Exam Review 3.pdf - ECON 1133.01 Fall 2017 EXAM I October 4...

Unformatted text preview: ECON 1133.01 Fall 2017 EXAM I October 4, 2017 Name Version A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. You have 70 minutes. 1) Economic reasoning implies that economic agents will make decisions: 1) A) by replicating the choices made by other economic agents. B) solely on the basis of tastes and preferences for various options. C) by random selection. D) by comparing the costs and benefits of various options. 2) Economics is primarily the study of: 2) A) the problems related to existence and evolution of society. B) the mental functions and behavior of individuals and groups. C) the state, nation, government, and politics and policies of governments. D) how agents choose to allocate scarce resources and how the choices affect society. 3) Which of the following is an example of a positive economic statement? 3) A) Higher interest rates will encourage more savings. B) The pricing policies of monopolies should be strictly supervised. C) Pollution is one of the most serious economic problems. D) Unemployment is more harmful than inflation. 4) Which of the following is an example of a topic studied by microeconomists? 4) A) Nationwide inflation rate B) Aggregate demand and aggregate supply in an economy C) Economic growth as a means to alleviate poverty D) Energy consumption by a firm 5) is the study of an economy as a whole. 5) A) Behavioral economics B) Macroeconomics C) Microeconomics D) Game theory 6) Which of the following statements is true? 6) A) Macroeconomics studies how individuals make choices. B) Microeconomics is the study of an economy as a whole. C) The study of the unemployment rate is covered under macroeconomics. D) The study of the inflation rate is covered under microeconomics. 7) Which of the following best describes equilibrium? 7) A) A situation where the government intervenes to allocate resources B) A situation where economic agents do not optimize as they do not have perfect information C) A situation where only one individual or firm takes an optimum decision D) A situation where no economic agent would benefit by changing his or her behavior A 8) is a calculation that adds up costs and benefits using a common unit of measurement, 8) like dollar values. A) Expenditure —income analysis B) Cost—benefit analysis C) Revenue —income analysis D) Budget constraint analysis 9) Causation occurs when: 9) A) two variables tend to move in the same direction. B) change in one variable does not cause any change in another variable. C) two variables tend to move in opposite directions. D) change in one variable is the reason for the change in another variable. 10) Which of the following is most likely to be an example of causation? 10) A) A firm producing CFLs installs new machinery. The per—day production of CFLs increases. B) A student wins money by scratching a ticket with a particular coin. He decides to scratch all tickets with the same coin in the future. C) The crime rate is high in a country. The literacy rate is high as well. D) A soccer player scores 4 goals when he wears red socks. He concludes that the red socks helped him score the goals. 11) Which of the following is a feature of a perfectly competitive market? 11) A) There is only one seller of a commodity. B) The government rations commodities. C) Each seller is too small to influence the market price. D) Commodities are auctioned to the highest bidder. 12) Which of the following examples best describes the Law of Demand? 12) A) When John's income doubles, his telephone bill also doubles. B) When a new anti—tobacco commercial is released, the consumption of tobacco products decreases sharply. C) When the price of bread doubles, John's consumption of bread halves. D) When the price of watches increases, a local manufacturer starts offering more watches for sale. The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market. Price Sandra's Demand David's Demand Mary's Demand ($/ Bottle) (Bottles) (Bottles) (Bottles) ———— m ———— 13) Refer to the table above. If the market price of wine is $8/ bottle, and the market demand for 13) wine is 19 bottles, David's consumption of wine is: A) 7 bottles. B) 4 bottles. C) 12 bottles. D) 9 bottles. A 14) Which of the following factors will NOT cause a shift in the demand for a good? A) A change in consumer incomes B) A change in the number of consumers C) A change in the market price of the good D) A change in tastes and preferences 15) Two goods are said to be complements when a fall in the price of one good: A) leads to a right shift in the demand for the other good. B) doesn't affect the demand for the other good. C) leads to a left shift in the demand for the other good. D) leads to a fall in price of the other good. 16) Which of the following factors is likely to lead to an increase in the quantity demanded of pens? A) A rise in the incomes of all consumers B) A fall in the price of paper C) A fall in the price of pens D) A fall in the incomes of all consumers 17) Assume that the economy is in a recession and consumers are expecting a fall in their income levels. This will cause a(n): A) increase in the total quantity demanded of all goods. B) decrease in the total quantity demanded of all goods. C) right shift in the market demand for all goods. D) left shift in the market demand for all goods. 18) Which of the following is likely to cause the demand curve for cars to shift to the left? A) A rise in the price of cars B) An increase in the cost of production leading to an increase in the price of cars C) An increase in the economy's national income D) A rise in the price of gasoline 19) Which of the following examples best describes the Law of Supply? A) When the cost of production of cotton increased, all suppliers' willingness to accept decreased. B) When the cost of production of cotton fell, the market price of cotton also fell. C) When the market price of pens increased, sellers started supplying more pens. D) When the market price of pens increased, sellers started supplying fewer pens. 20) Which of the following is likely to lead to a right shift in the supply curve of cotton? A) A decrease in the price of cotton B) An increase in labor productivity due to training programs C) A rise in labor costs due to wage demands by labor unions D) An increase in the price of cotton 21) A fall in the price of flour, used in making cakes, is likely to: A) decrease the supply of cakes. B) increase the supply of cakes. C) decrease the quantity supplied of cakes. D) increase the quantity supplied of cakes. 14) 15) 16) 17) 18) 19) 20) 21) A 22) Assume that a worker in a technology firm can produce 3 circuit boards in an hour. Due to subsequent innovation, he is now able to produce 6 circuit boards per hour. Other things remaining the same, the firm's supply curve is likely to: A) shift to the right. B) become steeper. C) shift to the left. D) remain unchanged. 23) An expected increase in the market price of oil in the coming year is likely to: A) cause no changes in the demand and supply curves of oil in the current year. B) shift the demand curve for oil to the left in the current year. C) shift the supply curve of oil to the left in the current year. D) shift the supply curve of oil to the right in the current year. 24) The equilibrium quantity in a perfectly competitive market is determined: A) at the point of intersection of the demand and supply curves. B) at the point of tangency between the demand and supply curves. C) at the point of intersection of the demand curve and the quantity axis. D) at the point of intersection of the supply curve and the quantity axis. 25) In a perfectly competitive market, the market clearing price: A) is always higher than the equilibrium price. B) is unrelated to the equilibrium price. C) is always equal to the equilibrium price. D) is always lower than the equilibrium price. 26) At a price of $1 per table, the quantity supplied of tables is 100 units whereas the quantity demanded is 70 units. Given this information, which of the following statements is true? A) At $1 per table, there is a shortage in the market. B) $1 per table is the equilibrium price. C) At $1 per table, there is a surplus in the market. D) $1 per table is the market clearing price. 27) Z is a normal good. The equilibrium price and quantity of Z in the year 2011 was $25 and 60 units, respectively. In 2014, the equilibrium price of Z had increased to $35 and the equilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change? A) Shift of the supply curve of Z to the left B) Shift of the demand curve for Z to the right C) Shift of the demand curve for Z to the left D) Shift of the supply curve of Z to the right 28) In a perfectly competitive market, all consumers: A) have exactly the same tastes and preferences. B) are price takers. C) have exactly the same demand schedules. D) set prices to compete in their market. 22) 23) 24) 25) 26) 27) 28) A The following figure displays John's budget constraint when he spends his income on tables and chairs. Quafltit'y' ' of Chairl{5} 9 S 7 5 5 ii 3 2 1 . D 10 10 3D 40 Quantity ofTableis) 29) Refer to the figure above. Which of the following statements is true? 29) A) The opportunity cost of buying one chair is 5 tables. B) The price of tables is more than the price of chairs. C) The opportunity cost of buying one table is 7 chairs. D) The opportunity cost of tables increases as more tables are bought. The following figure illustrates the market demand curve for wine. [II 2 £1 E 3 10 12 Quantity [in thousand bottle-5} 30) Refer to the figure above. What is the market—wide consumer surplus when the market price of 30) wine is $9? A) $180,000 B) $210,000 C) $90,000 D) $60,000 31) Which of the following statements best describes an inferior good? 31) A) An inferior good is a good that is sold at a subsidized price. B) An inferior good is a good that is rationed by the government. C) An inferior good is a good whose quantity supplied always exceeds the quantity demanded. D) An inferior good is a good whose demand decreases with an increase in consumers' 1ncome. A The following figure shows the production possibilities curve of a software engineer who has to divide his available time between producing computer programs and Web sites. Number of Computer Programs Produced 0 123456789101112 Number of Web sites Produced 32) Refer to the figure above. Which of the following combinations is attainable but inefficient? 32) NA m3 QC mD 33) Refer to the figure above. Which of the following combinations is attainable as well as efficient? 33) me mD OE m3 34) The slope of a production possibilities curve represents: 34) A) the marginal cost of producing the good measured on the horizontal axis. B) the opportunity cost of producing the goods. C) the ratio of the average cost of producing both goods. D) the marginal cost of producing the good measured on the vertical axis. Scenario: A machine that can be used to print both notebooks and magazines is available for use for a fixed period of time. If it is used only for printing notebooks, 30 notebooks can be printed. If it is used only for printing magazines, 15 magazines can be printed. 35) Refer to the scenario above. What is the opportunity cost of printing one notebook? 35) A) 30 magazines B) 2 magazines C) 0.5 magazines D) 1 magazine 36) Refer to the scenario above. What is the opportunity cost of printing one magazine? 36) A) 30 notebooks B) 15 notebooks C) 2 notebooks D) 1 notebook 37) In Lithasia, the opportunity cost of producing a chair is two tables and in Barylia, the 37) opportunity cost of producing a chair is 1/2 table. Which of the following statements is true? A) Barylia has a comparative advantage in producing tables. B) Lithasia has a comparative disadvantage in producing tables. C) Lithasia has a comparative advantage in producing chairs. D) Barylia has a comparative advantage in producing chairs. A The following figure shows the production possibilities curve of two individuals: Ryan and Tom. 6 o o d 1 S Ryan‘s PFC 7' E 5 4 3 2 1 Cl- 6 00d 2 38) Refer to the figure above. Which of the following statements is true? 38) A) Ryan has a comparative advantage in the production of Good 1, whereas Tom has a comparative advantage in the production of Good 2. B) Tom has a comparative advantage in the production of both the goods. C) Ryan has a comparative advantage in the production of Good 2, whereas Tom has a comparative advantage in the production of Good 1. D) Ryan has a comparative advantage in the production of both the goods. 39) Specialization occurs when each individual, firm, or country: 39) A) produces only those goods for which it has a higher opportunity cost of producing than the opportunity cost in other nations. B) is self—sufficient and produces all the goods and services it needs, without relying on imports. C) produces only a few specific goods and relies on trade for the other goods and services it needs. D) produces only those goods which are in demand in the global market and allow for high rates of profitability. Scenario: Hawaii and South Carolina are trading partners. Hawaii has an absolute advantage in the production of both coffee and tea. The opportunity cost of producing 1 pound of tea in Hawaii is 2 pounds of coffee and the opportunity cost of producing one pound of tea in South Carolina is 1/3 pound of coffee. 40) Refer to the scenario above. Which of the following statements is true? 40) A) South Carolina should specialize in the production of both tea and coffee. B) Hawaii should specialize in the production of coffee, whereas South Carolina should specialize in the production of tea. C) Hawaii should specialize in the production of tea, whereas South Carolina should specialize in the production of coffee. D) Hawaii should specialize in the production of both tea and coffee. 41) Refer to the scenario above. If both nations decide to trade, which of the following statements is 41) true? A) Hawaii should export tea and South Carolina should export coffee. B) Hawaii should export coffee and South Carolina should export tea. C) Hawaii should export both tea and coffee. D) Hawaii should import both tea and coffee. A 42) Refer to the scenario above. Which of the following statements is true of the terms of trade of tea 42) for coffee? A) The terms of trade will lie somewhere below 1/3. B) The terms of trade will lie between 1/3 and 2. C) The terms of trade will lie somewhere above 2. D) The terms of trade will equal zero. 43) A price ceiling refers to . 43) A) the lowest price that a producer is willing to accept for a good B) the highest price that a consumer is willing to pay for a good C) the upper limit on the price of a good D) the lower limit on the price of a good 44) A rent control is an example of a . 44) A) price ceiling B) negative externality C) price floor D) positive externality 45) The price of a gallon of gasoline in Bonland is $3.20. However, just before the election, the 45) government decides to fix the price of gasoline at $2.80 per gallon. This is an example of a A) positive externality B) price floor C) negative externality D) price ceiling 46) A gallon of milk costs $4 in Bonland. If the government fixes the price at $3.50, . 46) A) a shortage of milk will occur in the market B) the quantity demanded of milk will fall C) there will be an excess supply of milk in the market D) the quantity of milk supplied will increase The figure below shows the market for Good X: CLUE ntit'y' of Good 3-: 47) Refer to the figure above. The region PCCAF shows the after the imposition of the 47) price ceiling. A) consumer surplus B) deadweight loss C) government revenue D) producer surplus 48) Refer to the figure above. The triangular region BBC shows the due to the price ceiling. 48) A) loss in consumer surplus B) gain in producer surplus C) gain in consumer surplus D) loss in producer surplus 49) The government of Lithasia has decided to set a minimum price for certain agricultural products 49) in order to safeguard the interests of farmers. This is an example of a A) Pigouvian tax B) price floor C) Pigouvian subsidy D) price ceiling 50) The government of Richland has set a minimum wage for factory workers. This will lead to an 50) if above the current market wage. A) excess demand for workers B) increase in total surplus C) increase in the number of workers supplied D) increase in income inequality Answer Key Testname: FALL17-EXAMI-VERSIONA 1) D 2) D 3) A 4) D 5) B 6) C 7) D 8) B 9) D 10) A 11) C 12) C 13) A 14) C 15) A 16) C 17) D 18) D 19) C 20) B 21) B 22) A 23) C 24) A 25) C 26) C 27) B 28) B 29) A 30) D 31) D 32) A 33) D 34) B 35) C 36) C 37) D 38) A 39) C 40) B 41) B 42) B 43) C 44) A 45) D 46) A 47) A 48) D 49) B 50) C ...
View Full Document