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ANSWER KEY: MIDTERM #1 BUSN / SOCS 215 Principles of Economics (Macro) NUMERIC VALUES MAY BE CHANGED. ORDERING OF ANSWERS MAY CHANGE.

NAME: _______________________________________________________

1.The overriding reason why households and societies face many decisions is that |a. |resources are scarce. | |b. |goods and services are not scarce. | |c. |incomes fluctuate with business cycles. | |d. |people, by nature, tend to disagree. |

2.Who gets scarce resources in a market economy?
|a. |the government | |b. |whoever the government decides gets them | |c. |whoever wants them | |d. |whoever is willing and able to pay the price |

3.Diminishing marginal utility suggests that
|a. |more is always preferred to less. | |b. |the well-being of society is maximized when the distribution of income is equal. | |c. |the poor are less efficient at spending money than the rich. | |d. |the poor receive more satisfaction from the last dollar spent than the rich. |

4.Which of the following is true?
|a. |Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. | |b. |Government policies usually improve upon both equality and efficiency. | |c. |As long as the economic pie continually gets larger, no one will have to go hungry. | |d. |Efficiency and equality can both be achieved if the economic pie is cut into equal pieces. |

5.The law of demand states that, other things equal, when the price of a good |a. |falls, the demand for the good rises. | |b. |rises, the quantity demanded of the good rises. | |c. |rises, the demand for the good falls. | |d. |falls, the quantity demanded of the good rises. |

6.Trade
|a. |allows specialization, which increases costs. | |b. |allows specialization, which reduces costs. | |c. |reduces specialization, which increases costs. | |d. |reduces specialization, which reduces costs. |

7.When the "invisible hand" guides economic activity, prices of products reflect |a. |only the values that society places on those products. | |b. |only the costs to society of producing those products. | |c. |both the values that society...
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