Micro Midterm (Chapter 1 - 6)
The word "economy" comes from the Greek word oikonomos, which means
"one who manages a household"
Economics is defined as the study of
how society manages its scarce resources
Economics deals primarily with the concept of:
scarcity
Which of the following is an example of something economists study?
all of the above are correct
Scarcity exists when
there is less of a good or resource available than people wish to have
In most societies, resources are allocated by
the combined actions of millions of households and firms
The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
people face tradeoffs
Which of the following statements best represents the principle represented by the adage,
"There is no such thing as a free lunch"?
Andrew must decide between going to Florida or Brazil for spring break
When the government implements welfare programs, which of the following is likely to
occur?
equity is increased and efficiency is decreased
A tradeoff exists between a clean environment and a higher level of income in that
laws that reduce pollution raise costs of production and reduce incomes
The opportunity cost of an item is
what you give up to get that item
Suppose after graduating from college you get a job working at a bank earning $30,000 per
year. After two years of working at the bank earning the same salary, you have an
opportunity to enroll in a one-year graduate program that would require you to quit your job
at the bank. Which of the following should not be included in a calculation of your graduate
program cost?
the $45,000 salary that you will be able to earn after having completed the program
Suppose that you have received $300 as a birthday gift. You can spend it today or you can
put the money in a bank for a year and earn 5 percent interest. The opportunity cost of
spending the money today is
$315
