Microeconomics

Economics/AP Microeconomics Practice FINAL

Multiple Choice

Identify the choice that best completes the statement or answers the question.

____ 1. Making rational decisions "at the margin" means that people

a.|make those decisions that do not impose a marginal cost.|

b.|evaluate how easily a decision can be reversed if problems arise.|

c.|compare the marginal costs and marginal benefits of each decision.|

d.|always calculate the marginal dollar costs for each decision.|

____ 2. A person’s willingness to pay for a good is based on

a.|the availability of the good.|

b.|the marginal benefit that an extra unit of the good would provide for that person.|

c.|the marginal cost of producing an extra unit of the good.|

d.|esoteric factors, the study of which lies beyond the boundaries of economics.|

____ 3. To say that "people respond to incentives" is to say that

a.|changes in costs (but not changes in benefits) influence people's decisions and their behavior.|

b.|changes in benefits (but not changes in costs) influence people's decisions and their behavior.|

c.|changes in benefits or changes in costs influence people's decisions and their behavior.|

d.|tradeoffs can be eliminated by rational people who think at the margin.|

____ 4. The term market failure refers to

a.|a situation in which the market on its own fails to allocate resources efficiently.|

b.|an unsuccessful advertising campaign which reduces demand for a product.|

c.|a situation in which competition among firms becomes ruthless.|

d.|a firm which is forced out of business because of losses.|

____ 5. Rationing is

a.|the allocation of a limited supply of a good or resource among users who would like to have more of it.|

b.|a function that can only be performed by market prices.|

c.|a function that is unnecessary except in cases where markets are used to allocate goods and resources.|

d.|essential only when the price of a product is set above market equilibrium.|...