ECON 1100 – Global Economics (Section 05)
Exam #1 – Fall 2012 (Version A)
Multiple Choice Questions ( 2 12 points each):
1.
_________________ is the subfield of economics that compares and contrasts the
structure and performance of different types of economic organization.
A.
Microeconomics
B.
Macroeconomics
C.
International Trade
D.
Comparative Economic Systems
2.
____________ 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.
Moral Suasion
C.
The Invisible Hand
D.
Coercion
3.
In regards to a Production Possibilities Frontier, which of the following
statements is true?
A.
“A combination of goods is characterized by Productive Inefficiency if it
cannot possibly be produced with the currently available resources and
technology.”
B.
“An Attainable combination of output can never be characterized by
Productive Efficiency.”
C.
“A combination of goods is Unattainable if it cannot possibly be produced
with the currently available resources and technology.”
D.
More than one (perhaps all) of the above answers is correct.
4.
Adam Smith was
A.
a 17th century English mercantilist.
B.
an 18th century Scottish economist.
C.
a 19th century German philosopher, economist, and revolutionary.
D.
a 20st century American government bureaucrat.
5.
Eli and Peyton produce footballs and athletic shoes. Eli’s opportunity cost of
producing a football is lower than Peyton’s opportunity cost of producing a
football. The ________________ suggests that they can increase their total
output of these two goods if Eli focuses his production on footballs while Peyton
focuses his production on athletic shoes.
A.
Cost-Benefit Principle
B.
Incentive Principle
C.
Law of Comparative Advantage
D.
distinction between a positive statement and a normative statement
6.
Which of the following could NOT result in a “change in demand” for “hand
sanitizer”?
A.
A decrease in the market price of hand sanitizer.
B.
An increase in the number of buyers of hand sanitizer.
C.
A change in consumer income.
D.
An increase in the price of cold medicine.
7.
Which markets are represented in the simple “Circular Flow Diagram”?
A.
Markets for “Goods and Services” and markets for “Factors of
Production.”
B.
Markets for “Financial Assets” and markets for “Exports.”
C.
Markets for “Goods and Services” and markets for “Financial Assets.”
D.
Markets for “Imports” and markets for “Exports.”
8.
The U.S. presently has an estimated 2,203 trillion cubic feet of known recoverable
natural gas reserves in the ground within its borders. This resource is
A.
the Invisible Hand.
B.
human capital.
C.
a natural asset.
D.
a produced asset.
9.
________________ first said “From each according to his ability, to each
according to his need.”
A.
Karl Marx
B.
Louis Blanc
C.
Alec Nove
D.
Adam Smith
For Question 10, consider the continuum between the economic systems of Pure
Socialism and Pure Capitalism illustrated below.
Point D
Point C
Pure
Socialism
Germany
North
Korea
10.
Cuba
Poland
Point A
Point B
Switzerland
U.K.
Pure
Capitalism
Hong Kong
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
11.
Within our discussion of private ownership of property, it was noted that
“Property Rights” consist of three different interconnected dimensions of rights,
one of which was the “right to restitution.” The “right to restitution” refers to
A.
the right to decide how to use your property.
B.
the right to obtain ownership of property from or relinquish ownership of
property to another person.
C.
the right to be compensated by another person when he damages your
property.
D.
the right to be able to seize the property of someone else in order to use it
for the “public good.”
12.
The “Law of Demand” implies that
A.
if the price of a good decreases, then the quantity demanded of the good
will increase.
B.
demand curves should be “upward 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.
13.
One of the three primary types of “economic incentives” is “moral suasion,”
which could be described as
A.
the use of monetary rewards or direct increases in consumption which
result from engaging in an activity.
B.
attempts to convince individuals to behave in a certain manner because
doing so is “the right thing to do.”
C.
the use of torture or other “enhanced interrogation techniques” in order to
elicit information from someone.
D.
None of the above answers are correct.
14.
The Cost-Benefit Principle states that
A.
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.
B.
a person is more likely to take an action if its benefits rises, and less likely
to take an action if its cost rises.
C.
a person should take an action if and only if the additional benefit of doing
so is greater than or equal to the additional cost of doing so.
D.
None of the above answers are correct.
15.
When considering potential government policies, it is important to recognize that
A.
most businesses are “self-interested,” but households are not.
B.
voluntary trade generally makes both sellers and buyers worse off.
C.
if a policy alters the costs and/or benefits for a decision maker, then the
decision maker might change his behavior as a result of the policy.
D.
Republicans care only about “the 1%,” while Democrats care primarily
about “the 99%.”
16.
The ___________________ provides an illustration of the general interactions
between households and firms in a simplified free market economy.
A.
Production Possibilities Frontier.
B.
Circular Flow Diagram.
C.
Demand Curve.
D.
Supply Curve.
17.
_______________ specifies what different parties must do, whatever the external
circumstances, and provides for enforcement or compensation for nonperformance.
A.
Indicative Planning
B.
The Invisible Hand
C.
A Contract
D.
A Market
For Questions 18 and 19, consider a society with the “linear” Production Possibilities
Curve (i.e., a “straight-line,” which has a constant slope) illustrated below
Corn
4,200
3,300
C
2,400
B
1,800
A
Trucks
0
0
700
1,500
2,100
3,500
18.
Point “C” (2,100 Trucks and 3,300 units of Corn) is
A.
Unattainable.
B.
Attainable and characterized by Productive Inefficiency.
C.
Attainable and characterized by Productive Efficiency.
D.
None of the above answers are correct.
19.
Supposing that this society is producing an efficient combination of output, the
“opportunity cost of producing the 2,400th Truck” is ______________ the
“opportunity cost of producing the 500th Truck.”
A.
less than
B.
exactly equal to
C.
greater than
D.
None of the above answers are correct (since it is not possible for this
society to ever produce 2,400 Trucks).
20.
In the writings of Karl Marx, the “bourgeoisie” referred to the _______________
and the “proletariat” referred to the _______________.
A.
colonialists; nobility.
B.
tax collectors; artists and musicians.
C.
government bureaucrats; entrepreneurs.
D.
business owners; working class.
21.
The quote on page 12 of the “Economics” textbook suggests that Milton Friedman
believed that Mother Theresa was
A.
irrational but self-interested.
B.
irrational and not self-interested.
C.
rational but not self-interested.
D.
rational and self-interested.
22.
Consider a society consisting of only three people: Bea, Arthur, and Maude. Bea
and Arthur spend all day producing clothing and food. At the start of each day
Maude tells each worker precisely how much time to devote to the production of
each good. The “fundamental economic question” that Maude is answering for
this society is the
A.
Entrepreneurial Decision.
B.
Distributional Decision.
C.
Production Decision.
D.
Resource Use Decision.
23.
In a box of “Froot Loops” Tommy received a code which could be redeemed for
“one free MP3 download on Amazon.com.” Based upon a search of their
website, he narrowed his choices to two songs: “Somebody that I Used to Know”
by Gotye and “(Can’t Live Without) Your Love and Affection” by Nelson. After
deliberation he chose to use his code to download “Somebody that I Used to
Know.” The Opportunity Cost of downloading this song is equal to
A.
the maximum amount of money he would have been willing to pay to
download “Somebody that I Used to Know” if he had to instead pay “out
of pocket” to download the song (i.e., if he did not have the code for “one
free download”).
B.
the amount of money which he had to pay for the box of “Froot Loops.”
C.
the value he places on the MP3 file of “(Can’t Live Without) Your Love
and Affection.”
D.
zero, since he received the code for free.
24.
Privately owned enterprises in a free market economy have a primary goal of
A.
tricking consumers into thinking that they are “environmentally
conscious.”
B.
employing as many workers as possible (in order to make the
unemployment rate as low as possible).
C.
earning as large of a profit as possible.
D.
striving for social justice.
25.
With which of the following statements is there “general agreement” among most
economists?
A.
“The U.S. should restrict employers from outsourcing work to foreign
countries.”
B.
“Tariffs and import quotas usually reduce the general welfare of society.”
C.
“Increasing the minimum wage would lead to an increase in income for all
members of the labor force and a reduction in the unemployment rate.”
D.
None of the above answers are correct
26.
Consider the following two statements: (I) “Hockey legend Wayne Gretzky
scored a total of 894 goals during his professional career in the NHL.” and (II)
“The United States would be a better country if all recreational drugs were made
legal.” Statement (I) is a ____________ statement, and Statement (II) is a
____________ statement.
A.
Positive; Positive.
B.
Positive; Normative.
C.
Normative; Positive.
D.
Normative; Normative.
For Questions 27 through 29, consider the following information regarding Rory’s
Total Benefits from playing golf in August (measured in dollars):
Rounds of Golf Played
Total Benefits
from Playing Golf
0
1
2
3
4
5
6
7
8
9
10
0
60 110 150 180 200 210 218 222 224 220 210
27.
Rory’s “Marginal Benefit” for his 3rd round of golf played would be
A.
$40.
B.
$50.
C.
$150.
D.
$450.
28.
If Rory had to pay $25 for each round of golf played, then he would choose to
play ____ rounds in August.
A.
9
B.
8
C.
4
D.
0
29.
If Rory has the choice to either pay $25 per round of golf (as in question 28) or to
pay $140 to play “unlimited golf” in the month of August (i.e., as much as he
chooses, for a flat rate of $140) he should choose
A.
to pay $140 for “unlimited golf.”
B.
to pay $25 per round.
C.
neither option, since his maximum Economic Surplus is negative under
each option.
D.
either option, since his maximum Economic Surplus is identical under
each option.
11
For questions 30 through 32, refer to the graph below, which illustrates supply for
“Good Z” in June 2012. Suppose that in June 2012, the equilibrium price was $5.10
price
Supply – June 2012
11.40
8.00
5.10
quantity
0
0
1,800
2,950
3,975
30.
The value of “seller’s reservation price” for the seller of the 2,000th unit of “good
Z” is
A.
$5.10.
B.
greater than $5.10 but less than $8.00.
C.
$8.00.
D.
None of the above answers are correct (since more information is needed
in order to determine the value of “seller’s reservation price” for this
seller).
31.
Keeping in mind that the equilibrium price in June 2012 was $5.10, it follows that
in June 2012 there would have been _____________ at a price of $8.00 and
_____________ at a price of $11.40.
A.
excess demand; excess demand.
B.
excess supply; excess supply.
C.
excess demand; excess supply.
D.
excess supply; excess demand.
32.
Suppose that “Good Z” is an inferior good and that “Good Z” is a substitute for
“Good X.” If consumer income were to decrease between June 2012 and
September 2012 (with all other relevant factors in this market unchanged), it
follows that the equilibrium quantity in September 2012 would be
A.
greater than 1,800.
B.
exactly equal to 1,800.
C.
less than 1,800.
D.
None of the above answers are correct (since more information is needed
in order to make any insights on the new equilibrium quantity).
33.
In a typical modern economy, it is common for Government to have an impact on
economic outcomes by
A.
regulating the behavior of business.
B.
redistributing income.
C.
defining and enforcing property rights.
D.
More than one (perhaps all) of the above answers is correct.
34.
According to the results of the “Economic Freedom of the World” study, the level
of economic freedom in the United States is
A.
lower than every other country in the world.
B.
greater than every other country in the world.
C.
relatively low but not lower than every other country in the world
(illustrated by the fact that the U.S. ranked 97th out of the 141 countries in
the study, ahead of countries such as New Zealand, Australia, Germany,
and India).
D.
relatively high but not higher than every other country in the world
(illustrated by the fact that the U.S. ranked 10th out of the 141 countries in
the study, behind countries such as Hong Kong, Singapore, Canada, and
the United Kingdom).
35.
Which of the following is a basic characteristic of Capitalism?
A.
Income is distributed on the basis of “need.”
B.
Private ownership of property is illegal.
C.
Economic decisions occur primarily in markets.
D.
More than one (perhaps all) of the above answers is correct.
36.
Last weekend Bill won $700 at a casino in Biloxi, Mississippi. He decided to use
the money to purchase a new TV from Target. He was able to use the money to
acquire the new TV since money serves as a
A.
contract.
B.
medium of exchange.
C.
store of value.
D.
unit of measure.
37.
In 2012 college graduates earned $18,562 per year more than high school
graduates. If this difference had instead been $24,500 per year, then we would
expect
A.
nobody to pursue a college education.
B.
everybody to pursue a college education.
C.
fewer people (but still some people) to pursue a college education.
D.
more people (but probably not all people) to pursue a college education.
38.
_______________ is the branch of economics which studies 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 unemployment rate, inflation rate,
and Gross Domestic Product growth rate).
A.
Philosophy
B.
Comparative Economic Systems
C.
Microeconomics
D.
Macroeconomics
39.
Consider the market for lawn care services in Louisville, MS. Over 50% of the
production costs of firms in this market are accounted for by wages paid to
workers, most of whom are paid the current minimum wage of $7.25 per hour. If
the minimum wage were increased to $10.00 per hour, we would expect
A.
the Supply curve in this market to shift to the right.
B.
the Supply curve in this market to shift to the left.
C.
the Supply curve to remain unchanged, but a point further down the
supply curve (i.e., at a lower price) would be realized in equilibrium.
D.
the Supply curve to remain unchanged, but a point further up the supply
curve (i.e., at a higher price) would be realized in equilibrium.
40.
The “Patient Protection and Affordable Care Act” was signed into law by
President Barack Obama on 3/23/10. As this legislation was being debated,
A.
all educated and respectable economists supported the legislation.
B.
all educated and respectable economists opposed the legislation.
C.
no economists expressed any opinion on the legislation (upholding a long
standing tradition within the profession of never getting involved in
matters of public policy).
D.
educated and respectable economists had differing opinions on the
legislation (evidenced by the fact that 40+ economists wrote a letter to
President Obama in support of the legislation, while 130+ economists
wrote a letter to Rep. John Boehner opposing the legislation).
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