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Microeconomics Test 1 Practice Test Questions

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If you plot temperature on the y axis and time on the x axis, then you have created a
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time series
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Trade with other countries
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reduces consumer prices
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An architectural drawing is an example of a model because an architectural drawing
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is a stylized (simple) representation of reality
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When the ___ outweigh the ___ of the information, people attempt to obtain the information
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benefits; costs
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The highest valued alternative that is foregone when you choose an action is called its
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opportunity cost
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In the equation S=130-2T, where S is hot chocolate sales and T is temperature
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sales decrease by 20 if temperature increases by 10 degrees
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What indicator is not generally associated with highly productive countries?
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more restrictions on trade
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The term ceteris paribus is an assumption used in economics where
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all other relevant factors or variables are held constant
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Which of the following is a key idea in economic thinking?
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incentives matter
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According to the book, what is the present value, or the value on the day you graduate, of a college degree?
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$250,000
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With the study of economic principles, the primary method to construct an economic model is to
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illustrate relationships with graphs and charts
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Working an extra hour of overtime is an example of
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thinking at the margin
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Economists generally have ___ to say about equity than efficiency
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less
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Ceteris paribus means
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other things being equal
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Macroeconomics deals with all of the following except
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markets for semiconductor chips
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The efficiency of markets is shown when
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new competitors enter a market when profits and prices get too high
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Highly productive countries have the following characteristics except
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most have warm climates
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Information plays an important role in the market because it allows
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market participants to make good decisions based on cost-benfit analysis
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Why is it important for students to study economics?
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we all live in the economic environment and make economic decisions
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Jonathan decides to join the army instead of go to college. This is an example of
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opportunity cost
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Production efficiency occurs when
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goods are produced with the lowest possible resource cost
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With the study of economic principles, the primary method to model an economic concept is to
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produce a graph or a chart
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When an economist says a good is scare, he/she means that
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desire for the good is greater than the supply that is freely available from nature
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Economists like to use graphs and equations primarily because
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these tools efficiently express economic concepts
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A common definition of economics is that it is the study of
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the allocation of scarce resources to competing wants
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Economic growth has two basic determinants, these are ___ and ___
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expanding resources; improving technologies
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The theory of comparative advantage says
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countries should export those goods they can produce at a lower opportunity cost than another country
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The increased participation of women in the work force
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has contributed to the rate of economic growth
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In a capitalist economy, the answer to the question “What should be produced?” is determined by
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the government
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According to the Organization for Economic Co-operation and Development, economic growth is driven by
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higher imports and exports as a percentage of GDP
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In economics, real capital refers to
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actual manufactured products used in the production process
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Suppose that if the United States produced only oil, it could produce 25 million barrels, and if it produced only microchips it could produce 20 million chips. Suppose that if Mexico produced only oil, it could produce 16 million barrels, and if it produced only microchips, it could produce 8 million chips. Which of the following statements is correct?
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The United States has an absolute advantage over Mexico in producing both goods
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The concepts of absolute and comparative advantage were developed by
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David Ricardo
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In a market economy, product prices do not help determine how
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governments allocate their resources
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In addition to land in the usual sense, economists include which of the following in the definition of land?
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mineral deposits, oil and natural gas, water
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The key to computing comparative advantage is
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measurement of opportunity cost
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A production possibilities curve with increasing opportunity cost is considered
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bowed
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The payment to labor is called
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wages
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Which of the following encourages economic growth?
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education
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Which of the following is not considered a basic economic question?
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how will the system accommodate change?
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The historical evidence shows that
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quality of life, including the protection of moral values, improves as the standard of living rises
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As used in economics, “rent” is associated with which resource?
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land
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When an economy is producing the right mix of goods and services that are desired by society, that economy is considered to be
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allocatively efficient
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A country’s GDP is inside the frontier of the production possibilities curve. This could happen because of
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a recession
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Voluntary trade between nations
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is a positive-sum game