Economics 101 Final Review
1. A statement that may be wrong but can be tested is a…
a. Normative statement
b. Economic statement
c. Positive statement
d. Comparative statement
Use the following scenario to answer the following questions:
Sally can either go on a weeklong trip on a cruise in the Caribbean. Plane
tickets, food, and board included, Sally will pay $2,240. Sally would otherwise
work her usual 40 hours a week making $10 an hour at the local tanning
salon. Sally chooses to go on the cruise.
2. What is Sally’s opportunity cost?
a. $2,240
b. $2,640
c. $400
d. $1,840
3. What is Sally’s direct cost?
a. $2,240
b. $2,640
c. $400
d. $1,840
4. Mike has made a Production Possibility Frontier for his company to find how
many potatoes and apples he should use given his resources. He has come up
with points A, B, and C. Point A is inefficient and unattainable. Point A is most
likely…
a. Outside of the PPF curve
b. In the inner bounds of the PPF curve
c. On the PPF curve
d. Below Point C and above Point B
5. Using Mike’s same PPF, Point B is attainable but inefficient. Point B is most
likely…
a. Outside of the PPF curve
b. Inside the PPF curve
c. On the PPF curve
d. Above Point A and Point C
6. Japan and the USA are creating a trade. We find that the USA has a
comparative advantage over Japan in Product A. This means that…
a. The USA can produce more of Product A than Japan can
b. Japan can produce more of Product A than the USA can
c. The USA has the lowest loss of opportunity cost when producing
Product A
d. The USA can produce more of Product A than Product B
7. Which of the following would not shift the demand curve in a graph of the
market?
a. An increase in consumer income
b. Expectations that an input price may rise in the near future
c. A decrease in population
d. An increased price of a substitute good
8. Which of the following would not result in a shift in the supply curve?
a. More suppliers entering the market
b. Changes in prices of related goods and services supplied by the
company
c. An increase in technology
d. A change in preference
9. A surplus can be created by a _____________, it is when there is an excess in
_____________
a. Price floor, demand
b. Price ceiling, supply
c. Price ceiling, demand
d. Price floor, supply
10. What does it mean when there is an excess demand
a. There is a shortage in the product
b. At the price set, there was not enough supplied to meet demand
c. The government may have set a price floor
d. All of the above
e. A and B
11. If the demand in hot dogs goes up, then Hy-Vee should…
a. Supply more hamburgers, expecting the demand in hamburgers also to
go up
b. Supply less milk, expecting the demand in milk to go down
c. Supply more mustard, expecting the demand in mustard to increase
d. None of the above
12. A substitute is...
i. When two products have a negative correlation
ii. When two products have a positive correlation
iii. When two products can be interchangeable
iv.
When one product is thought to go along with/be necessary with
another product
a.
b.
c.
d.
i and iii
ii and iii
i and iv
ii and iv
13. Calculate the Marginal Product of Labor when going from 3 workers to 4
workers:
L
Q
a. 400
1
1000
b. 600
2
1800
c. 800
3
2400
d. 1200
4
2800
14. If a price ceiling were put into motion, the quantity would
a. Decrease
b. Stay the same
c. Increase
d. It is impossible to tell
15. What is the key difference between perfect competition and monopolies?
a. Monopolies make higher profits than perfectly competitive firms
b. Monopolies have market power
c. Only perfectly competitive markets face government regulation
d. Only perfectly competitive firms can shut down or exit a market
16. Suppose the economy in Iowa improves and everyone in the state becomes a
millionaire. What will happen to the demand for diamond rings
a. It will increase because it is a normal good
b. It will decrease because it is a normal good
c. It will increase because it is an inferior good
d. It will decrease because it is an inferior good
17. What is the marginal utility from adding
the third unit?
a. 160
b. 540
c. 50
d. 40
Utility
0
50
110
160
200
Quantity
0
1
2
3
4
18. A firm, in a perfectly competitive market, is trying to decide how much output
they should produce. Which should they use to determine where to produce
at?
a. TR=P*Q
b. MR=MC
c. MUa/Pa=MUb/Pb
d. MC=ATC
19. Why is the Demand Curve in a perfectly competitive market horizontal?
a. Any increase in the quantity will lead to a price change to price 0
b. Any increase in the price will lead to a quantity change to quantity 0
c. Any increase in Marginal Cost will lead to a price of 0
d. Any increase in ATC will lead to a price change of 0
20. Which of the following are not required for a monopolist competition?
a. Many buyers and sellers
b. No significant barriers to entry
c. Nobody is allowed to have market power
d. A differentiated product
21. Which of the following does not produce where MR=MC
a. Monopolistic competition
b. Oligopoly
c. Monopoly
d. Perfectly Competitive Market
22. How do cartels make above normal profits?
a. They behave like a monopoly
b. They shift their marginal cost curve
c. They ignore MR=MC
d. They use violence and force to change their prices
23. If a company is deciding how high to raise the price of their own product, they
may look at…
a. Income elasticity
b. Price elasticity
c. Cross-price elasticity
d. The demand curve
24. Income elasticity measures
a. The distance a demand curve shifts when a populations income
changes
b. The change in income of a population
c. Which products will respond to a change in income
d. The responsiveness of the quantity demanded for a good to change in
the income of the people demanding the good
25. To calculate the responsiveness in quantity demanded that a price change has
on a good, we will want to find:
a. The percentage change in quantity demanded divided by the
percentage change in price
b. The percentage change in price divided by the percentage change in
quantity demanded
c. The percentage change in price divided by the percentage change in
income
d. The percentage change in quantity demanded divided by the
percentage change in income
26. If a good has a high income elasticity (E>1), then the demand increase for
a/an
a. Inferior good
b. Inferior good and a normal good
c. Normal good
d. It is impossible to tell
27. The Law of Diminishing Marginal Utility
a. States that marginal utility will be consistently low
b. States that the total utility will decrease with time
c. States that utility in general will diminish
d. States that with each unit of production, marginal utility will decrease
28. On a budget constraint for tomatoes and cucumbers, if Bob’s income would
rise, Bob would be able to buy…
a. More tomatoes, the same amount of cucumbers
b. More cucumbers, less tomatoes
c. More tomatoes, more cucumbers
d. Less tomatoes, the same amount of cucumbers
29. Perfect competition is characterized by:
a. Rivalry in advertising
b. Fierce quality competition
c. The inability of any one firm to influence price
d. Widely recognized brands
30. A perfectly competitive firm maximizes profit by producing the quantity at
which:
a. TR = TC
b. MR = MC
c. Q * (P-ATC)=0
d. P > AVC
31. A competitive firm will supply at an output:
a. That maximizes sales
b. Where marginal cost just exceeds market price
c. At the last unit where Price > MC
d. Where total costs > price
32. How would a firm find the optimal price to maximize profits in a single-price
monopoly?
a. Where MC=MR
b. Where the quantity meets demand
c. (P-ATC)*Q
d. Where ATC is below Marginal Cost
33. Tim began with $40. He has already spent $35 and has $5 more to buy either
one banana for $4 or one kiwi for $5. He has already bought 3 bananas, which
give him a total utility of 44, and 5 kiwis, which gives him a total utility of 76.
If he chooses to buy another banana, his total utility will increase from 44 to
69. If he chooses the kiwi, his total utility will increase from 76 to 88. Which
should he buy?
a. A kiwi, because he will get a bigger bang for his buck, more marginal
utility per dollar
b. A banana, because it is cheaper
c. A banana, because the total utility is higher
d. A kiwi, because the marginal utility is higher
34. Average costs are…
a. The difference in cost from adding one more product
b. The sum of all of the costs
c. The total cost minus the marginal cost
d. The sum of all of the costs divided by the number of products
35. Last night Tanya went roller-skating at the local roller skating spot. Shortly
after she rented skates, she realized that the skates were missing a wheel.
Unable to skate, Tanya demanded a refund, but the skating spot refunded the
skates but wouldn’t refund her admission. So Tanya bought a ticket to a move
with some popcorn to go along. What is the sunk cost?
a. The skate rental
b. The skate admission
c. The movie ticket
d. The popcorn
36. The Nash equilibrium is the situation where
a. Each player leaves happy
b. Each player leaves without regretting their decision
c. Each player used their dominant strategy
d. Each player cheated and did the opposite of what they’d agreed on
37. What is the Nash equilibrium in the following graph?
a. Both introduce new item
b. Bob introduces new item and
Clara does not
c. Clara introduces new item and
Bob does not
d. Neither introduce new item
38. Which is not a condition of
Fundamental Theorem of Welfare
Economics?
a. The commodity being bought
and sold is a standardized
product
b. The buyers are well informed
(of the prices and qualities of the product, etc.)
c. Many buyers attempting to maximize profits
d. The consumers pay the full cost of what they consume
39. Which is not an example of an externality
a. Second-Hand Smoke
b. Paying lower house rental prices because the population has decreased
c. A neighbors sprinkler that reaches your lawn
d. Noise from the highway outside of your house
40. The idea that you can not predict the stock price tomorrow but there may be
an general upward trend over time is
a. The Efficient Market Hypothesis
b. The Random Walk Hypothesis
c. Opportunity cost hypothesis
d. The New York Stock Exchange How To
41. According to the Efficient Market Hypothesis
a. Only illegal information gives the stockholder the ability to beat the
market
b. No investment strategy can systematically beat the market
c. No strategy will yield a higher return than the average of all of the
returns
d. All of the above
THAT’S ALL, GOOD LUCK ON FINALS  THANK YOU FOR EVERTHING, ACE IT!!! 