ECON 1 (Summer 218 Section 5) Exam #1BB Multiple Choice Questions: (3 points each) 1. I am taking of the exam. B. Version BB 2. A.C. and Zack produce surfboards and hair gel. A.C. s opportunity cost of producing a surfboard is lower than Zack s opportunity cost of producing a surfboard. The suggests that they can increase their total output of these two goods if A.C. focuses his production on surfboards while Zack focuses his production on hair gel. A. Law of Comparative Advantage B. Law of Absolute Advantage C. distributional decision D. Cost-Benefit Principle 3. In 26 the U.S. government paid a $5 million reward to informants who provided information which led to the successful killing of terrorist Khadaffy Janjalani in the Philippines. In this example the U.S. government used to obtain the desired information. A. an Invisible Hand B. a Material Incentive C. Moral Persuasion D. Coercion 4. Which of the following is a basic characteristic of Capitalism? A. Private ownership of property is illegal. B. Economic decisions occur in markets. C. Income is distributed on the basis of need. D. None of the above answers are correct. 5. Normative Statements A. attempt to assess the desirability of how the world is or functions, often with suggestions of things that could be done to improve outcomes. B. attempt to describe how the world actually is or actually functions. C. are never made by economists or policy analysts. D. More than one (perhaps all) of the above answers is correct. 6. Which markets are represented in the Basic Circular Flow Diagram? A. Markets for Goods and Services and markets for Factors of Production. B. Markets for Goods and Services and markets for Financial Assets. C. Markets for Financial Assets and markets for Factors of Production. D. Markets for Stocks and markets for Bonds. 7. The essay illustrates the importance of spontaneous order in a market system. A. I, Pencil by Leonard Read B. The Wealth of Nations by Adam Smith C. The Communist Manifesto by Karl Marx and Friedrich Engels D. The Magus by John Fowles
8. Economic Man (aka, homo economicus) is A. neither rational nor self-interested. B. both rational and self-interested. C. self-interested, but not rational. D. rational, but not self-interested. For Questions 9 through 11, consider a society with four workers (Axl, Slash, Duff, and Izzy) who spend their workday producing two goods (Guns and Roses). Their daily piecewise linear Production Possibilities Frontier (i.e., four straight-line segments) is illustrated below. Points on the frontier between B and C are obtained as Axl switches his time away from Roses production toward Guns production. Likewise: points between C and D are obtained as Slash reallocates his time; points between D and E are obtained as Duff reallocates his time; and points between E and F are obtained as Izzy reallocates his time. Roses 6 5 B C 25 A D 1 4 9 15 9. Output combination A (i.e., 4 Guns and 25 Roses) is A. unattainable and characterized by productive efficiency. B. unattainable but characterized by productive inefficiency. C. attainable and characterized by productive efficiency. D. attainable but characterized by productive inefficiency. E F 11 Guns 1. If each worker produced only Roses, could produce the most in a single day. A. Izzy B. Duff C. Slash D. Axl 11. has the highest Opportunity Cost for producing a Gun. A. Izzy B. Duff C. Slash D. Axl
12. Which of the following countries currently has an economic system closest to Pure Capitalism? A. The United States. B. New Zealand. C. Russia. D. Great Britain. 13. One of the principle functions of money is that it serves as a medium of exchange. This role could be described by recognizing that money is A. the root of all evil. B. used as a basic unit of measuring economic activity. C. an asset that can be used as a means to hold wealth. D. an asset used as payment when purchasing goods and services. For questions 14 through 16, consider the market for beef, with supply in 216 and 218 as illustrated below. In 216, market equilibrium price was $5.15 per unit and market equilibrium quantity traded was 3,49 units. Assume that the Law of Demand is satisfied in this market. price Supply 216 Supply 218 5.15 2.65 3,49 5,82 14. In 216 there would have been at a price of $4.75. A. Excess Supply B. Excess Demand C. both Excess Supply and Excess Demand D. neither Excess Supply nor Excess Demand quantity 15. Which of the following could be a possible explanation for the change in supply between 216 and 218 illustrated above? Between 216 and 218 there was A. a decrease in the price of chicken (a substitute for beef). B. an increase in income of beef consumers. C. an improvement in technology that allows more beef to produced with the same amount of inputs. D. an increase in the price of cattle feed (an input used in the production of beef). 16. Supposing that the demand for beef was unchanged between 216 and 218, it follows that in 218 equilibrium price will be and equilibrium quantity will be. A. below $2.65; below 3,49 units. B. somewhere between $2.65 and $5.15; somewhere between 3,49 units and 5,82 units. C. somewhere between $2.65 and $5.15; below 3,49 units. D. above $5.15; above 5,82 units.
17. Robbie is a ventriloquist. Jade stole Robbie s puppet (named Rex) and tore off its arms, legs, and head (for no reason she s just a jerk most of the time). Robbie demands that Jade buys him a new puppet to replace the one which she destroyed. By making this demand, Robbie is claiming his in regards to his puppet Rex. A. right to transfer B. right to control C. right to scarcity D. right to restitution 18. According to the results of the International Property Rights Index study, private property rights are most secure in and least secure in. A. Venezuela; Canada. B. the United States; Spain. C. Finland; Myanmar. D. France; New Zealand. 19. Austin recently attended the Post Malone concert at Cellairis Amphitheatre at Lakewood in Atlanta. His Total Benefits from attending this show were $12 while his Total Costs were $8. From this information, it follows that his Economic Surplus was A. $12 + $8 = $2. B. $12 $8 = 1.5. C. $12 $8 = $4. D. $8 $12 = $4 (i.e., negative $4). 2. Within our discussion in lecture of views of economists on economic and public policy issues, it was noted that there is generally more agreement among economists A. on statements about macroeconomics than on statements about microeconomics. B. on positive statements than on normative statements. C. Both A and B are correct. D. Neither A nor B is correct. 21. The market equilibrium in the model of Supply and Demand A. 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. B. is a stable outcome, which we should expect to persist so long as market conditions do not change. C. is not unique, because of the Law of Absolute Advantage. D. More than one (perhaps all) of the above answers is correct. 22. Which of the following could NOT result in a Change in Demand for corn? A. A change in income of corn consumers. B. A change in the perceived health benefits of eating corn. C. A change in the price of corn. D. A change in the number of consumers of corn. 23. In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. A. citizens of a country; illegal immigrants. B. business owners; working class. C. uneducated class; educated class. D. voters; government employees.
24. The Incentive Principle states that A. having more of one thing usually means getting by with less of something else. B. the behavior of self-interested decision makers interacting in free markets often leads to outcomes which are better for everyone in society. C. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity (whereas, if the marginal cost of an activity increases, then a rational person will engage in less of the activity). D. a society can produce a greater amount of total output when individuals focus their production on those activities for which they have a comparative advantage. 25. refers to someone who organizes and manages a business, typically with considerable initiative and exposure to risk is. A. An Entrepreneur B. A Self-Interested Individual C. An Irrational Individual D. New Soviet Man 26. Consider the following two statements. Statement 1: A ceiling on rents reduces the quantity and quality of available housing. Statement 2: A minimum wage increases unemployment among young and unskilled workers. Most economists would A. agree with both Statement 1 and Statement 2. B. agree with Statement 2, but disagree with Statement 1. C. agree with Statement 1, but disagree with Statement 2. D. disagree with both Statement 1 and Statement 2. For Questions 27 through 28, consider the following scenario. Bill and Ted spend their workdays producing beer and pizza. 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. Beer Pizza Bill 48 24 Ted 4 8 27. has an Absolute Advantage in the production of beer, and has an Absolute Advantage in the production of pizza. A. Bill; Ted. B. Ted; Bill. C. Ted; Ted. D. Bill; Bill. 28. Bill s Opportunity Cost for producing one pizza is. Ted s Opportunity Cost for producing one pizza is. A. 24 units of beer; 8 units of beer. B. 3 units of beer; 12 units of beer. C. 2 units of beer; ½ a unit of beer. D. ½ a unit of beer; 2 units of beer.
29. This past Sunday, Dominic Thiem lost to Rafael Nadal in the finals of the French Open tennis tournament. Around the same time an earthquake in Azerbaijan killed 42 people. If Dominic Thiem is more upset about losing the tennis match than about the loss of life from the earthquake, it would seemingly suggest that he A. is a self-interested individual. B. is an irrational individual. C. enjoys seeing other people suffer. D. does not care about anyone other than himself. 3. A seller s reservation price A. is visually illustrated by the height of the supply curve. B. is always exactly equal to market equilibrium price for every unit that a seller chooses to sell. C. refers to the maximum dollar amount a seller is willing to accept in exchange for an item. D. None of the above answers are correct. 31. Which of the following is NOT one of the Three Basic Economic Questions that every society must address? A. How can we guarantee that all people have a sufficient amount of leisure time? B. What combination of goods and services should we produce with our scarce resources. 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 NOT one of the Three Basic Economic Questions that every society must address. Answer Questions 32 and 33 based upon the information conveyed in the following table, which states Isaac s Total Costs of engaging in Activity X (measured in dollar terms): Level of Activity X 1 2 3 4 5 6 7 8 9 1 Total Costs $ $4 $1 $18 $3 $45 $65 $9 $12 $16 $21 32. Isaac s Marginal Cost of engaging in the 8 th unit of activity X is. A. $96 B. $12 C. $3 D. $15 33. Suppose that Isaac has a constant Marginal Benefit of engaging in this activity, denoted MB. If his Marginal Benefit were to increase from MB L =$14 to MB H =$24, then he would choose to A. decrease the amount that he engages in the activity from X=5 down to X=8, contradicting the Incentive Principle. B. increase the amount that he engages in the activity from X=2 up to X=3, consistent with the Incentive Principle. C. increase the amount that he engages in the activity from X=3 up to X=9, contradicting the Incentive Principle. D. increase the amount that he engages in the activity from X=4 up to X=6, consistent with the Incentive Principle.
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