ECN2012 Final exam
Fall 2015
1. 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 supply
b. a decrease in supply
c. a decrease in demand
d. an increase in demand
2. What's going to happen to the labor market for college grads as the world economy falls into a recession at the same time more
people are graduating. If these 'shocks' occur, then we can be certain that ___.
a. Demand will rise and supply will fall
b. Demand will fall and supply will fall
c. Demand will rise and supply will rise
d. Demand will fall and supply will rise
3. Billy Beane revolutionized baseball by identifying _____ discrimination.
a. employee
b. statistical
c. employer
d. customer
4. One of my colleagues used to rant about 'terrorist vehicles," the name he gave to SUVs. He called them this because he felt that the
$s going to fill up those gas tanks put $s into the hands of potential terrorists. His goal was to get his students out of those SUVs, and
this strategy was focused on ____ incentives.
a. social
b. Bayesian
c. moral
d. economic
5. Which of these headlines is true based on the world's demographic patterns? Be careful when reading the headlines!!!
a. "Life expectancies in the US becomes longest in the world".
b. "North America is the continent with the slowest projected population growth rate in next 20 years"
c. "many of the world's poorest countries are getting younger while its richest countries are getting older"
d. "Russia's population growth rate inches past that of the US"
Use this info to answer the next two questions: The administration decided to increase enrollment by 1,200 students and add 20 fulltime faculty members. Based on this data and the fact that each additional student would pay tuition of $10,000 and each faculty
member would be paid $80,000
6. What is the marginal cost of an additional faculty member?
a. $80,000
b. $100,000
c. $500,000
d. $750,000
7. What is the marginal revenue of an additional faculty member?
a. $80,000
b. $100,000
c. $600,000
d. $750,000
8. In the US we have seen a long-running "battle" for the hearts and minds of the American people between proponents of competing
ideologies. That battle has been accurately described as one in which the “ _____ mistake is to think that there is a program or policy
to alleviate every problem in the world, the _______ flaw is to be vigilant against concentrations of power in government only – not
in the private sector.”
a. liberal
Marxist
b. liberal
conservative
c. institutionalist
liberal
d. conservative
liberal
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Tammy: I think it's dumb as hell ... to sit here and pound the (deleted) out of each other and neither one of us making a
(deleted) dime. ... We can both live here and there ain't no room for Bob [a potential new competitor]. But there's, ah, no
reason that I can see, all right, to put both companies out of business.
Frank: Do you have a suggestion for me?
Tammy: yes, I have a suggestion for you. Raise your goddamn prices twenty percent. I'll raise mine the next morning. ...
You'll make more money, and I will too.
Frank: We can't talk about pricing.
Tammy: Oh (deleted), Frank. We can talk about any goddamn thing we want to talk about.
9. Above is the transcript of a phone conversation between Tammy and a competitor on pricing behavior. The conversation is an
example of _____.
a. collusion
b. sales maximization
c. contestable markets
d. price discrimination
10. Research has shown that we can expect a difference in sales patterns if a dealer shifted strategies from offering base cars at
$25,000 with an option to remove some accessories at $2,000, or offered the cars at $23,000 with the option of adding accessories of
$2,000. The expected reduction in demand for accessories is a result of the power of the _____.
a. Status quo bias
b. psychophysics of perception
c. Observational learning
d. Sunk costs
11. 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
12. If I wanted a plan to raise revenue and wanted to know if I should raise or lower the price, then I would want to have information
on?
a. The cross-price elasticity of demand
b. The own-price elasticity of demand
c. The income elasticity of demand
d. The cross-income elasticity of demand
13. The price of gas rose substantially in late 2002 and early 2003 with a rising fear of a war with Iraq Which diagram best depicts
the impact of the rising gas prices on the market for SUVs?
a. A
b. B
c. C
d. D
14. Insurance companies in recent years have suffered some very large losses on homeowner policies. As a result the insurance
companies want the builders to install costly equipment on new homes, such as storm shutters, that would reduce the damage done by
the hurricanes. The builders do not want to be forced to provide the extra equipment since it will add to the costs of construction. The
increase in construction costs on the market for housing could best be demonstrated by which graph?
a. A
b. B
c. C
d. D
15. 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.
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a.
b.
c.
d.
elastic
elastic
inelastic
inelastic
decrease
increase
increase
decrease
16. A university's ratings is affected by the average SAT scores of applicants, why would making SATs optional increase a school’s
ranking? What is the concept behind this?
a. Moral Hazard
b. Signaling
c. Adverse selection
d. Observational learning
17. This is a graph of supply of autos made in the US where the original graph is the
solid line. Which of the following could explain the shift in the relationship
represented by the new dotted line?
a.
b.
c.
d.
An increase in price of autos
A reduction in imported autos
An increase in wages of United Auto Workers
A decrease in the price of steel used to build autos
18. 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
19. 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
20. 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. Increasing acceptance of divorce
c. Increase in value of public pensions
d. Increase in discrimination against women in the labor market
21. 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
22. 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. instability
b. imperfect competition
c. inadequate growth
d. externalities
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23. 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
The chances of rising in the income
distribution have declined over time
In the US those at the bottom of the income
distribution have a larger chance of remaining
in the bottom of the distribution
Income growth is largest in the US
24. 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. US ageing slower than other wealthy countries
d. Infant mortality rate is lower in the US.
25. How would we make an adjustment in the table to reflect the situation
facing an older student, which would help explain why older students tend
to work harder in school?
a. The $41,000 figure would be higher
b. The $40,000 figure would be higher
c. The $8,000 figure would be lower
d. The $35,000 figure would be lower
26. Miller beer was successful where others had failed - marketing light beer. What phenomenon was responsible for its success?
a. adverse selection
b. signaling
c. observational learning
d. opportunity cost
27. Claudia Goldin in "The quiet revolution that transformed women’s employment, education, and family" tried to make sense of the
dramatic changes in women's attachment to the labor market by adopting the traditional rational choice model. Which of the
following would not be among those factors identified by the rational choice model as cause of the increased labor force participation
rate?
a. decrease in divorce rates
b. decreased discrimination against women in the labor market
c. discovery and distribution of the pill
d. increase in women's rights
28. If things got bad for me and I decided I really needed to sell As in this class, which of the following would probably drive the
going price down?
a. Reinstitution of the draft to support the US war effort in the Middle East
b. The College of Business' decision to raise the GPA requirement of students in pre business courses that include ECN201
c. The hiring of a new faculty member in ECN that is a notoriously easy grader
d. A tighter job market that raises the importance of a good GPA for those grads looking for work.
29. Which of these headlines would be true based on the world's demographic patterns? Be careful when reading the headlines!!!
a. "Life expectancies in the US becomes longest in the world".
b. "China's rapidly aging population putting strains on pension system"
c. "Russia's population growth rate inches past that of the US"
d. "World's population growth rates rise as immigration rates rise"
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30. Which of these would NOT be responsible for the growing ideological divide we see today in Congress and the news media?
a. Rapid economic growth
b. Gerrymandering
c. Fracturing of media
d. Increased heterogeneity of the population
31. "In an oft-cited experiment from 2006, students in two New York University classes read case studies about a tech entrepreneur
who in some versions was named Heidi and in others, Howard. The students rated Heidi and Howard as equally competent, but liked
Heidi less and didn’t want to work with her." This would be an example of ____ discrimination.
a. employer
b. customer
c. employee
d. statistical
32. 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
33. 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 progressive
b. the butt tax is regressive
c. the butt tax is proportional
d. there is no way to know the relationship between butt taxes and income
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
34. 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%
35. Tutoring is quite a competitive business and Tammy wants to reduce the competition on RIU’s campus, which she can do by
creating some barriers to competition. At the present time Tammy is trying to persuade the administration to issue her the only
license are operating on campus. This is an example of _____.
a. control of a resource
b. economies of scale
c. legal restrictions
d. imperfect information
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36. 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
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
37. Which of the following statements is true based on the table above?
a. In a recession demand will fall most for fresh fruit
b. If the price of Coke rises 10%, demand will fall 6%
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
38. Based on the possibility curve for Americans who can spend money
on college educations or vacations, which of the following statements
explains the movement from B to D?
a.
b.
c.
d.
A decrease in total spending
An increase in the cost of education
A increase in the cost of vacations
An increase in total spending
39. 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. "cotton prices soar on reports of good growing season in China'"
c. "price cut by Honda pushes GM sales lower"
d. "oil prices fall on news of higher Iraqi oil shipments"
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40. 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
Hemophobic
Conservative
Marxist
41. Which of the following would be the mostly likely to cause a
movement from A to B on the demand curve?
_
a. an increase in income
b. a decrease in the price of pizzas
c. a story that linked pizza consumption to obesity
d. a decrease in the cost of pizza dough
42. 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. economies of scale
c. price discrimination
d. imperfect information
43. The best explanation of the price of
oil in 1979 would be ___
a.
b.
c.
d.
an increase in both supply and
demand
an increase in supply and a
decrease in demand
a increase in supply
an increase in demand
44. 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? You can see the italicized statement that should have been deleted when I edited the questions. I suspect
most of you ignored it and got it right, but just in case I will give everyone credit for this question..
a.
b.
c.
d.
reducing "pop" quizzes on Fridays
institution of free “pizza at the movies” night on Thursday night at the student union
instituting exams on Fridays
reducing the weighting given to class attendance in final grades
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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 $3 per hoop. This price is $2 below
the price the hoops are currently selling for in the US and $1 below the price of hoops selling in Europe. We also know Mistell is
currently 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 $4,000 for every increase in production of
1,000 hoops. Your job is to evaluate Mistell's situation.
45. What is the MC of the Africa “deal’?
a. $7
b. $6
c. $4
d. $3
e. $2
46. What is the MR of the Africa “deal’?
b. $7
b. $6
c. $4
d. $3
e. $2
47. 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
48. Here is a possibility curve for an ad agency allocating its budget
between Internet ads (I) and print ads (P). If the solid line is the original
possibility curve, what would have caused the possibility line to move to the
dotted line?
_
a. An increase in the ad budget
b. A decrease in the price of print ads
c. An increase in the price of print ads
d. A decrease in the price of print and Internet ads
I obviously lost something near the end since this has no correct
answer – so more added to the curve because you will all get points
for this one.
49. 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. requirement of average fleet mileage for auto manufacturers
c. imposing a tax of $1.00 on each gallon of gas
d. imposing a car tax based on the car's gas mileage
50. Based on this table, how much did the population of Africa
grow between 1950 and 2010?
a. 1.8%
b. 2.5%
c. 2.9%
d. 3.6%
These are obviously annual rates, but I did not ask this so
you will all get credit for this question – a small curve.
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