ECON 2100 (Summer 2016 Sections 10 and 11) Exam #1B

Transcription

1 ECON 21 (Summer 216 Sections 1 and 11) Exam #1B Multiple Choice Questions: (3 points each) 1. I am taking of the exam. B. Version B 2. Which of the following statements is a Positive Statement? A. Muhammad Ali passed away on 6/3/16 in Scottsdale, AZ. B. Muhammad Ali was the best professional boxer of all-time. C. Both A and B are Positive Statements. D. Neither A nor B is a Positive Statement. 3. When interpreting a Production Possibilities Frontier, which of the following statements is true? A. All output combinations below the PPF are unattainable and inefficient. B. All output combinations above the PPF are attainable and efficient. C. All output combinations on the PPF are attainable and efficient. D. More than one (perhaps all) of the above answers is correct. 4. A buyer s reservation price A. is visually illustrated by the height of the demand curve. B. refers to the maximum dollar amount a buyer is willing to pay for an item. C. refers to the minimum dollar amount a seller is willing to accept for an item. D. More than one (perhaps all) of the above answers is correct. 5. The states that since people have unlimited needs/wants but a limited amount of resources, they face tradeoffs in that having more of one thing means getting by with less of something else. A. Incentive Principle B. Scarcity Principle C. Cost-Benefit Principle D. Principle of Increasing Opportunity Cost 6. Which of the following is NOT one of the Three Basic Economic Questions that every society must address? A. Which resources and productive techniques should be used to produce which goods and services? B. What mix of goods and services should we produce? C. How can we minimize income inequality? D. None of the above answers are correct (since each choice is one of the Three Basic Economic Questions ). 7. Demand for Good X decreases as a result of an increase in consumer income. This observation implies that Good X is A. a complementary good. B. a substitute good. C. an inferior good. D. a normal good.

2 8. With which of the following statements is there general agreement among most economists? A. Cash payments increase the welfare of recipients to a greater degree than do transfersin-kind of equal cash value. B. Imposing trade restrictions between two countries will increase economic welfare in both countries. C. Most economists would disagree with both A and B. D. Most economists would agree with both A and B. 9. Last week John went to an Atlanta Braves game at Turner Field. His Opportunity Cost for attending this game was equal to A. the price of the ticket to the game. B. the total amount of money he spent in order to go to the game plus the value of his time. C. the price of a ticket to go to the movies (i.e., the activity that he would have engaged in if he hadn t gone to the game). D. zero, as long as he does not regret his decision to go to the game. 1. A(n) is defined as some with well-defined goals who takes actions to fulfill those goals as best as possible. A. self-interested individual B. rational decision maker C. economist D. Utilitarian For Questions 11 through 13, consider the following scenario. Amy and Ben spend their workdays producing corn and dresses. The table below provides a summary of the number of units of each good that each worker produce in a full workday. Answer the following questions based upon these values. Corn Dresses Amy 25 5 Ben has an Absolute Advantage in the production of corn, and has an Absolute Advantage in the production of dresses. A. Ben; Ben. B. Amy; Amy. C. Amy; Ben. D. Ben; Amy. 12. Amy s Opportunity Cost for producing a dress is A. 25 units of corn. B. 5 units of corn. C. 4 units of corn. D. 2 units of corn. 13. Suppose that Amy and Ben have decided to maximize their joint output through specialization in production. Further, they want to produce a total of 8 dresses each day. It follows that A. Amy and Ben should each make 4 dresses. B. Amy should make 5 dresses and Ben should make 3 dresses. C. Ben should make all 8 of the dresses. D. None of the above answers are correct (since the table does not provide enough information to be able to determine which worker can produce the dresses at lower cost).

3 14. Armen Alchain and Gordon Tullock A. wrote a letter to FDR in 1939, advising him to have the U.S. government assist physicists in the U.S. working on research related to the creation of a uranium bomb. B. were the first to explain why there is typically excess demand at the market equilibrium in the model of Supply and Demand. C. suggested that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. D. developed the Principle of Comparative Advantage. 15. Pretzels are a substitute for potato chips. If the price of pretzels were to increase, then the A. demand for potato chips would increase. B. demand for potato chips would decrease. C. supply of potato chips would increase. D. supply of potato chips would decrease. Answer Questions 16 and 17 based upon the information conveyed in the following graph (which illustrates the Marginal Cost and Marginal Benefit of an activity for a decision maker). $ Marginal Cost Q Q 1 Q 2 Q 3 Marginal Benefit 16. If the decision maker increased the amount which she was engaging in the activity from Q2 to Q3, then A. Total Costs and Total Benefits would both increase, but Total Economic Surplus would decrease. B. Total Costs and Total Economic Surplus would both increase, but Total Benefits would decrease. C. Total Costs, Total Benefits, and Total Economic Surplus would all increase. D. None of the above answers are correct. 17. Total Economic Surplus is maximized when Q is equal to A. Q1. B. Q2. C. Q3. D. Q4. Q 4

4 18. Good X is a normal good, and Good Y is an inferior good. Suppose that consumer income increases. In the market for Good X, equilibrium price would and equilibrium quantity would. A. increase; increase. B. increase; decrease. C. decrease; increase. D. decrease; decrease. 19. Tony recently started playing tennis with his friend Dennis. After doing so, Tony realizes that his benefits from playing tennis are higher than they were before. As a result of this increase in his benefits from playing tennis, we would expect that the amount of tennis he chooses to play would A. not change at all. B. decrease, relative to the amount of tennis he previously chose to play (but he would still choose to play some tennis). C. increase, relative to the amount of tennis he previously chose to play. D. drop all the way to zero (i.e., he would chose to not play any tennis in the future). For Questions 2 through 22, consider a society facing the Production Possibilities Curve illustrated below (which becomes more negatively sloped as Car production is increased): Wheat 1,5 1, A B C E D Cars Which of the following combinations of output is unattainable? A. E (275 Cars and 1,15 bushels of Wheat). B. C (275 Cars and 88 bushels of Wheat). C. A (195 Cars and 4 bushels of Wheat). D. More than one (perhaps all) of the above answers is correct. 21. If this society wanted to produce 4 bushels of Wheat, then its maximum output of Cars A. would be greater than 315 Cars. B. would be exactly 315 Cars. C. would be greater than 195 but less than 315 Cars. D. would be exactly 195 Cars. 22. Focusing on points B, C, and D, the Opportunity Cost of producing one additional Car is A. exactly equal at points B, C, and D. B. largest at point B and smallest at point D. C. largest at point D and smallest at point B. D. None of the above answers are correct (since the graph does not convey enough information to make a comparison of the value of Opportunity Cost at these two points).

5 23. When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage, A. only the individual with an absolute advantage in the production of every good realizes consumption outside (i.e., beyond) his individual production possibilities frontier. B. they each realize consumption inside (i.e., below) their individual production possibilities frontier. C. they each realize consumption exactly on their individual production possibilities frontier. D. they each realize consumption outside (i.e., beyond) their individual production possibilities frontier. 24. Kevin voluntarily bought a cup of coffee from McDonald s. We can reasonably infer that this purchase A. made Kevin worse off but made the owner of McDonald s better off. B. made Kevin better off but made the owner of McDonald s worse off. C. made both Kevin and the owner of McDonald s better off. D. made both Kevin and the owner of McDonald s worse off. For questions 25 through 27, consider a market with demand and supply as illustrated below. price 4 Supply Demand 8 quantity In this market there would be at a price of $22.. A. excess demand B. excess supply C. neither excess demand nor excess supply. D. both excess demand and excess supply. 26. In equilibrium, units would be traded each at a price of. A. 352; $24. B. 44; $2. C. 528; $16. D. 88; $ Focusing on the 352 nd unit, the Buyer s Reservation Price for this unit is and the Seller s Reservation Price for this unit is. A. $4; $8. B. $24; $16. C. $2; $2. D. $4; $4.

6 28. For a market to be perfectly competitive, the following two conditions must be met: A. (i) the goods offered for sale by different sellers are identical to one another and (ii) there are many sellers but only one buyer. B. (i) the goods offered for sale by different sellers are identical to one another and (ii) there are many sellers and many buyers. C. (i) the goods offered for sale by different sellers are drastically different for one another and (ii) there are many buyers but only one seller. D. (i) the goods offered for sale by different sellers are drastically different for one another and (ii) there are many sellers and many buyers. 29. Outputs refer to A. a process which transforms scarce resources into useful goods and services. B. scarce resources that can be used to directly or indirectly satisfy human wants. C. finished, usable products which result from production. D. the loss associated with not using a resource for its next best use. 3. Suppose that in the market for apples there is excess demand at a price of $5.75. This observation implies that the equilibrium price is A. greater than $5.75. B. exactly equal to $5.75. C. less than $5.75. D. None of the above answers are correct, since the given information does not allow us to obtain any insight on the value of equilibrium price. 31. Ken read two articles in the newspaper this morning which dealt with economic issues. Article 1 focused on the choice of a local pizza restaurant owner to go out of business after operating his restaurant for over three decades. Article 2 discussed recent trends in the unemployment rate of the United States during the past twelve months. Based upon these descriptions it appears as if the primary perspective of A. both articles was from a microeconomics point of view. B. both articles was from a macroeconomics point of view. C. Article 1 was from a microeconomics point of view, while Article 2 was from a macroeconomics point of view. D. Article 1 was from a macroeconomics point of view, while Article 2 was from a microeconomics point of view. 32. The provides a simplified representation of the interaction between households and firms in the Markets for Finished Goods/Services and the Markets for Factors of Production. A. Model of Supply and Demand B. Production Possibilities Frontier C. Incentive Principle D. Circular Flow Diagram 33. Suppose that car manufacturers incorporate an improved technology which reduces production costs. Focusing on the market supply curve for cars, visually A. demand will shift to the right. B. demand will shift to the left. C. supply will shift to the right. D. supply will shift to the left.

7 (Blank Page)