Midterm 1 Spring 07 - _'_____‘______-___________7...

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Unformatted text preview: _'_____‘______-___________7 UNIVERSITY OF ARIZONA ELLER COLLEGE OF MANAGEMENT DEPARTMENT OF ECONOMICS SPRING, 2007 PROFESSOR MCBREARTY my 103 INDIVIDUALS & SOCIETY: AN ECONOMIC PERSPECTIVE SECTION 63 12:30-1245PM HARVILL IsoILc 120 FIRST MID-TERM EXAMINATION (THURSDAY, FEBRUARY 8, 2007) Name: STUDENT ID# (Please print clearly) Signature _ E-mail GENERAL INSTRUCTIONS TURN OFF ALL CELL PHONES! N0 CAPSIHOODS AND NO EAR PIECES! There are 50 Multiple Choice Questions on the examination. The total examination is worth 100 points or 25% of the course grade. Print your name, Student ID number, section and E-mail address on both the Questions and the Scantron Answer Sheet. Fill in your answers in the spaces provided on the Scantron Answer Sheet by coloring completely the box for the appropriate letter for the Multiple Choice questions. Make dark marks on the Scantron sheet with a No. 2 or mechanical pencil. The Questions along with an analysis of your results (but _n_o_t the Scantron Sheet) will be returned to you in one week. SCANTRON INSTRUCTIONS 0 Use #2 Pencil or Mechanical Pencil 0 Enter your student ID Number 0 If your SID starts with an “S” substitute “0” 0 Bubble your SID - 0 Put down your Last Name, First Name and MI. 0 Bubble your name 0 Enter the Test Form based on your exam version Blue: Form A Green: Form B 0 Enter your e-mail address where it says “Name”, followed by the Subject, Date, and Hour (12:30) 0 Indicate the color of your exam in the middle above where it says, “Parscore Score Sheet” I COmpletely gag any mistakes I At the front of the classroom in two separate piles, turn in your: 0 Exam Questions 0 Scantron Answer Sheet When economists say that people act rationally in their self-interest, they mean that individuals: G19 look for and pursue opportunities to increase their utility (i.e., pleasure, happiness or satisfaction) b. generally disregard the interests of others c. are mainly creatures of habit d. are unpredictable ACcording to the poet Emerson: “Want is a growing giant whom the cost of Have was never large enough to cover.” According to economists, “Want” exceeds “Have” because: a. people are greedy productive resources are limited c. human beings are inherently insecure d, people are irrational Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, “At least I didn’t lose any money on my financial investment." His economist fi'iend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificatepf deposit instead of the coins. The economist’s analysis in this case incorporates the idea of: a. normative economics b. marginal benefits that exceed marginal costs 0. imperfect competition opportunity cost Economics may best be defined as the: interaction between macro an micro considerations empirical testing of value judgments through the use of logic a. _ b. 6:) social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants d. use of policy to refute facts and hypotheses The “economic perspective” entails: a. irrational behavior by individuals and institutions ® a comparison of marginal benefits and marginal costs in decision making c. short-term but not long-term thinking d. rejection of the scientific method Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact: a. is an example of irrational behavior b. implies that reading should be taught through phonics rather than the whole language method c. contradicts the economic perspective ((9 implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost 7. The fundamental problem of economics is: a. b. I e to establish a democratic political framework for the provision of social goods and services the establishment of prices that accurately reflect the relative scarcities of products and resources the scarcity of productive resources relative to economic wants ' to achieve a more equitable distribution of money income in Order to mitigate poverty 8. Which of the following is a “land” resource? a. a farmer b. an oil drilling rig C (9 a machine for detecting earthquakes natural gas 9. Which of the following lists includes only capital resources (and therefore no labor or land resources)? a. b. C. @ an ice arena; a professional hockey player; hockey uniforms the .owner‘of a new startup firm; a chemistry lab; a researcher a hydroelectric dam; water behind the dam; power lines autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport 10. A nation’s production possibilities curve is bowed out from the origin because: @ b. of (1. resources are not equally efficient in producing every good the originator of the idea drew it this way and modern economists follow this convention resources are scarce wants are virtually unlimited 1 l. The production possibilities curve: a. b. (c? d. shows all of those levels of production that are consistent with a stable price level indicates that any combination of goods lying outside the curve is economically inefficient is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced shows all of those combinations of two goods that are most preferred by society 12. Two types of markets shown in the circular flow model are: a. b. c. 61 e. business and household real and money competitive and monopolistic product and resource planned and unplanned Use the following to answer questions 13—19. l3. 14. 15. 16. 17. Refer to the above diagram. Points A, B, C, D, and E show: @ c. d. that the opportunity cost of bicycles increases, while that of computers is constant combinations of bicycles and computers that society can produce by using its resources efficiently that the Opportunity cost of computers increases, while that of bicycles is constant that society’s demand for computers is greater than its demand for bicycles Refer to the above diagram. This production possibilities curve is: a. b. (:9. convex to the origin because opportunity costs are constant linear because opportunity costs are constant concave to the origin because of increasing opportunity costs convex to the origin because of increasing opportunity costs Refer to the above diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost: P-PP‘QD will be 4 units of bicycles will be 2 units of bicycles will be zero because unemployed resources are available of doing so cannot be determined from the information given Refer to the above diagram. The combination of computers and bicycles shown by point G is: pd) attainable, but too costly irrelevant because it is inconsistent with consumer preferences attainable, but involves unemployment unattainable, given currently available resources and technology Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles. a. @ c. cl. cannot be achieved because resources are fully employed will cost 1 unit of computers will cost 2 units of computers will cause some resources to become unemployed 18. 19. 20. 21. 22. 23. Refer to the above diagram. The combinations of computers and bicycles shown by pointh a. b. $9. is unattainable, given currently available recourses and technology is irrelevant because it is inconsistent with consumer preferences is attainable, but entails economic inefficiency suggests that opportunity costs are constant Refer to the above diagram. The movement down or up the production possibilities curve from point A to point B or from point B to point A suggests that the production of: a. ’0. computers, but not bicycles, are subject to increasing opportunity costs bicycles, but not cemputers, are subject to increasing opportunity costs both bicycles and computers are subject to constant opportunity costs both bicycles and computers are subject to increasing opportunity costs Which of the following @ describes pure capitalism? a. b. @ an economic system characterized by private ownership of the means of production, centralized decision making, and command implementation an economic system characterized by public ownership of the means of production, centralized decision making, and market implementation an economic system characterized by private ownership of the means of production, decentralized decision making, and market implementation an economic system characterized by public ownership of the means of production, decentralized decision making, and market implementation an economic system characterized by a high degree of private ownership, somewhat centralized decision making, and market implementation Iii-pure capitalism, the production decisions of businesses are guided by: O O a. b. c. d. e. In pure capitalism: a. b. c. d. e. the central planning board social concerns the needs of households government commands the way that consumers spend their incomes each household is equally important in guiding the production decisions of businesses there is very limited competition consumer sovereignty ensures that the basic needs of all consumers will be met output is distributed to those who are willing and able to pay for it central planners dictate what goods and services will be produced In pure capitaliSm, consumers are protected from shoddy products and high prices by the presence of: a. b. \i e: a strong central government the unselfish nature of businesspersons competition central planners Ralph Nader, the consumer advocate 24. 26. 27. 28. 29. Which of the following is pg: a function of prices in a capitalist economy? ensuring that income is distributed fairly signaling information to buyers motivating businesses to produce the products desired by consumers rationing the society’s output of goods and services signaling information to sellers nP-PP‘fi In pure capitalism, the scarcest resources tend to be employed very conservatively because: a. they are carefully rationed by the central planning board b. the central government rations their use c. businesspersons are concerned about future generations d. businesses gain by helping one another @ they tend to have high prices According to the concept of consumer sovereignty: a. producers respond to the dictates of central planners b. all members of society have an equal voice in determining what products will be produced @ businesses attempt to produce the products that are most desired by consumers d. the central government must ensure that businesses produce the proper mix of products c. you get what you pay for Which of the following is p_g_t_ an accurate description of the information flows in the command pyramid? a. data regarding production capacities is transmitted from producing units to central planners b.- information about labor capabilities is transmitted fiom producing units to central planners 0. facts about consumer preferences are or at least can be, transmitted from consuming units to the central planners (1. data regarding raw materials supplies flows fiom producing units to central planners © production targets are transmitted from producing units to the central planners In pure command socialism, the job of ensuring that specific production objectives agree (so that ax handle manufacturers don’t produce 500,000 handles, while ax head manufacturers produce only 250,000 heads) is performed by: ' a. the market b. prices 0. commands from the central authority @ economic planning e. consumer sovereignty The relationship between quantity supplied and price is quantity demanded and price is C? direct, inverse inverse, direct c. inverse, inverse (1. direct, direct and the relationship between 30. 31. 32. 33. 34. 35. 36. When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes: a. the cost effect b. the inflationary effect the income effect (1. the substitution effect Which of the following would n_ot shift the demand curve for beef? a. a widely publicized study that indicates beef increases one’s cholesterol @ a reduction in the price of cattle feed 0. an effective advertising campaign by pork produccrs d. a change in the incomes of beef consumers In 2003 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: a. complementary goods and the higher price for oil increased the demand for natural gas b. complementary goods and the higher price for oil decreased the supply of natural gas @ substitute goods and the higher price for oil increased the demand for natural gas d. substitute goods and the higher price for oil decreased the supply of natural gas An economist for a bicycle company predicts that, other things equal, a gig; in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: a. there are many goods that are substitutes for bicycles b. there are many goods that are complementary to bicycles 0. there are few goods that are substitutes for bicycles @ bicycles are normal goods If the demand curve for product B shifts to the right as the price of product A declines, then: a. both A and B are inferior goods b. A is a normal good and B is an inferior good c. A is an inferior good and B is a normal good A and B are complementary goods Which of the following will cause the demand curve for product A to shift to the Q? @ an increase in money income if A is an inferior good b. an increase in money income if A is a normal good c. a decrease in the price of complementary product C d. population growth that causes an expansion in the number of persons consuming A Other things equal, which of the following might shift the demand curve for gasoline to the Q? the discovery of vast new oil reserves in Montana a. @ the development of a low-cost electric automobile c. an increase in the price of train and air transportation (1. a large decline in the price of automobiles 37. The demand for most products varies directly with changes in consumer’s incomes. Such products are known as: a. complementary goods b. competitive goods @ normal goods d. inferior goods 38. If the demand for a normal good (for example, steak) shifts to the M, the most likely reason is that: K5.) consumer incomes have fallen b. cattle production has declined c. the price of steak has risen d. the price of cattle feed has gone up Use the following to answer questions 39-41. Answer the next question(s) on the basis of the given supply and demand data for wheat: Bushels demanded per month Price per bushel Bushels supplied per month 45 $5 77 50 4 73 56 3 68 61 2 61 67 l 57 39. Refer to the above data. Equilibrium pm will be: a. $4 b. $3 {9 $2 d. $1 40. Refer to the above data. If the price in this market was $4: farmers would not be able to sell all their wheat buyers would want to purchase more wheat than is currently being supplied the market would clear; quantity demanded would equal quantity supplied there would be a shortage of wheat 99¢® 41. Refer to the above data. If price was initially $4 and free to fluctuate, we would expect: a. quantity supplied to continue to exceed quantity demanded @ the quantity of wheat supplied to decline as a result of the subsequent price change c. the quantity of wheat demanded to fall as a result of the subsequent price change (1. the price of wheat to rise Using the following to answer questions 42-45. 42. 43. 44. 45. 46. 8.. Prlce 50 100 150 200 Quantity Refer to the above diagram. A price of $60 in this market will result in: equilibrium a shortage of 50 units 0 a surplus of 50 units a surplus of 100 units Refer to the above diagram. A price of $20 in this market will result in: P-PP‘® a shortage of 100 units a surplus of 50 units a surplus of 100 units a shortage of 50 units Refer to the above diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is: - a. c. d. $30 $60 $40 $20 Refer to the above diagram. If this is a competitive market, price and quantity will move toward: a. b. @ (1. $60 and 100 respectively $60 and 200 respectively $40 and 150 respectively $20 and 150 respectively The rationing function of prices refers to the: capacity of a competitive market to equate the quantity demanded and quantity supplied fact that ration coupons are needed to alleviate wartime shortages of goods tendency of supply and demand to shift in opposite directions ability of the market system to generate an equitable distribution of income Use the following to answer questions 47-50: Quantity demanded Quantity Supplied (thousands) Price (thousands) 40 $80 60 50 60 60 60 40 60 70 20 6O 80 10 60 47. Suppose that the market above is for tickets to a specific football game. We can conclude that the: a. preset ticket price will necessarily be $40 @ stadium capacity is 60,000 c. stadium capacity can be adjusted from 40,000 to 80,000 d. preset ticket price will necessarily be $80 48. Suppose that the market above is for tickets to a specific football game. If the preset ticket price is $60: a. ticket scalping will occur b. a shortage of 10,000 tickets will occur c. a surplus of 20,000 tickets will occur ® 10,000 seats will remain unfilled 49. Suppose that the market above is for tickets for a specific football game. If the preset ticket price is $20: ticket scalping will occur a shortage of 20,000 tickets will occur a surplus of 10,000 tickets will occur 20,000 seats will remain unfilled gogép 50. Suppose that the market above is for tickets to a specific football game. If the preset ticket price is $40: a. a shortage of 10,000 tickets will occur b. 10,000 seats will remain unfilled ? all the tickets will be sold a surplus of 20,000 tickets will occur ...
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Midterm 1 Spring 07 - _'_____‘______-___________7...

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