Exam II – ECON2100
1)
Which of the following best describes the USSR type of economies
a)
market economy
b)
command economy
c)
mixed economy, with elements of capitalism and socialism mixed together
d)
mixed economy, with elements of capitalism, socialism, and communism
mixed together
e)
none of the above
2)
In a market economy productive efficiency and the evolution of the production
process are primarily achieved through?
a)
government regulations
b)
competition
c)
property rights
d)
price controls
3)
Which of the following statements is incorrect?
a)
in a capitalist economy physical capital belongs to private individuals
b)
socialistic economies try to create a more uniform income distribution
c)
capitalism must assume that the individual is selfless and values the
wellbeing of others as much as his/her own
d)
most modern economies use a mixed economic system where socialism and
capitalism coexist together
4)
During the course of the 1990’s the Eastern European economies went through a
transition from
a)
market economy
b)
command economy
c)
pure communist type economy
d)
none of the above
5)
Which of the following statements is incorrect?
a)
several former members of the USSR block have joined the European Union
in 2004
b)
the transition in Eastern Europe in most places involved economic and
political reforms being done at the same time
c)
Eastern European transition experience is similar to the current experience of
China, where the economic reforms tend to precede political reforms.
d)
None of the above
6)
It can be argued that the transition of the economies of the former Soviet Republics
was more difficult than the transition of the former Soviet Eastern European states
because
a)
the USSR put strong emphasis on the heavy industry, dominated by large in
terms of employment firms, many of which were producing military
equipment
b)
the USSR experienced command economy for a considerably longer period
of time
c)
choices a and b
d)
there is no possible economic explanation for the differences in the
experience of the transition
7)
Which of the following statements about privatization is incorrect?
a)
privatization is the process of transfer of assets from public ownership to
private ownership
b)
privatization has been an important part in the transitional process of the
Eastern European economies
c)
privatization of profitable state run enterprises can cause a drop in the
revenues of the state
d)
none of the above
8)
Which of the following best describes the Principal-Agent problem?
a)
A conflict of interest that exists between the principal, typically the owner of
the business, and the agent who is hired to represent the interests of the
principal
b)
An issue that arises when the agent, worker knows that no matter how
productive he or she is, the reward remains the same, and hence the incentive
to work disappears
c)
A situation where the agent, worker, overstates his/her abilities prior to being
hired, thus misleading the principal, the business owner, of the worker’s true
productivity
d)
None of the above
9)
Which of the following statements about the Commonwealth of Independent States is
false?
a)
The Commonwealth of Independent States includes all former republics of
the USSR except the three Baltic States
b)
The Commonwealth of Independent States acts as an Economic Union and
has one common currency, the Russian Rouble
c)
The Commonwealth of Independent States is NOT a political and military
alliance
d)
None of the above
10)
The principle of comparative advantage implies that the nation should specialize in
the production of that product in which it
a)
has the lowest absolute cost of production when compared to all other
producers
b)
utilizes the least amount of real resources
c)
has the lowest opportunity cost compared to all other producers
d)
none of the above
For questions 11-12 use the following table with real costs of production, defined here in terms of
worker-hours
Country
Product
A
B
X
2
4
Y
3
5
11)
Which country has the comparative advantage in the production of product Y?
a)
A
b)
B
c)
Neither
12)
Which country has the absolute advantage in the production of product X?
a)
A
b)
B
c)
Neither
13)
Which of the following is not a characteristic of free trade?
a)
Free trade can make nations more interdependent
b)
Free trade can cause some instability in a nation’s economy as a nation’s
comparative advantage may change over time
c)
Imports can cause some domestic jobs to be lost
d)
None of the above
14)
Concerning import tariffs and quotas which of the following statements is true?
a)
both lead to lower prices for domestic consumers
b)
both lead to more imports
c)
tariffs result in higher prices while quotas leave prices unchanged
d)
tariffs generate government revenues, while quotas will not, unless the quota
rights are auctioned
15)
If trade between two nations is voluntary, then
a)
both nations benefit
b)
one nation could experience greater benefits than the other nation
c)
living standards should rise in both nations
d)
all of the above
16)
Removal of import restrictions on foreign t-shirts will
a)
Make domestic consumers of t-shirts better off as the price level decreases
b)
Cause an increase in the unemployment in the domestic textile industry
c)
Increase the supply of foreign t-shirts in the domestic market
d)
All of the above
17)
Economic theory suggests that
a)
countries tend to have comparative advantage in those industries that
intensely use the country’s abundant inputs
b)
comparative advantage does not change over time
c)
international trade does not impact the standard of living
d)
none of the above
18)
NAFTA is an example of
a)
an Economic Union
b)
a Free Trade Area
c)
a Customs Union
d)
a Political Alliance
19)
NAFTA at present does not include
a)
USA
b)
Canada
c)
Nicaragua
d)
Mexico
e)
None of the above
20)
Which of the following has no impact on the nation’s comparative advantage?
a)
physical capital
b)
technological endowment
c)
of human capital
d)
none of the above
21)
Which of the following is not a function of the WTO?
a)
assisting member states with design of trade policies
b)
providing a trade dispute resolution mechanism
c)
assisting member states with currency stabilization
d)
none of the above
22)
Which of the following statements about the WTO is incorrect?
a) the WTO membership includes over 140 countries
b) the USA is not a member of the WTO
c) the WTO membership helps the country lower the trade restrictions its producers face
when selling their output in other WTO member states
d) none of the above
23)
Market economy requires
a)
well defined property rights
b)
contract law
c)
anti-trust regulations
d)
all of the above
e)
none of the above
True/False
24)
Immigration is capable of changing the nation’s comparative advantage
25)
The Brain Drain phenomenon refers to a situation where low skilled immigrants
migrate into the country and cause a reduction in the level of human capital of the
country
26)
Since immigration contributes to the supply of labor, a concentrated immigration of
certain type (in terms of skills) of labor can reduce the wage for that type of labor.
27)
Public sector tends to be more efficient when facing stronger competition from the
private sector.
28)
Principal-Agent problem is present in state-run enterprises only
29)
Given the current picture of the US international trade we can conclude that the US
economy does not have the lowest opportunity cost in the production of most
manufactured goods
30)
When a nation restricts imports to protect domestic jobs, it in effect preserves less
productive employment at the expense of more productive employment