Microeconomics Midterm Review

The basic difference between macroeconomics and microeconomics is that:

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets)

macroeconomics is concerned with generalization while microeconomics is concerned with specialization

macroeconomics is concerned with groups of individuals while microeconomics is concerned

with single countries

microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the

trees (individual markets)

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets)

Specialization:

leads to greater self-sufficiency.

is always the result of an inefficient use of resources

can lead to an increase in overall production.

allows workers to develop skills by working on a large number of tasks

can lead to an increase in overall production

In a _, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

market-oriented economy

macroeconomy

microeconomy

command economy

market-oriented economy

The circular flow diagram of economic activity is a model of the:

role of unions and government in the economy. flow of goods, services, and payments between households and firms.

influence of government on business behavior.

interaction among taxes, prices, and profits.

flow of goods, services, and payments between households and firms.

Which of the following best describes a fiscal policy tool?

financial capital markets

household spending

bank lending

government spending

government spending

Which of the following best describes a monetary policy tool?

household savings

taxes

interest rates

government spending

interest rates

In a command economy, the __ either makes most economic decisions

itself or at least strongly influences how the decisions are made.

market

firm

business sector

government

government

In the , households work and receive payment from firms.

savings market

financial investment market

financial capital market

labor market

labor market

Which of the following is most likely a topic of discussion in macroeconomics?

a decrease in the unemployment rate

an increase in the wage rate paid to automobile workers

an increase in the price of a hamburger

a decrease in the production of DVD players by a consumer electronics company

a decrease in the unemployment rate

Which of the following statements most likely lies within the realm of microeconomics?

A rapid acceleration of the supply of money may create inflation.

Unemployment rises during a recession and falls during an expansion.

An increase in government spending will increase the aggregate demand for goods and

services in the economy.

An increase in labor costs will increase the additional cost of producing another bus.

An increase in labor costs will increase the additional cost of producing another bus.

Philosophers draw a distinction between positive statements, which describe the world as it is, and _s, which describe how the world should be.

budget constraint

normative statement

trade-off

opportunity cost

normative statement

Attending college is a case where the __ exceeds the monetary cost.

marginal analysis

budget constraint

marginal utility

opportunity cost

opportunity cost

As depicted in _, it is necessary to give up some of one good to gain more of the other good.

scarcity

utility

allocative efficiency

the production possibilities frontier

the production possibilities frontier

Why is there scarcity?

Because human wants are limited.

Because theory dictates it.

Because our unlimited wants exceed our limited resources.

Because the opportunity set determines this.

Because our unlimited wants exceed our limited resources.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend

four hours at work where I earn $10 per hour." The opportunity cost of attending

class this evening is:

$4

$40

$0

$44

$44

As a person receives more of a good, the _ from each additional unit of the good declines.

marginal utility

sunk costs

budget constraint

utility

marginal utility

Which of the following would most likely shift the production possibilities curve

inward?

technological progress

a decrease in the average number of hours worked per week as the labor force chooses to

enjoy more leisure time

an increase in the production of capital goods

an increase in the number of hours factories are in use

a decrease in the average number of hours worked per week as the labor force chooses to

Economists refer to this pattern, the _,

which means that as a person receives more of a good, the additional or marginal

utility from each additional unit of the good declines.

law of diminishing marginal utility

law of increasing marginal utility

law of trade-offs

production possibilities frontier

law of diminishing marginal utility

Philosophers draw a distinction between _, which describe the world as it is, and normative statements, which describe how the world should be.