Test 1 Highlighted Answers for Avenue

Test 1 Highlighted Answers for Avenue - Page 1 of 9...

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Page 1 of 9 McMaster University Department of Economics ECON 1B03 Fall 2011 Test 1 ANSWERS Saturday October 15, 2011 90 minutes Instructor: H Holmes MULTIPLE CHOICE Answer all questions on the scan sheet using HB pencil. Calculators are permitted. Hand in the scan and this sheet separately. TOTAL MC MARKS AVAILABLE: 40 NAME:__________________________________________________________________________ STUDENT #:_____________________________________________________________________
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Page 2 of 9 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Which of the following is the best example of a marginal change? a. After graduating college, Audrey's income increases from $500 per month to $3,000 per month. b. Morgan gets a raise at her part-time job and is now paid $7.25 per hour instead of $7.00. c. Housing prices in an area increase by 40% when a new highway is built in a small town. d. A hard freeze wipes out half of the tobacco crop in Ontario and the price of orange juice doubles. ____ 2. According to Adam Smith, the success of decentralized market economies is primarily due to a. the basic benevolence of society. b. society's justice (legal) system. c. individuals' self-interest. d. basic human survival instincts. ____ 3. If a copper refinery does NOT bear the entire cost of the smoke it emits, it will a. not emit any smoke so as to avoid the entire cost of the smoke. b. emit lower levels of smoke. c. emit an acceptable level of smoke. d. emit too much smoke. ____ 4. The two loops in the circular-flow diagram represent the flow of a. goods and the flow of services. b. dollars and the flow of financial assets. c. inputs and outputs and the flow of dollars. d. capital goods and the flow of consumer goods. Figure 2-1
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Page 3 of 9 ____ 5. Refer to Figure 2-1 on the previous page . Which arrow shows the flow of goods and services? a. A b. B c. C d. D ____ 6. Production possibilities frontiers are usually bowed outward. This is due to a. constant opportunity cost. b. increasing opportunity cost. c. decreasing opportunity cost. d. None of the above are correct. ____ 7. Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 72 units of food and 28 machines. This year, it is producing 75 units of food and 30 machines. Which of the following would not explain the increase in output? a. a reduction in unemployment b. an increase in the labour force c. an improvement in technology d. All of the above are correct. ____ 8. If an economy is producing efficiently a. there is no way to produce more of one good without producing less of the other. b. it is possible to produce more of both goods.
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Test 1 Highlighted Answers for Avenue - Page 1 of 9...

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