ECON 1000 (Summer 2018 Section 02) Exam #1A

Transcription

1 ECON 1 (Summer 218 Section 2) Exam #1A Multiple Choice Questions: (3 points each) 1. I am taking of the exam. A. Version A 2. When interpreting a Production Possibilities Frontier, which of the following statements is true? A. All output combinations on the PPF are attainable and efficient. B. All output combinations below the PPF are attainable and efficient. C. All output combinations above the PPF are inefficient. D. All output combinations above the PPF are efficient. 3. A positive statement A. can eventually be proven right or wrong by gathering enough data and evidence. B. aims to assess the desirability of how the world is or functions. C. is a type of statement that no reputable economist would ever make (since economists only ever make opinion-based statements which offer policy recommendations). D. is the only type of statement any reputable economist would ever make (since economists never make opinion-based statements which offer policy recommendations). 4. Economics is the social science that A. studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy. B. focuses exclusively on determining how businesses can earn larger profits. C. studies how people make decisions in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein. D. None of the above answers is correct. 5. Which of the following could NOT result in a Change in Demand for pizza? A. A decrease in the price of pizza. B. An increase in the number of consumers of pizza. C. An increase in income of pizza consumers. D. A decrease in the price of beer. 6. The Preliminary Circular Flow Diagram illustrates A. the transfer of money between households and firms. B. the transfer of Factors of Production and Finished Goods and Services between households and firms. C. the transfer of imports and exports between a country and its international trading partners. D. the role that Government plays in collecting taxes from households and firms. 7. The present day economic system of Germany is best described as. A. Pure Capitalism B. Pure Socialism C. Feudalism D. a Mixed Economy

2 8. Consider the following two statements. Statement 1: Transfers-in-kind increase the welfare of recipients to a greater degree than do cash payments of equal monetary value. Statement 2: A minimum wage reduces unemployment, particularly among young and unskilled workers. Most economists would A. agree with Statement 1, but disagree with Statement 2. B. agree with Statement 2, but disagree with Statement 1. C. disagree with both Statement 1 and Statement 2. D. agree with both Statement 1 and Statement In the model of Supply and Demand, the market equilibrium A. is unique, as a direct consequence of the Law of Supply and Law of Demand. B. is an unstable outcome, which we should never expect to persist for any extended period of time. C. is not self-enforcing, since there is upward pressure on price at prices above the equilibrium price and downward pressure on price at prices below the equilibrium price. D. More than one (perhaps all) of the above answers is correct. 1. The set of rules and methods put in place by a society to answer (directly or indirectly) the three fundamental economic questions can be described as A. the Principle of Comparative Advantage. B. money. C. the Invisible Hand. D. an economic system. For Questions 11 through 13, consider the following scenario. Arthur and Bedevere spend their workdays producing coconuts and shrubberies. The table below provides a summary of the number of units of each good that each worker produces in a full workday. Answer the following questions based upon these values. Coconuts Shrubberies Arthur 9 18 Bedevere has an Absolute Advantage in the production of coconuts, and has an Absolute Advantage in the production of shrubberies. A. Arthur; Arthur. B. Bedevere; Bedevere. C. Bedevere; Arthur. D. Arthur; Bedevere. 12. Bedevere s Opportunity Cost for producing one unit of coconuts is units of shrubberies. A..25 = ¼ B. 3 C. 4 D has a Comparative Advantage in the production of coconuts, and has a Comparative Advantage in the production of shrubberies. A. Bedevere; Bedevere. B. Bedevere; Arthur. C. Arthur; Bedevere. D. Arthur; Arthur.

3 14. refers to the natural and undirected emergence of order out of chaos. A. Scarcity B. The Incentive Principle C. Spontaneous Order D. Microeconomics For questions 15 through 18, refer to the graph below. This graph illustrates supply and demand for pencils in 218. price Supply ,175 14,65 19,7 15. In this market there would be at a price of $6.5. A. neither excess demand nor excess supply. B. both excess demand and excess supply. C. excess supply D. excess demand Demand 218 quantity 16. In equilibrium units of pencils will be traded, each at a price of. A. 7,175; $ B. 7,175; $5.5. C. 14,65; $8.1. D. 19,7; $ For the 1, th pencil, the value of buyer s reservation price for the buyer of this unit, while the value of seller s reservation price for the seller of this unit. A. is greater than $11.65; is less than $5.5. B. is greater than $8.1 but less than $11.65; is greater than $5.5 but less than $8.1. C. is exactly equal to $8.1; exactly equal to $8.1. D. is exactly equal to zero; is exactly equal to $ Suppose that there is an increase in the wage rate paid to workers that produce pencils. As a result, the market equilibrium price of pencils will and the market equilibrium quantity of pencils traded will. A. decrease; decrease. B. increase; increase. C. decrease; increase. D. increase; decrease.

4 19. In general, the downward sloping nature of a production possibilities curve illustrates A. the tradeoff in production between two goods that society faces. B. the difference between positive statements and normative statements. C. the fact that there is neither excess supply nor excess demand at the market equilibrium. D. the recognition that when costs increase a rational decision maker will engage in less of an activity. 2. Socialism refers to an economic system in which A. land ownership is restricted to an aristocratic nobility. B. the means of production are privately owned and operated for profit. C. the means of production are owned by the government. D. the means of production are collectively owned by all of the people in society (without any intervention by a government or state). 21. Which of the following would be considered a Natural Asset? A. The college education which has been acquired by approximately 27% of the U.S. population. B. The Volkswagen Chattanooga Assembly Plant in Chattanooga, TN. C. The Mississippi River. D. More than one (perhaps all) of the above answers is correct. 22. George got the video game ARMS for the Nintendo Switch for his birthday. His younger brother Phil smashed the cartridge with a hammer (just for a joke), making the game unplayable. Their dad says, Phil, you need to pay George $6, which is the replacement cost of the game. In taking this position, their dad is essentially maintaining that George has a in regards to the video game. A. right to equilibrium B. right to restitution C. right to control D. right to transfer 23. One of the principle functions of money is that it serves as a store of value. This role could be described by recognizing that money can be used A. as a way to hold wealth. B. as payment when purchasing goods and services. C. as a basic unit of measuring economic activity. D. None of the above answers are correct. 24. Alec Nove described as when the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel. A. Command Planning B. Indicative Planning C. the free market D. anarchy 25. is a general concept that refers to the cost of giving up the best alternative that must be foregone in order to do or acquire something. A. Absolute Advantage B. Comparative Advantage C. Opportunity Cost D. The Invisible Hand

5 Answer Questions 26 through 29 based upon the information conveyed in the following graph (which illustrates the Marginal Benefits and two different levels of Marginal Costs of an activity for a decision maker): 3.5 $ MC MC Suppose Marginal Benefits are given by MB and Marginal Costs are given by MC 1. Total Benefits (i.e., Total Benefits, not Total Economic Surplus) would be maximized by choosing Q equal to A. 19 (the quantity at which the difference between MB and MC 1 is largest). B. 33 (the quantity at which MB is largest). C. 56 (the quantity at which MB is equal to MC 1 ). D. 89 (the quantity at which MB is equal to zero). 27. Again suppose Marginal Benefits are given by MB and Marginal Costs are given by MC 1. If the decision maker increased Q from Q=4 to Q=5, then A. Total Costs would increase, but Total Benefits and Total Economic Surplus would both decrease. B. Total Costs and Total Benefits would both increase, but Total Economic Surplus would decrease. C. Total Costs, Total Benefits, and Total Economic Surplus would all increase. D. Total Costs, Total Benefits, and Total Economic Surplus would all decrease. 28. Continue to suppose Marginal Benefits are given by MB and Marginal Costs are given by MC 1. Total Economic Surplus would be maximized by choosing Q equal to A. 19 (the quantity at which the difference between MB and MC 1 is largest). B. 33 (the quantity at which MB is largest). C. 56 (the quantity at which MB is equal to MC 1 ). D. 89 (the quantity at which MB is equal to zero). 29. Finally suppose that Marginal Costs change from MC 1 to MC 2 (with Marginal Benefits still given by MB). It follows that, consistent with the Incentive Principle, A. this increase in Marginal Costs will lead to a decrease in the optimal choice of Q. B. this increase in Marginal Costs will lead to an increase in the optimal choice of Q. C. this decrease in Marginal Costs will lead to a decrease in the optimal choice of Q. D. this decrease in Marginal Costs will lead to an increase in the optimal choice of Q. Q MB

6 3. Consider the level of economic freedom in the three countries of Singapore, Spain, and Zimbabwe. According to the results of the Economic Freedom of the World study, of these three countries, the amount of economic freedom is A. greatest in Singapore and least in Zimbabwe. B. greatest in Spain and least in Singapore. C. greatest in Zimbabwe and least in Singapore. D. greatest in Zimbabwe and least in Spain. 31. Kyle is concerned that his ten year old son is not performing up to his full potential in school. In order to give him an additional reason to bring up his grades, he offers to pay his son $2 for every A that he gets on his next report card. Kyle is trying to alter his son s behavior by way of A. coercion. B. a material reward. C. moral suasion. D. the Invisible Hand. 32. Which of the following illustrates the Law of Supply? A. After the price of low skilled labor increased by $1.25 per hour, Clarissa chose to close down her coffee shop. B. After the price of coffee beans decreased by 8%, Sabrina chose to sell more coffee. C. Melanie chooses to sell more coffee at a price of $2.1 per cup than she chooses to sell at a price of $1.85 per cup. D. None of the above illustrate the Law of Supply (but, collectively, they do seem to illustrate that Prof. Mathews has some sort of weird obsession with TV s Melissa Joan Hart). 33. Which of the following is not one of the Three Fundamental Economic Questions that every society must address? A. How can we maximize the number of people that earn a college degree? B. Who gets to consume which good/service? C. What resources should be used for the production of which goods/services? D. What combination of goods/services should we produce?

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