
- When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of A)a market mechanism. B)a fallacy of composition. C) opportunity cost. D)macroeconomics.
56)
- Marginal benefit is the benefit A)that arises from the secondary effects of an activity. B)of an activity that exceeds its cost. C) that arises from an increase in an activity. D)that your activity provides to someone else.
57)
- The benefit that arises from an increase in an activity is called A)an incentive. B)the marginal cost. C) the marginal benefit. D)opportunity cost.
58)
- Marginal cost is the cost A)of an activity that exceeds its benefit. B)that arises from an increase in an activity. C) that your activity imposes on someone else. D)that arises from the secondary effects of an activity.
59)
- Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A)the total revenue from sales of printers to the total cost of producing all the printers. B)the extra revenue from selling a few additional printers to the extra costs of producing the printers. C) HP's printers to printers from competing companies, such as Lexmark. D)the extra revenue from selling a few additional printers to the average cost of producing the additional printers.
60)
- In economics, positive statements are about A)macroeconomics, not microeconomics. B)the way things are. C) the way things ought to be. D)microeconomics, not macroeconomics.
61)
- A positive statement is A)valid only in the context of a model with simple assumptions. B)the result of a model's normative assumptions. C) about what ought to be. D)about what is.
62)
- A positive statement is A)always true. B)one that does not use the ceteris paribus clause. C) about what is. D)about what ought to be.
63)
- A positive statement A)is an affirming statement that is strongly worded. B)cannot be tested by checking it against the facts. C) is a statement of what is. D)is a statement of what ought to be.
64)
- Which of the following are true regarding "positive" statements? I. They describe what "ought to be." II. They describe what is believed about how the world appears. III. They can be tested as to their truthfulness. A)II and III B)I and II C) I and III D)I, II and III
65)
- Positive and normative statements differ in that A)normative statements depict "what is" and positive statements depict "what ought to be." B)positive statements can be graphed, whereas normative statements cannot. C) normative statements can be tested, whereas positive statements cannot. D)positive statements can be tested, whereas normative statements cannot.
66)
- Which of the following is an example of a positive statement? A)Business firms ought to contribute more to charities. B)Government should not redistribute income. C) The foreign sector should be more tightly controlled. D)Households are the primary source of saving.
67)
- Which of the following is an example of a positive statement? A)The Federal Reserve ought to cut the interest rate. B)Increasing the minimum wage results in more unemployment. C) We should cut back on our use of carbon-based fuels such as coal and oil. D)Every American should have equal access to health care.
68)
- Which of the following is a positive statement? A)A 10 percent increase in income leads to a 4 percent increase in the consumption of beef. B)My economics class should last for two terms because it is my favorite class. C) Given their negative impact on productivity, the government should eliminate labor unions. D)Taxes should be lower because then people get to keep more of what they earn, so they will work more.
69)
- When Al makes the statement, "The cost of living has increased 10 percent over the past 1 0 years," he is A)making a normative statement. B)facing the standard of living tradeoff. C) testing an economic model. D)making a positive statement.
70)
- Which of the following is a positive statement? A)State lotteries are good methods to use for raising revenues. B)Increased prison sentences are the best way to reduce the crime rate. C) Inflation is a more serious problem than is deflation. D)An increase in gas prices leads people to carpool more.
71)
- The statement "Managers with a college education earn $18 an hour while ski instructors who did not complete college earn $10" is A)an ethical statement. B)a political statement. C) a normative statement. D)a positive statement.
72)
- Which of the following is a normative statement? A)Forty percent of the public believes that the unemployment rate is too high. B)The unemployment rate rose last month. C) The unemployment rate is too high. D)all of the above
83)
- "Government should act to reduce poverty levels." A)This statement is an example of the fallacy of composition. B)This statement is an example of the posthoc fallacy. C) This statement is a normative statement. D)This statement is a positive statement.
84)
- When Susan makes the statement, "The government should spend less money to take care of national parks," she is A)facing the standard of living tradeoff. B)testing an economic model. C) making a positive statement. D)making a normative statement.
85)
- "All children should have health insurance" is a A) post hoc fallacy. B)normative statement. C) fallacy of composition. D)positive statement.
86)
- "The rich should pay higher income tax rates than the poor" is an example of a A)normative statement. B)theoretical statement. C) positive statement. D)descriptive statement.
87)
- Which of the following is a normative statement? A)Taking extra vitamin C prevents catching a cold. B)States should require all motorcycle riders to wear helmets to reduce the number of riders killed. C) Studying more hours leads to an increase in your GPA. D)An increase in tax rates means people work fewer hours.
88)
- Which of the following is a normative statement? A)Low rents are good because they make apartments more affordable. B)Low rents will restrict the supply of housing. C) Owners of apartment buildings are free to charge whatever rent they want. D)Housing costs are rising.
89)
- Which of the following is an example of a normative statement? A)Government spending rose in the 1990s. B)Household consumption is the largest component of spending. C) Households should save more. D)The business sector is the primary source of jobs.
90)
- Which of the following is a normative statement? A)The current butter surplus is the result of federal policies. B)Next year's inflation rate will be under 4 percent. C) The government's cuts in welfare spending impose an unfair hardship on the poor. D)Consumers will buy more gasoline over the Christmas holiday even if the price of gas is 10 cents higher than it was during the Thanksgiving holiday.
91)
- Suppose that an economist tells you that people in the United States do not save enough out of their incomes. This is an example of ________ statement. A)a ceteris paribus B)a positive C) a normative D)an autonomous
92)
- The task of economic science is to discover ________ that are consistent with ________. A)positive statements; normative statements B)positive statements; what we observe C) normative statements; positive statements D)ways to make money; the law
93)
- Economic models A)are essentially different from those used in other sciences. B)include all relevant facts. C) always use graphs. D)simplify reality.
94)
- Economic models A)are better if they include most of the detail of the real economy. B)rely on simplification. C) do not address questions about the economy. D)make no assumptions that have not been proved.
95)
- An economic theory is A)a generalization that summarizes what we understand about economic choices. B)a positive statement that cannot use the ceterisparibus clause. C) usually more complex than the real world. D)always a mathematical, or nonverbal, model.
96)
- Three steps that economists take to discover how the economic world works are A)model building; speculation; and, revision. B)observation and measurement; model building; and, testing models. C) data mining; data testing; and, drawing conclusions. D)speculation; observation and measurement; and, drawing conclusions.
97)
- The birth of economics as an intellectual discipline can be dated fairly precisely in the eighteenth century with A)the publication of the book, The WealthofNations. B)the opening of the London stock exchange. C) the development of the factory system. D)the introduction of paper currency.
98)
- Who wrote The Wealth of Nations? A)Adam Smith B)Michael Parkin C) Thomas Jefferson D)Karl Marx
99)
- Adam Smith wrote the book A) Poverty and Progress .B) The Dismal Science. C) First Principles of Economics .D) The Wealth of Nations.
100)
- When economists study the effects of unemployment insurance on the unemployment rate by comparing the United States with Canada, they assume that other conditions in the two economies do not differ significantly. This procedure is an example of A)the post hoc fallacy. B)the fallacy of composition. C) applying the ceteris paribus principle. D)falling prey to the post composition fallacy.
110)
- The fallacy of composition is evident in which of the following statements? A)"What is bad for the Joneses is bad for the Smiths." B)"X and Y go together, therefore X has caused Y." C) "If each farmer works harder, all farmers will be richer." D)"Technological progress helps everybody."
111)
- The fallacy of composition is the false belief that A)what is true for the parts is also true for the whole. B)the ceteris paribus condition does not apply. C)because event A occurred before event B, event A caused event B. D)because event A occurred after event B, event A caused event B.
112)
- The fallacy of composition is the (false) statement that A)models can be positive without being normative. B)theories bridge models and the real world. C) what is true of the parts is true of the whole. D)experiments can be designed to analyze human behavior.
113)
- The fallacy of composition is the A)use of ceteris paribus in order to study the impact of one factor. B)claim that the timing of two events has nothing to do with which event caused the other. C) claim that one event caused another because the first event came first. D)assertion that what is true for the parts of the whole must be true for the whole.
114)
- A farmer grazes two cows on one acre of land. To increase total milk yield, he purchases two more cows and allows all four cows to graze on his land. Unfortunately the cows overgraze on his land and the food supply to the cows is reduced, which causes the total milk yield of the four cows to fall below that achieved when only two cows were grazed. The farmer has fallen prey to A)the post hoc fallacy. B)the ceteris paribus normative fallacy. C) the marginal benefit/marginal cost fallacy. D)the fallacy of composition.
115)
- Because total income in the United States has increased over time, everyone's total income has increased as well. This incorrect argument is an example of A)opportunity cost. B)voluntary exchange. C) the post hoc fallacy. D)the fallacy of composition.
116)
- The fallacy of composition is A)an expression that means "other things being equal." B)the (false) statement that what is true of the parts is true of the whole or what is true of the whole is true of the parts. C) the error of reasoning that a first event causes a second event because the first event occurred before the second event. D)a statement about the way the economic world ought to be.
117)
- "Hunting limits on deer help ensure a constant population. Therefore, if I only hunt to my limit, there will be sufficient deer for all." This statement is an example of a possible A) ceteris paribus fallacy) posthoc fallacy. C) fallacy of composition. D)normative statement.
118)
- To better see a football game, one spectator stands. Assuming that everyone trying to get a good view of the game can also stand represents an example of the A)opportunity cost fallacy. B)fallacy of truth. C) post hoc fallacy. D)fallacy of composition.
119)
- The post hoc fallacy is the error of reasoning A)from models to predictions. B)from predictions to theories. C) from timing to cause and effect. D)from cause and effect to models.
120)
- You are not surprised that it has started to rain. After all, a hour ago you just finished washing your car. Your reasoning is an example of A)the ceteris paribus assumption. B)the distinction between positive and normative statements. C) the post hoc fallacy. D)the fallacy of composition.
121)
- The post hoc, ergo propter hoc fallacy is A)a statement about the way the economic world ought to be. B)the error of reasoning that a first event causes a second event because the first event occurred before the second event. C) an expression that means "other things being equal." D)the (false) statement that what is true of the parts is true of the whole or what is true of the whole is true of the parts.
122)
- A rooster crows and then the sun rises. The rooster thinks that the sun rises because he crows. And he is very proud of it. The rooster falls prey to A)the fallacy of composition. B)his self interest. C) marginal thinking. D)the post hoc fallacy.
123)
- "Every time I go to a basketball game, our team wins." This statement is an example of A)a normative economic statement. B)fallacy of composition. C) post hoc fallacy) ceterisparibus fallacy.
124)
- A normative statement is A)about what is. B)about what ought to be. C) one that does not use the ceteris paribus clause. D)always true.
134)
- Which of the following is a positive statement? A)My favorite dinner is pizza and soda. B)The government must provide health insurance so that the poor can obtain decent medical treatment. C) The government should spend more on education. D)An increase in the price of pizza will lead fewer students to buy pizza.
135)
- An economic model includes A)only details considered essential. B)all known details in order to increase its accuracy. C) no use of ceteris paribus. D) post hoc statements.
136)
- The Latin term ceteris paribus means A)"false for the whole, false for the parts." B)"buyer beware." C) "other things the same." D)"true for the parts not necessarily true for the whole."
137)
- One student in a football stadium with 30,000 students can see the game better if he or she stands up. Assuming that all 30,000 students can each see the game better if they all stand is an example of the A)fallacy of large numbers. B) post hoc fallacy. C) fallacy of composition. D)fallacy of ceteris paribus.
138)
- The post hoc fallacy is the A)assertion that what is true for parts of the whole must be true for the whole. B)incorrect use of ceteris paribus in order to study the impact of one factor. C) claim that normative statements are less important than positive statements. D)claim that one event caused another because the one event came first.
139)
- Economics can be defined as the social science that explains the ________. A)choices that we make as we cope with scarcity B)choices made by households C) choices made by politicians D)choices we make when we trade in markets
140)
- Scarcity is a situation in which ________. A)something is being wasted B)long lines form at gas stations C) some people are poor and others are rich D)we are unable to satisfy all our wants
141)
- Microeconomics is the study of ________. A)the global economy B)the choices that individuals and businesses make C) the national economy D)all aspects of scarcity
142)
- Factors of production include all of the following EXCEPT________. A)machines made in past years B)money C) an wheat field that is not irrigated D)entrepreneurship
143)
- The income earned by the people who sell the services of the factor of production ________ is called ________. A)entrepreneurship; profit B)entrepreneurship; wages C) land; profit D)capital; rent
144)
- When the government chooses to spend the tax dollars that it collects on homeland security, its choice ________. A)illustrates that scarcity does not always exist B)involves no tradeoff because the defense is necessary C) involves a tradeoff of other goods and services such as education for more homeland security D)primarily affects who gets the goods and services produced
145)
- Making a choice at the margin means ________. A)making a choice by comparing the total benefit and the total cost B)deciding to do a little bit more or a little bit less of an activity C) waiting until the last minute to make a choice D)letting someone else choose for you
146)
- Suppose that for the past two months, you have studied economics one hour a day. You now decide to study economics two hours a day. For the past two months, ________. A)your marginal cost of studying economics for an hour must have exceeded its marginal benefit B)the opportunity cost of studying economics must have risen. C) the marginal cost of studying economics must have fallen D)your marginal benefit from studying economics an hour must have been greater than its marginal cost
147)
- If the cost of a computer falls by a large amount, you have an incentive to ________. A)use your friend's computer rather than buy one yourself B)avoid buying anew computer because it is now less valuable C) take a shorter vacation D)buy a new computer
148)
- The statement that ________ is a positive statement. A)the price of gasoline is too high B)too many people in the United States have no health care insurance C) the price of sugar in the United States is higher than the price in Australia D)more students should study economics
149)
Answer Key
Testname: UNTITLED
1) C
2) D
3) A
4) C
5) D
6) B
7) D
8) B
9) B
10) A
11) D
12) B
13) A
14) D
15) A
16) D
17) B
18) D
19) D
20) C
21) A
22) D
23) D
24) B
25) A
26) D
27) C
28) B
29) D
30) C
31) B
32) A
33) A
34) D
35) A
36) C
37) D
38) D
39) A
40) D
41) B
42) D
43) B
44) C
45) B
46) D
47) D
48) C
Answer Key
Testname: UNTITLED
49) A
50) B
51) C
52) C
53) D
54) C
55) D
56) C
57) C
58) C
59) B
60) B
61) B
62) D
63) C
64) C
65) A
66) D
67) D
68) B
69) A
70) D
71) C
72) D
73) B
74) D
75) A
76) D
77) D
78) A
79) A
80) B
81) A
82) D
83) C
84) C
85) D
86) B
87) A
88) B
89) A
90) C
91) C
92) C
93) B
94) D
95) B
96) A
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Microeconomics multiple choice questions with answers
Course: Microeconomics (EPMP 602)
14 Documents
Students shared 14 documents in this course
University: University of Ghana
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Chapter 1 What is Economics?
Test bank
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) An incentive
A) is the opposite of a tradeoff.
B) could be a reward but could not be a penalt
y
.
C) could be either a reward or a penalt
y
.
D) could be a penalt
y
but could not be a reward.
1)
2) The most fundamental economic problem is
A) securit
y
.
B) the fact the United States bu
y
s more goods from foreigners than we sell to foreigners.
C) health.
D) scarcit
y
.
2)
3) Economics is best defined as the stud
y
of how people, businesses, governments, and societie
s
A) make choices to cope with scarcit
y
. B) attain wealth.
C) choose abundance over scarcit
y
. D) use their infinite resources.
3)
4) Economists point out that scarcit
y
confronts
A) the rich but not the poor. B) the poor but not the rich.
C)
b
oth the poor and the rich. D) neither the poor nor the rich.
4)
5) Scarcit
y
requires that people mus
t
A) trade. B) compete. C) cooperate. D) make choices.
5)
6) As an economic concept, scarcit
y
applies t
o
A) neither time nor mone
y
.B)
b
oth mone
y
and time.
C) time but not mone
y
. D) mone
y
but not time.
6)
7) Which is the most accurate definition of the stud
y
of economics? Economics is the stud
y
o
f
A) the distribution of surplus goods to those in need.
B) affluence in a morall
y
bankrupt world.
C) wa
y
s to reduce wants to eliminate the problem of scarcit
y
.
D) the choices we make because of scarcit
y
.
7)
8) Which of the following is a macroeconomic topic?
A) wh
y
plumbers earn more than janitors
B) the reasons for the rise in average prices
C) whether the arm
y
should bu
y
more tanks or more rockets
D) the reasons for a rise in the price of orange juice
8)
9) Which of the following is a microeconomic topic?
A) the reasons for a decline in average prices
B) the reasons wh
y
Kath
y
bu
y
s less orange juice
C) the cause of wh
y
total emplo
y
ment ma
y
decrease
D) the effect of the government budget deficit on inflatio
n
9)
1
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