Micro Sudy

Approximately what percentage of the world's economies experience scarcity?

• 10%

• 40%

• 85%

• 100%

The principle that "people face tradeoffs" applies to

• individuals.

• families.

• societies.

• All answers are correct.

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to
music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This
illustrates the basic concept that

• trade can make everyone better off

• people face trade-offs

• rational people think at the margin

• people respond to incentives

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes
with it, the regulations come at the cost of reducing the incomes of the regulated firms’ owners, workers, and
customers. This statement illustrates the principle that

• trade can make everyone better off

• rational people think at the margin

• people face tradeoffs

• people respond to incentives

In economics, the cost of something is

• the dollar amount of obtaining it.

• always measured in units of time given up to get it.

• what you give up to get it.

• often impossible to quantify, even in principle.

Ed spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying is

• the improvement in his grades from studying for the hour.

• the improvement in his grades from studying minus the enjoyment of watching tv.

• the enjoyment he would have received if he had watched tv with his friends.

• zero. Since Ed chose to study rather than watch tv, the value of studying must have been greater than the value of watching tv.

A marginal change is a

• change that involves little, if anything, that is important.

• large, significant adjustment.

• change for the worse, and so it is usually a short-term change.

• small, incremental adjustment.

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

• She should make both improvements to her house.

• She should replace the carperting but not replace the roof.

• She should replace the roof but not replace the carpeting.

• She should not make either improvement to her house.

Economists are particularly adept at understanding that people respond to

• laws.

• incentives.

• punishments more than rewards.

• rewards more than punishments.

People are likely to respond to a policy change

• only if they think the policy is a good one.

• only if the policy change changes the costs of their behavior.

• only if the policy change changes the benefits of their behavior.

• if the policy changes either the costs or benefits of their behavior.