ECN2012 Final exam
Fall 2013
1. “Human ingenuity alone –free from onerous taxes, regulations and inflation – leads to prosperity and economic growth” is a
sentiment you would most expect to hear from a _____.
a. Marxist
b. Liberal
c. Institutionalist
d. Conservative
2. "When people are free to do as they please, they usually imitate each other. . . . A society which gives unlimited freedom to the
individual, more often than not attains a disconcerting sameness." What phenomenon is this person writing about?
a. moral hazard
b. observational learning
c. adverse selection
d. biases and rules of thumb
3. Why do Europeans work fewer hours than Americans? Which of the following would be the best explanation if you accepted the
economists’ model of rational choice?
a. Americans enjoy work more than Europeans
b. Unemployment benefits are higher in the US
c. The income tax rate is higher in Europe than the US
d. Women face more discrimination in the US
4. Which of these headlines is true based on the world's demographic patterns? Be careful when reading the headlines!!!
a. "many of the world's poorest countries are getting younger while its richest countries are getting older"
b. "Life expectancies in the US becomes longest in the world".
c. "North America is the continent with the slowest projected population growth rate in next 20 years"
d. "Russia's population growth rate inches past that of the US"
Here is what I know at the present time concerning the costs of hosting a retirement-party roast for a colleague. It will cost $300 for
the honoree’s gift, $200 for her dinner and drinks, $500 for the music, $1,000 to reserve the hall, and $150 for drinks and dinner for
each quest.
5. What is the fixed cost of the event?
a. $1,000
b. $1,150
c. $1,500
d. $2,000
6. What will be the least I could charge per person to cover my average costs if there are 100 quests?
a. $100
b. $115
c. $170
d. $210
7. What is the marginal cost of a new guest if I decide to add an additional guest to the event?
a. $100
b. $115
c. $150
d. $210
8. One of my favorite images was a satellite view of a peninsula that showed the effect an economic system can have on economic
growth. The photo was of ___ and it clearly demonstrated the limitations of a ____ economic system.
a. Vietnam / tradition
b. Korea / command
c. Poland / capitalism
d. Iberia / capitalism
9. A study showed demand for gasoline falls 2% when the price increases by 10%. If this is true and we need to reduce gas demand
by 6%, what would have to happen to the price to make that happen? The price would need to be ____.
a. lowered by 10%
b. raised by 20%
c. raised by 40%
d. raised by 30%
10. I recently went to my neighbor and suggested he contribute to the cost of the painting of my house. Which imperfection in the
market system would I use as a basis for my proposal?
a. inadequate growth
b. instability
c. externalities
d. imperfect competition
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11. Based on this graph, which of the following
statements is true? When we compare the US with
these European countries___.
a.
b.
c.
d.
Income inequality is largest in the US
Income growth is largest in the US
In the US those at the bottom of the income
distribution have a larger chance of remaining
in the bottom of the distribution
The chances of rising in the income
distribution have declined over time
12. You cannot have missed the debate over health care reform since it was the BIG story in 2013. One of the features in the program
first pushed by Hillary Clinton was to “force” younger people to enroll. This feature of the reform was included to negate the
problem caused by ____.
a. signaling
b. adverse selection
c. money illusion
d. anchoring
13. If these graphs represent the market for housing in RI, which graph would best depict the impact of an increase in lumber costs?
a. A
b. B
c. C
d. D
14. The appearance of zipcar – the car sharing service - has affected the market for automobiles in the US among the millennials?
Which of the graphs best captures the impact of millennials “borrowing” cars on the market for new cars in the US?
a. A
b. B
c. C
d. D
15. Stories about China seem to show up everywhere. One of the stories I have read about frequently is the one about China’s impact
on the price of oil. What would be the best way to represent China’s rapid economic growth on the market for oil?
a. A
b. B
c. C
d. D
16. A doctor friend of mine has been accused of having no bedside manner. He feels that there is no difference between telling a
patient contemplating surgery that she has a 10% chance of death or telling the patient that she has a 90% chance of survival. While a
statistician would say these are different ways of saying the same thing, research has shown these two to produce very different
choices. The fact that the two approaches leads to very different survey choices among patients results is an example of the
importance of _____.
a. moral hazard
b. framing
c. adverse selection
d. sunk costs
17. Which of the following headlines doesn't seem to make sense given what we have learned about supply and demand?
a. "orange juice prices rise on news of hard freeze in Florida "
b. "price cut by Honda pushes GM sales lower"
c. "cotton prices soar on reports of good growing season in China'"
d. "oil prices fall on news of higher Iraqi oil shipments"
e. "increased immigration pushes service worker wages lower"
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18. The best explanation of the price of oil in 1979 would be ___
a. an increase in both supply and demand
b. an increase in supply and a decrease in demand
c. a increase in supply
d. an increase in demand
19. Which of these headlines would be true based on the world's demographic patterns? Be careful when reading the headlines!!!
a. "World's population growth rates rise as immigration rates rise"
b. "China's rapidly aging population putting strains on pension system"
c. "Russia's population growth rate inches past that of the US"
d. "Life expectancies in the US becomes longest in the world".
20. Which of the following statements is true?
a. Corporate income taxes have become an increasingly important component of federal tax revenue in the past 30 years
b. tariffs in recent years have become a minor source of revenue for the federal government
c. payroll taxes have become a less important source of federal tax revenues in the past 30 years
d. property taxes are the major source of tax revenue at the federal level
21. Based on this Gini Coefficient graph produced by the World
Bank, which of the following statements is true? In the past 200
years___
a. the population in the world’s poor countries has risen
b. the level of pollution in the world has risen fairly steadily
with industrialization
c. the share of the world’s income in wealthy countries has
risen
d. the share of economic activity controlled by the
government has increased
22. It doesn't matter whether we look at economic or demographic data, the story is still the same - the US is very different from the
other rich countries in the world. When we look at the demographic differences, which of the following would be true?
a. Life expectancies are higher in the US.
b. Population is growing slower in the US.
c. Infant mortality rate is lower in the US.
d. US ageing slower than other wealthy countries
23. Which of the following statements is NOT true?
a. Carbon dioxide levels in the world are increasing
b. Inequality is increasing in the US
c. Fewer sellers usually means lower prices
d. The world’s rich countries are aging rapidly
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24. At one time my daughter worked for a large retailer so I got a chance to see more about the inner workings of these operations.
One of the things that always intrigued me was the use of SALE signs. Why was it that almost every store had Sale signs rather than
simply low prices? It turns out those "Sale" signs are there for a good reason. Research has found that people react differently to a
price tag of $20 and one that has $40 crossed out with a $20 sales price. The fact that the sales ticket looks better is an example of
which behavioral peculiarity?
a. opportunity cost
b. moral hazard
c. anchoring
d. regression to the mean
25. There has been much discussion about the possibility of a recession because a recession would mean a slow-down of the
economy that would certainly alter demand for a wide array of industries. If I wanted to forecast the impact on demand of a
recession, then I would most want to know the value of which of the following?
a. cross-price elasticity of demand
b. own-price elasticity of demand
c. income elasticity of demand
d. price elasticity of supply
26. There have been proposals to reduce obesity by raising the price of sugary products. In one article I read that a 10% increase in
price reduces consumption by about 5%. Based on this we could conclude that the own-price elasticity of demand is _______ and as
a result a price increase will ____ expenditures on gasoline.
a. elastic
decrease
b. inelastic
increase
c. elastic
increase
d. inelastic
decrease
27. The headline read, “Medicaid Growth Could Aggravate Doctor Shortage.” As a result of the Affordable Care Act there will be an
increasing number of Americans who will be eligible for Medicaid. How will we show the impact of this on the market for physician
services?
a. an increase in demand
b. a decrease in demand
c. an increase in supply
d. a decrease in supply
28. In the aftermath of hurricane Katrina we saw a dramatic increase in the price of oil that had many people beginning to talk about
hybrid automobiles. The problem is that the hybrids are too expensive at the present time, but the optimists believe that once
production levels are increased the average costs of the hybrids will come down substantially. When these people talk about the idea
that unit production costs will fall as output rises they are talking about ______
a. marginal product
b. average product
c. economies of scale
d. marginal cost
Beer - own price elasticity of demand
Wine - own price elasticity of demand
Cigarettes - own price elasticity of demand
Marijuana own -price elasticity of demand
Fresh fruit – own price elasticity of demand
Beer - income elasticity
Wine- income elasticity
Public transportation – income elasticity of demand
Computers – income elasticity
Beer - in response to price changes in wine
Hard liquor - in response to price changes in beer
Pepsi - with price of Coke
Coke - with price of Pepsi
-0.25
-0.8
-0.4
-1.5
-2.3
0.4
1
-.4
1.7
0.2
0.7
0.8
0.6
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29. Which of the following statements is true based on the table above?
a. If the price of Coke rises 10%, demand will fall 6%
b. In a recession demand will fall most for fresh fruit
c. If the price if wine increases 10%, demand will fall 8%
d. If the sellers of fresh fruit raise the price this will increase the revenue earned by the sellers
30. The languages department is developing their schedule for next year and they are assessing the possibilities. The department can
teach either French courses or Portuguese courses. For reasons that remain unknown, the French classes have an average enrollment
of 80 and the Portuguese have an average enrollment of 50, and that the Language Department will only teach 10 sections a
semester. What will happen to the student possibility curve if the French Department raises the average class size? In the graph P
represents the number of students in Portuguese classes and F represents the number of students in French classes.
a.
it will move inward
b. it will move outward
c. it will get flatter
d. it will get steeper
31. AIDS has clearly changed the sex landscape, and if you believe in the economists’ model of choice, you would expect it to affect
sexual activity. Based on that rational choice model, which of the following would not be an expected change associated with the
arrival of the AIDS epidemic?
a. Higher prices charged by prostitutes for unprotected sex
b. Increase in the use of the pill
c. Increase in the use of condoms
d. Decrease in the likelihood of a male engaging in homosexual acts after the death of a family member from AIDS.
32. If you have not noticed, URI is bursting at the seems as a result of the president's decision to expand enrollment - by 1,500
students paying $30,000 in tuition. To accommodate this expansion the decision was made to add 25 full-time faculty members with
an average salary of $80,000. Based on this data, the MC of an additional student would be approximately___? [I want the closest
number]
a. $80,000
b. $30,000
c. $1,300
d. $1,100
33. Claudia Goldin recently wrote "The quiet revolution that transformed women’s employment, education, and family" in which she
examined the changing role of women in modern society. As she tried to make sense of the dramatic changes in women's attachment
to the labor market she adopted the traditional rational choice model, so her conclusions regarding the factors behind the movement
were not that surprising. Which of the following would be among those factors identified by the rational choice model as a cause of
the increased labor force participation of women?
a. Discrimination against women in the labor force
b. Increase in value of public pensions
c. Increase in discrimination against women in the labor market
d. Increasing acceptance of divorce
Times have been tough for Mistell, a local toy manufacturer, which is why it finds itself considering an offer from a potential new
customer. Mistell has been offered a deal to sell 60,000 hula hoops in Africa at a fixed price of $4 per hoop. This price is $2 below
the price the hops are currently selling for in the US and $1 below the price of hoops selling in Europe. We also know Mistell
icurrently produces 200,000 hoops at a cost of $400,000. The cost accountants have informed Mistell's management that if they
ramped up production to fill the new Africa order that production costs would rise by $3,000 for every increase in production of
1,000 hoops. Your job is to evaluate Mistell's situation.
34. What is the MR of the Africa “deal’?
a. $7
b. $6
c. $4
d. $3
e. $2
35. What is the MC of the Africa “deal’?
b. $7
b. $6
c. $4
d. $3
e. $2
36. Should the firm take the ‘out-of-state deal’ if the government, wanting to promote US exports, entered the picture by offering to
pay Mistell $4.50 for every hoop it exported?
a. Yes
b. no
c. not enough information
d. only if the price is above 13
5
HS grads
1980
11,622
9,795
84.3
8,567
1,228
1,827
Civilian population, total
In labor force
....Percent of population
..Employed
..Unemployed
Not in labor force
2009
6,994
5,340
76.3
4,071
1,269
1,655
HS Dropouts
1980
5,254
3,549
67.5
2,651
898
1,705
2009
3,030
1,911
63.1
1,308
603
1,119
37. There has been much discussion of education and unemployment during the economic crisis, so let’s look at the numbers. The
unemployment rate is defined as the percent of the labor force that is unemployed, so based on the table above, the unemployment
rate for HS dropouts in 2009 was
a.
12%
b. 20%
c. 32%
d. 46%
38. What is going to happen to the price of gas next year? Here is what the experts are saying. China’s economy is expected to grow
rapidly, while oil production in Iran will drop due to expanded economic sanctions. Which of the following best captures this
situation?
a. the supply curve would shift in and the demand curve would shift out
b. the demand curve would shift in and the supply curve would shift in
c. the supply curve would shift out and the demand curve would shift in
d. the demand curve would shift out and the supply curve would shift out
39. You have all been through the college application process, but you may not be aware of a common strategy used by admissions
offices. Schools use detailed data to systematically cut aid to students whose behavior shows that they are likely to attend regardless
of the offer. "A student who lists a school first when asked where to send test scores, files for financial aid with that school, and then
visits campus has tipped his hand, and some schools will figure, why waste money to attract a sure thing.” This is an example of a
school implementing ______.
a. control of a resource
b. price discrimination
c. economies of scale
d. imperfect information
40. The scatter diagram above provides evidence that___.
a. Higher inequality rates tend to push economic growth rates lower
b. Lower inequality rates tends to increase social mobility
c. Higher social mobility rates tend to rise as wealth rises
d. Income rises as inequality rises
41. Which of the following would be an example of the use of the performance standards approach to direct regulation?
a. require catalytic converters on all passenger cars
b. imposing a tax of $1.00 on each gallon of gas
c. requirement of average fleet mileage for auto manufacturers
d. imposing a car tax based on the car's gas mileage
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42. Let's assume for a moment that a survey has been conducted that clearly shows a negative relationship between cigarette smoking
and income - the higher the income the lower the lower the chance someone would be smoking. Based on this result you would be
able to conclude that:
a. the butt tax is regressive
b. the butt tax is progressive
c. the butt tax is proportional
d. there is no way to know the relationship between butt taxes and income
43. The world's biggest shippers in 2008 were dealing with the effects of a number of new ships coming into service and a decline in
ocean going foreign trade as a result of the fall in the US $. This situation is best captured by which of the following?
a. the demand curve would shift in and the supply curve would shift in
b. the supply curve would shift in and the demand curve would shift out
c. the supply curve would shift out and the demand curve would shift in
d. the demand curve would shift out and the supply curve would shift out
44. In the campaign for president in 2011 Rick Perry described Social Security as a Ponzi scheme, picking up on George Bush 's
2004 State of the Union message in which he mentioned his interests in privatizing social security - or at least a part of it. This
suggestion that the US government should reduce its role as the provider of retirement income would be what you would expect to
hear from______.
a.
b.
c.
d.
Liberal
Conservative
Marxist
Hemophobic
United States
China
Japan
India
Russia
Saudi Arabia
Brazil
Germany
Korea, South
Canada
45.
a.
b.
c.
d.
1980
17056.0
1765.0
4960.0
643.0
-610.0
1148.0
-537.0
1873.0
Petroleum Production
1990
2000
16988.5
19701.1
2296.4
4795.7
5315.0
5515.5
1168.3
2127.4
-2578.5
1107.0
1537.1
1466.5
2166.3
-2771.8
1048.0
2135.3
1737.0
2034.9
2010
19148.1
8371.0
4422.9
3215.0
2686.0
2676.0
2599.0
2488.9
2248.6
2237.0
How much did China’s petroleum consumption increase in the first decade of the 21 st century? (closest approximation)
6%
10%
75%
470%
46. Too many students are spending too much time partying late into the night rather than burning the late night oil studying, and I
am looking for a policy that would increase students’ attendance on Fridays. There are many potential policies that could increase
attendance by lowering the cost of attending class and or raising the cost of not attending, but one of the following proposals would
not be one of them. Which of the following policies would, at least in theory, reduce Thursday night partying by raising the cost of
that partying?
a. reducing "pop" quizzes on Fridays
b. instituting exams on Fridays
c. reducing the weighting given to class attendance in final grades
d. institution of free “pizza at the movies” night on Thursday night at the student union
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