Reading Quiz
Multiple Choice
1. Which of the following would eliminate the need for economics?
a. Wants are limited
b. Needs are limited
c. Resources are unlimited
d. Resources are limited
e. Needs are unlimited
2. The scarcity principle implies that to have more of one thing usually means
a. increasing resources.
b. limiting wants.
c. increasing the need for another.
d. having less of another.
e. none of the above
3. The Cost-Benefit Principle tells people they should take an action if
a. benefits exceed costs.
b. costs exceed benefits.
c. marginal costs exceed marginal benefits.
d. marginal benefits exceed marginal costs.
e. benefits are positive.
4. People who have well-defined goals and try to fulfill those goals as best they can are known as
a. rational.
b. macroeconomists.
c. microeconomists.
d. maximizers.
e. opportunists.
5. The reservation price for a good is
a. the lowest price you can get it for.
b. the amount you would pay to get on a waiting list.
c. the highest price you would pay for it.
d. the price you pay to buy it.
e. equal to the market price.
6. If you pay less than your reservation price for a good or service, you have
a. followed the cost-benefit principle.
b. generated economic surplus.
c. increased your opportunity cost.
d. acted rationally.
e. earned a profit.
7. Which of the following is a synonym for "marginal" in economics?
a. extra
b. additional
c. one more
d. change
e. all of the above
8. Which of the following topics is most likely to be studied in microeconomics?
a. tax policies
b. the price level
c. national output
d. the auto market
e. the unemployment rate
For Questions 9 - 10 refer to the graph below.
$
20
15
10
5
MB
1 2 3 5 7 Quantity
9. If each unit costs $12, and you can only buy whole units, what is the optimal quantity to purchase?
a. 1
b. 2
c. 3
d. 5
e. 6
10. What would price have to equal before 7 units would be purchased?
a. 0
b. 5
c. 10
d. 15
e. 20
Problems/Short Answer
1. The meal plan at a university lets students eat as much as they like for a $600 per semester fee. The university is considering changing to a meal plan that charges students $600 for a book of meal tickets that entitles them to eat 200 pounds of food per semester. Under the new plan, if students eat less they get refunds and if they eat more they must pay extra.
a. What is the marginal cost of food under the existing plan?
b. What is the marginal cost of food under the new plan being considered?
c. Under which plan will food consumption be highest? Explain.
2. You own and manage your own fruit stand. You can work growing your own apples to sell as shown in the following table or you can buy apples to sell for $.25 per pound. For every hour you work growing apples, you must pay someone $5 per hour to run the fruit stand. How much time will you spend growing apples?
hours pounds
worked
of apples
0 0
5 200
10 400
15 500
20 620
25 680
30 700
35 720
40 730
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