ECON 1000 (Fall 2016 Section 03) Exam #1A Multiple Choice Questions: (3 points each) 1. I am taking of the exam. A. Version A 2. 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. an asset used as payment when purchasing goods and services. B. an asset that can be used as a means to hold wealth. C. used as a basic unit of measuring economic activity. D. None of the above answers are correct. 3. When interpreting a Production Possibilities Frontier, which of the following statements is true? A. All output combinations above the PPF are attainable and efficient. B. All output combinations on the PPF are attainable and efficient. C. All output combinations below the PPF are attainable but inefficient. D. More than one (perhaps all) of the above answers is correct. 4. Consider the costs of complying with bureaucratic regulations to economic decision makers in Singapore, South Africa, and Venezuela. According to the results of the Ease of Doing Business study, of these three countries, such costs are: A. lowest in Singapore and highest in South Africa. B. lowest in Singapore and highest in Venezuela. C. lowest in South Africa and highest in Venezuela. D. lowest in South Africa and highest in Singapore. 5. 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 transfer of money between households and firms. C. the movement of economic resources (i.e., factors of production and finished goods/services) between households and firms. D. 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. 6. The Incentive Principle states that A. an action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so. B. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity. C. 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. D. firms can only ever reduce costs of production by being inventive and devising new ways of producing a good at lower cost.
7. The Law of Demand implies that A. if the price of a good increases, then the quantity demanded of the good will increase. B. demand curves should be downward sloping. C. demand for a good will increase if consumers realize an increase in income. D. More than one (perhaps all) of the above answers is correct. 8. Which of the following statements is a Positive Statement? A. Noel Gallagher (formerly of the band Oasis) played a sold-out show at the Tabernacle in Atlanta, GA on July 1, 2016. B. The Kennesaw State University football team had a record of 6-5 (i.e., 6 wins and 5 losses) during the 2015 season. C. Neither A nor B is a Positive Statement. D. Both A and B are Positive Statements. 9. Which of the following countries has an economic system that is closest to pure Capitalism? A. China. B. Spain. C. The United States. D. New Zealand. 10. Privately owned enterprises in a free market economy have a primary goal of A. producing goods of low quality. B. earning as large of a profit as possible. C. employing as many workers as possible. D. convincing consumers that they are environmentally conscious. 11. Which of the following could NOT result in a Change in Demand for donuts? A. An increase in the number of consumers of donuts. B. An increase in consumer income. C. A decrease in the price of muffins. D. A decrease in the price of donuts. Answer Questions 12 and 13 based upon the information conveyed in the following table, which states Amy s Total Benefits from consumption of cups of coffee per day (measured in dollars): Cups of Coffee Consumed per Day 0 1 2 3 4 5 6 7 8 Total Benefits from Consumption 0 3 8 12 14 13 10 6 1 12. Amy s Marginal Benefit from consuming coffee is A. positive for her first 2 cups of coffee (but negative beyond 2 cups of coffee). B. positive for her first 4 cups of coffee (but negative beyond 4 cups of coffee). C. positive for all levels of consumption up to 8 cups of coffee. D. negative for all levels of consumption up to 8 cups of coffee. 13. Amy works in an office where she can drink as much coffee as she likes for free (i.e., her total costs and marginal costs of consuming coffee are zero for all levels of consumption). In order to maximize her total economic surplus she should consume cups of coffee per day. A. 8 B. 4 C. 2 D. 1
14. Between August 2014 and August 2016 there was a decrease in equilibrium price and an increase in equilibrium quantity traded of pens. This change in the market equilibrium outcome would result from A. an increase in Demand. B. a decrease in Demand. C. an increase in Supply. D. a decrease in Supply. 15. In the opening paragraph of the textbook it was noted that Mike Ditka has suggested that football related injuries could likely be reduced by have participants play without helmets (or at least without facemasks on their helmets). His underlying argument A. relies heavily upon the Incentive Principle. B. illustrates the vertical interpretation of the demand curve. C. does not make any sense whatsoever when analyzed using the tools of economics. D. implicitly assumes that football players are irrational. 16. Voluntary Trade generally makes buyers and makes sellers. A. better off; better off. B. better off; worse off. C. worse off; worse off. D. worse off; better off. For Questions 17 through 19, consider the following scenario. Alex and Bob spend their workdays producing rice 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. Rice Shirts Alex 32 8 Bob 12 4 17. has an Absolute Advantage in the production of rice, and has an Absolute Advantage in the production of shirts. A. Alex; Alex B. Alex; Bob. C. Bob; Alex. D. Bob; Bob. 18. Alex s Opportunity Cost for producing a shirt is units of rice. A. 2 B. 3 C. 4 D. 24 19. Suppose that Alex and Bob 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. Alex should make all 6 shirts. B. Alex and Bob should each make 3 shirts. C. Alex should make 2 shirts and Bob should make 4 shirts. D. Alex should make 8 shirts and Bob should make 2 (i.e., negative two) shirts.
20. 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: Tariffs and import quotas usually reduce the general welfare of society. Most economists would A. agree with Statement 2, but disagree with Statement 1. B. agree with Statement 1, but disagree with Statement 2. C. agree with both Statement 1 and Statement 2. D. disagree with both Statement 1 and Statement 2. 21. Which markets are represented in the Basic Circular Flow Diagram? A. Markets for Imports and markets for Exports. B. Markets for Goods and Services and markets for Financial Assets. C. Markets for Goods and Services and markets for Factors of Production. D. Markets for Financial Assets and markets for Factors of Production. For questions 22 through 24, consider a market with demand and supply as illustrated below. price 80 Supply 48 40 32 Demand 0 16 0 400 500 600 1,000 quantity 22. In this market there would be at a price of $20. A. excess supply B. excess demand C. both excess demand and excess supply. D. neither excess demand nor excess supply. 23. In equilibrium, units would be traded each at a price of. A. 400; $16. B. 500; $40. C. 600; $32. D. 1,000; $80. 24. Focusing on the 400 th unit, the Buyer s Reservation Price for this unit is and the Seller s Reservation Price for this unit is. A. $88; $72. B. $80; $16. C. $48; $32. D. $8; $8.
25. One of the three primary types of economic incentives is coercion, which could be described as A. attempts to alter behavior by mind control. 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. the use or threat of force or incarceration to obtain compliance. 26. In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. A. peasants/smurfs; nobles/aristocats. B. uneducated class; educated class. C. business owners; working class. D. voters; non-voters. 27. Ralphie got a Red Ryder BB Gun for Christmas last year. He has decided to sell this item to Grover for $40 in order to have some money to buy a new baseball glove. When selling his BB Gun to Grover, Ralphie is exercising which of the following sub-dimension of property rights? A. The right to control. B. The right to transfer. C. The right to restitution. D. The right of equilibrium. 28. Based upon the research findings discussed by Dr. Kaitlyn Harger during her guest lecture, the opening of a new professional sports facility will likely A. cause many existing businesses in the area to go out of business. B. induce a substantial number of new businesses to open in the area. C. not have any impact (positive or negative) on the number of new businesses in the area. D. None of the above answers are correct (since her talk did not address this issue in any way whatsoever). 29. Demand for Good Y increases as a result of an increase in consumer income. This observation implies that Good Y is A. a substitute good. B. a complementary good. C. a normal good. D. an inferior good. 30. The set of rules and methods put in place by a society to answer (directly or indirectly) the three fundamental economic questions of What to produce?, How to produce it?, and For whom to produce it? can be described as A. an economic system. B. government. C. scarcity. D. the Invisible Hand.
31. refers to the natural and undirected emergence of order out of chaos. A. Command Planning B. Production C. Scarcity D. Spontaneous Order 32. Economics is A. the social science that studies decision making in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein. B. the social science that studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy. C. the art of communicating financial information about a business entity to stakeholders, such as employees, managers, shareholders, and customers. D. the study and analysis of business decisions related to promoting and selling products or services, including market research and advertising. 33. Socialism is defined as an economic system in which A. the means of production are owned by the government. B. the means of production are privately owned by individuals. C. the government has established a wide range of programs intended to provide a safety net to people, thereby equalizing levels of income and consumption across households. D. all decision makers are motivated by selfless benevolence.
(Blank Page)