ECON 1000 (Spring 2017 Section 08) Exam #1A

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1 ECON 1000 (Spring 2017 Section 08) Exam #1A Multiple Choice Questions: (3 points each) 1. I am taking of the exam. A. Version A 2. Capitalism is defined as an economic system in which A. the means of production are owned by the government, and the President dictates their use in order to maximize the welfare of his supporters. B. the means of production are privately owned and operated for a profit. C. the means of production are owned by an aristocratic nobility. D. the means of production are collectively owned and used for the good of the community. 3. The Preliminary Circular Flow Diagram illustrates A. the interactions between buyers and sellers in a market which give rise to a unique quantity of trade and per unit price for a good or service. B. the limits of production that a society faces, by identifying the maximum amount of one good that can be produced for every possible level of production of another good. C. the movement of economic resources (i.e., factors of production and finished goods/services) between households and firms. D. None of the above answers are correct. 4. The Law of Supply implies that A. all other factors fixed, a greater quantity of a good will be supplied at lower prices. B. supply curves should be upward sloping. C. excess supply for a good will put downward pressure on price. D. None of the above answers are correct. 5. When interpreting a Production Possibilities Frontier, which of the following statements is true? A. All output combinations below the PPF are unattainable. B. All output combinations above the PPF are unattainable. C. All output combinations on the PPF are attainable but inefficient. D. More than one (perhaps all) of the above answers is correct. 6. 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 is A. an asset that can be used as a means to hold wealth. B. used as a basic unit of measuring economic activity. C. an asset used as payment when purchasing goods and services. D. None of the above answers are correct. 7. In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. A. voters; non-voters. B. business owners; working class. C. educated class; uneducated class. D. non-citizens; political elites.

2 8. Which of the following statements is a Normative Statement? A. The New England Patriots defeated the Atlanta Falcons in Super Bowl LI by a score of 34 to 28. B. Super Bowl LI was the first Super Bowl ever to be tied at the end of regulation (and go to overtime). C. Both A and B are Normative Statements. D. Neither A nor B is a Normative Statement. 9. Recall the results of the Economic Freedom of the World study discussed in lecture and summarized on page 55 of the textbook. According to this study, of the 157 countries examined, the country in which people have the greatest amount of economic freedom is and the country in which people have the least amount of economic freedom is. A. the United States; France. B. New Zealand; the United States. C. Hong Kong; Venezuela. D. Australia; Russia. 10. Alec Nove described as when the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel. A. Communism B. Consumer Sovereignty C. Indicative Planning D. The Invisible Hand For Questions 11 through 13, consider the following scenario. Ann and Beth spend their workdays producing corn and shirts. 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. Corn Shirts Ann 18 6 Beth has an Absolute Advantage in the production of corn, and has an Absolute Advantage in the production of shirts. A. Ann; Ann. B. Ann; Beth. C. Beth; Beth. D. Beth; Ann. 12. Ann s Opportunity Cost for producing one shirt is. A. $6 B. 24 units of corn C. 3 units of corn D. 2 units of corn 13. Suppose that Ann and Beth have decided to maximize their joint output through specialization in production. Further, they want to produce a total of 6 shirts each day. It follows that A. Ann and Beth should each make 3 shirts. B. Ann should make 2 shirts and Beth should make 4 shirts. C. Ann should make all 6 shirts. D. Beth should make all 6 shirts.

3 14. Phil recently got the video game Gears of War 4 for the Xbox One for his birthday. His older brother George wants to play the game, but Phil doesn t want to share. Their dad says, George, I wish Phil would share his game with you, but if he doesn t want to let you play he doesn t have to. In taking this position, their dad is essentially maintaining that Phil has a in regards to the video game. A. right to control B. right to transfer C. right to restitution D. right to equilibrium 15. Adam Smith was A. a 20th century American political scientist. B. a 19th century German philosopher, economist, and revolutionary. C. an 18th century Scottish economist. D. a 17th century English mercantilist. 16. Which of the following is an example of a Produced Asset? A. The college education which has been acquired by approximately 27% of the U.S. population. B. The 12.4 billion barrels of oil reserves in Mexico. C. The Kia Motors manufacturing plant in West Point, GA. D. More than one (perhaps all) of the above answers is correct. 17. Sam and Cat spend their time starring in webcasts and providing babysitting services. Cat s opportunity cost for providing babysitting services is lower than Sam s opportunity cost for providing babysitting services. The suggests that they can increase their total output if Cat focuses her production on babysitting while Sam focuses her production on webcasts. A. Law of Comparative Advantage B. Law of Comparative Economic Systems C. Incentive Principle D. Cost-Benefit Principle For Question 18, consider the continuum between the economic systems of Pure Socialism and Pure Capitalism illustrated below. Point A Point B Point C Point D Pure Socialism North Korea Cuba China France Norway U.K. Hong Kong Pure Capitalism 18. Based upon the discussion in lecture, along the continuum illustrated above the economy of the United States currently would most accurately lie at. A. Point A B. Point B C. Point C D. Point D

4 19. In general, the downward sloping nature of a production possibilities curve illustrates A. the tradeoff in production 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 fact that every worker/resource must always possess an absolute advantage in the production of at least one good. 20. is the study of the functioning and performance of a society s economy as a whole, often with a focus on levels of and changes in aggregate measures such as the inflation rate, unemployment rate, and gross domestic product growth rate. A. Microeconomics B. Macroeconomics C. Comparative Economic Systems D. Political Science Answer Questions 21 and 22 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 Marginal Benefit 21. Total Benefits (i.e., Total Benefits, not Total Economic Surplus) would be maximized by choosing Q equal to A. 0 B. 9 C. 25 D If the decision maker increased the amount which she was engaging in the activity from Q=22 to Q=24, 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. Q

5 23. Which of the following is one of the Three Basic Economic Questions that every society must address? A. Which productive resources will be used to produce which goods and services? B. How can we guarantee that all people have a sufficient amount of leisure time? C. Who gets to consume the goods and services that we have chosen to produce? D. More than one (perhaps all) of the above is one of the Three Basic Economic Questions that every society must address. 24. 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 economists to argue that tariffs and import quotas increase general economic welfare (a position with which nearly all contemporary economists agree). C. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. D. argued that automobile accident rates could be decreased by installing five point harness seat belts and improved airbags in every car. For questions 25 through 27, consider a market with demand and supply as illustrated below. price 20 Supply Demand ,500 quantity 25. In this market there would be at a price of $9. 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. 1,500; $20. B. 750; $10. C. 600; $8. D. 0; $ Focusing on the 900 th unit, the Buyer s Reservation Price for this unit is and the Seller s Reservation Price for this unit is. A. $2; $3. B. $8; $13. C. $10; $10. D. $20; $4.

6 28. refers to the freedom of an individual to choose to purchase (or to choose to not purchase) a good or service at a price determined in a free market. A. Consumer Sovereignty B. Indicative Planning C. The Law of Demand D. The Invisible Hand 29. On Sunday, 2/5/17 the Atlanta Falcons lost Super Bowl LI to the New England Patriots in overtime by a score of 34 to 28. Around the same time an earthquake in Turkey killed 12 people. If Falcons quarterback Matt Ryan is more upset about the outcome of the Super Bowl than about the loss of life in Turkey from the earthquake, then it would seemingly suggest that he A. does not care about anyone other than himself. B. is a self-interested individual. C. is an irrational individual. D. is not as good of a person as Patriots quarterback Tom Brady. 30. Consider the following two statements. Statement 1: Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. Statement 2: A minimum wage decreases unemployment, particularly among highly skilled workers. Most economists would A. agree with both Statement 1 and Statement 2. B. agree with Statement 1, but disagree with Statement 2. C. agree with Statement 2, but disagree with Statement 1. D. disagree with both Statement 1 and Statement A household is a decision making entity whose A. primary objective is to maximize income earned. B. primary objective is to obtain benefits from consuming goods and services. C. primary role is to produce goods and services for consumption. D. primary role is to pay taxes to the government. 32. One of the three primary types of economic incentives is moral suasion, which could be described as A. the use or threat of force or incarceration to obtain compliance. B. attempts to convince individuals to behave in a certain manner because doing so is the right thing to do. C. the use of monetary rewards or direct increases in consumption which result from engaging in an activity. D. attempts to alter policy through increased regulation by the Federal government. 33. 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. scarcity. B. money. C. the Invisible Hand. D. an economic system.

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