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Microeconomics Prep Questions Midterm Chapters 1-5

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ECON71050

This document contains answers and questions designed to help with review in microeconomics courses. The content covers chapters 1 to 5 and will cover the essentials for you to review in preparation of your midterm.

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Mid-Term Exam
Prep. Questions

Chapter 1
2) Which of the following is the best definition of economics?
A) the study of how a provincial government allocates tax dollars
B) the study of how consumers spend their income
C) the study of how producers decide what inputs to hire and what outputs to produce
D) the study of how individuals, businesses, governments, and entire societies make
choices as they cope with scarcity and the incentives that influence and reconcile those
choices
E) the study of how consumers and producers meet each other at the market
Answer: D

4) The study of how wages are set for New Brunswick teachers is classified as
A) a macroeconomic topic.
B) a microeconomic topic.
C) economics of social interest.
D) economics of private interest.
E) normative economics.
Answer: B

6) The branch of economics that studies the choices of individuals and businesses is
A) macroeconomics.
B) microeconomics.
C) positive economics.
D) normative economics.
E) social economics.
Answer: B

8) Complete the following sentence. Macroeconomics
A) is primarily concerned with the operation of individual markets in the economy.
B) deals mainly with the economic behaviour of households.
C) is the only part of economics to deal with government decisions.
D) is primarily concerned with the behaviour of the stock market.
E) is the study of the performance national economy and the global economy.
Answer: E

16) The problem of scarcity exists
A) only in economies that lack incentives.
B) only in economies that have incentives.
C) in all economies.
D) only when people are unemployed.
E) now but will be eliminated with economic growth.
Answer: C

1

,17) The inescapable economic fact is that
A) there are unlimited wants and limited resources.
B) there are unlimited resources, and we just have to decide how to allocate them.
C) capitalists are always exploiting the workers.
D) unions are always exploiting firms.
E) capitalists and unions cannot work together.
Answer: A

18) An incentive
A) could be a reward but could not be a penalty.
B) could be a penalty but could not be a reward.
C) could be either a reward or a penalty.
D) is the opposite of a tradeoff.
E) occurs in the macroeconomy but not in the microeconomy.
Answer: C

9) To meet increased demand for its good, a firm decides to hire a few high-skilled workers,
rather than hire many low-skilled workers. The firm is answering the ________ question.
A) "when"
B) "what"
C) "who"
D) "where"
E) "how"
Answer: E

25) Which one of the following is an example of capital as a factor of production?
A) money held by Tim Hortons
B) a Bell Canada bond
C) an automobile factory owned by Ford
D) a high school teacher
E) natural gas
Answer: C

39) An outcome is considered efficient if
A) it is the best available choice for an individual.
B) as many people as possible are happy about the outcome.
C) it is not possible to make someone better off without making anyone else worse off.
D) everyone makes the same income.
E) there is the smallest difference possible between the highest income earned and the
lowest income earned.
Answer: C

2

, 1) Opportunity cost is
A) the value of your favourite activity.
B) your value of leisure.
C) the money you spend on food, shelter, and clothing.
D) the marginal benefit from an activity.
E) the highest-valued alternative that we give up to get something.
Answer: E

4) When the government of Alberta chooses to build more roads, the required resources
are no longer available to provide better healthcare facilities. This situation illustrates the
concept of
A) marginal benefit.
B) monetary cost.
C) opportunity cost.
D) human capital.
E) entrepreneurship.
Answer: C

6) Which one of the following is a necessary consequence of scarcity?
A) no choices required
B) high profits
C) the requirement of making choices
D) all wants are satisfied
E) low profits
Answer: C

9) Marginal benefit is
A) the cost of an increase in an activity.
B) the sum of benefit and cost that arises from an increase in an activity.
C) the cost of a decrease in an activity.
D) the benefit that arises from an increase in an activity.
E) the benefit that arises from a decrease in an activity.
Answer: D

10) When asked in an interview what she missed the most because of the time she spent
training for the Olympics, a rower, who lived on her own, answered "a normal social life."
She also revealed that she had given up a job that paid $30,000 per year to train fulltime.
She received a grant of $8,000 per year from Sport Canada, but this failed to cover all her
training expenses. Her food and rent were $5,000 per year and training expenses were
$12,000 per year. Aside from the value of a normal social life, what is the annual
opportunity cost, expressed in dollars, to this rower of "Going for Gold"?
A) $25,000
B) $4,000
C) $30,000
D) $39,000
E) $34,000
Answer: E

3

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