Microeconomics Midterm 1

The reason why households and societies face many economic decisions is that

• resources are scarce

• goods and services are not scarce

• income fluctuate with business cycles

• people, by nature, tend to disagree

Efficiency means that

• society is conserving resources in order to save them for the future.

• society's goods and services are distributed equally among society's members.

• society's goods and services are distributed fairly, though not necessarily equally, among society's members.

• society is getting the maximum benefits from its scarce resources.

A rational decision-maker takes an action if and only if

• The marginal benefit of the action exceeds the marginal cost of the action.

• The marginal cost of the action exceeds the marginal benefit of the action.

• The marginal cost of the action is zero.

• The marginal benefit of the action is zero.

• $3,000

• $17,000

• $20,000

• $37,000

In a market economy,

• Households decide with firms to work for and what to buy with their incomes

• Firms decide whom to hire and what to make

• The government makes decisions about production and consumption

• Both a and b are correct

A certain cowboy spends 10 hours per day mending fences and herding cattle. For the cowboy, a graph that shows his various possible mixes of fences mended per day and cattle herded per day is called his

• line of tastes.

• trade-of curve.

Denise decides to spend three hours working overtime rather than watching a video with her friends. She earns $10 an hour. Her opportunity cost of working is

• The $30 she earns working

• The $30 minus the monetary value of the enjoyment she would have received from watching the video

• The monetary value of the enjoyment she would have received had she watched the video

• Nothing, since she would have received less than $30 of enjoyment from the video

For which of the following individuals would the opportunity cost of going to college be highest?

• A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball.

• A famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree.

• A promising young mathematician who will command a high salary once she earns her college degree.

• A student with average grades who has never held a job.

In the figure, which of the following set of points represent feasible but not efficient production points

• Points A, B and C

• Points E and C

• Points A and B

• Points D and E

A production possibilities frontier with constant opportunity cost is considered

• convex

• concave

• a straight line

• all of the above