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Miami Dade College
ECO 2013.018 Principles of Macroeconomics – Spring 2016
Practice Test #1
1.
For economists, the word "utility" means:
a)
b)
c)
d)
versatility and flexibility.
rationality.
pleasure or satisfaction.
purposefulness.
2.
When economists say that people act rationally in their self-interest, they mean that
individuals:
a)
b)
c)
d)
look for and pursue opportunities to increase their utility.
generally disregard the interests of others.
are mainly creatures of habit.
are usually impulsive and unpredictable.
3.
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I
didn't lose any money on my financial investment." His economist friend points out that in effect
he did lose money because he could have received a 3 percent return on the $1,000 if he had
bought a bank certificate of deposit instead of the coins. The economist's analysis in this case
incorporates the idea of:
a)
b)
c)
d)
4.
opportunity costs.
marginal benefits that exceed marginal costs.
imperfect information.
normative economics.
A person should consume more of something when its marginal:
a)
b)
c)
d)
benefit exceeds its marginal cost.
cost exceeds its marginal benefit.
cost equals its marginal benefit.
benefit is still better.
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5.
Economics may best be defined as the:
a) interaction between macro and micro considerations.
b) social science concerned with how individuals, institutions, and society make optimal
choices under conditions of scarcity.
c) empirical testing of value judgments through the use of logic.
d) study of why people are rational.
6.
Purposeful behavior means that:
a)
b)
c)
d)
7.
people are selfish in their decision making.
people weigh costs and benefits to make decisions.
people are immune from emotions affecting their decisions.
decision makers do not make mistakes when weighing costs and benefits.
You should decide to go to a movie:
a)
b)
c)
d)
8.
if the marginal cost of the movie exceeds its marginal benefit.
if the marginal benefit of the movie exceeds its marginal cost.
if your income will allow you to buy a ticket.
because movies are enjoyable.
Opportunity costs exist because:
a)
b)
c)
d)
9.
the decision to engage in one activity means forgoing some other activity.
wants are scarce relative to resources.
households and businesses make rational decisions.
most decisions do not involve sacrifices or trade-offs.
In constructing models, economists:
a)
b)
c)
d)
make simplifying assumptions.
include all available information.
must use mathematical equations.
attempt to duplicate the real world.
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10.
The Latin term "ceteris paribus" means:
a)
b)
c)
d)
11.
Macroeconomics approaches the study of economics from the viewpoint of:
a)
b)
c)
d)
12.
the entire economy.
governmental units.
the operation of specific product and resource markets.
individual firms.
Which of the following is a positive statement?
a)
b)
c)
d)
13.
that if event A precedes event B, A has caused B.
that economics deals with facts, not values.
other things equal.
prosperity inevitably follows recession.
A humidity level of 90 percent is too high.
It is too hot to run outside when the temperature exceeds 80 degrees.
The temperature is 92 degrees today.
Summer evenings are nice when it cools off to around 70 degrees.
The budget line shows:
a) the amount of product A that a consumer is willing to give up to obtain one more unit of
product B.
b) all possible combinations of two goods that can be purchased, given money income and
the prices of the goods.
c) the minimum amount of two goods that a consumer can purchase with a specific money
income.
d) all possible combinations of two goods that yield the same level of utility to the
consumer.
14.
Which of the following is a distinguishing feature of laissez-faire capitalism?
a) Public ownership of all capital.
b) Central planning.
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c) Minimal government intervention.
d) A circular flow of goods, resources, and money.
15.
An economic system:
a) requires a grouping of private markets linked to one another.
b) is a particular set of institutional arrangements and a coordinating mechanism used to
respond to the economizing problem.
c) requires some sort of centralized authority (such as government) to coordinate economic
activity.
d) is a plan or scheme that allows a firm to make money at some other firm's expense.
16.
Which of the following is a fundamental characteristic of the market system?
a)
b)
c)
d)
17.
Property rights.
Central planning by government.
Unselfish behavior.
Government-set wages and prices.
The regulatory mechanism of the market system is:
a)
b)
c)
d)
18.
self-interest.
private property.
competition.
specialization.
Specialization in production is important primarily because it:
a)
b)
c)
d)
results in greater total output.
allows society to avoid the coincidence-of-wants problem.
allows society to trade by barter.
allows society to have fewer capital goods.
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19.
Given the information and assuming trade occurs between the three states, we can expect:
a) that there is no means by which Michigan can obtain lettuce while specializing in the
production of autos.
b) that money will not be needed to accomplish the desired exchanges.
c) money to flow counterclockwise from Michigan to Texas to Washington.
d) money to flow clockwise from Michigan to Washington to Texas.
20.
The "coincidence of wants" problem associated with barter refers to the fact that:
a)
b)
c)
d)
21.
for exchange to occur, each seller must have a product that some buyer wants.
money must be used as a medium of exchange or trade will never occur.
specialization is restricted by the size or scope of a market.
buyers in resource markets and sellers in product markets can never engage in exchange.
The presence of market failures implies that:
a)
b)
c)
d)
22.
money is not an effective tool for exchange in a market system.
there is an active role for government, even in a market system.
individuals and firms should strive to be self-sufficient rather than specialize.
command systems are superior to market systems in the allocation of resources.
Which of the following is one of the Five Fundamental Questions?
a)
b)
c)
d)
Which products will be in scarce supply and which in excess supply?
Who should appoint the head of the central bank?
How much should society save?
What goods and services will be produced?
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23.
From society's point of view, the economic function of profits and losses is to:
a)
b)
c)
d)
24.
If a competitive industry is neither expanding nor contracting, we would expect:
a)
b)
c)
d)
25.
promote the equal distribution of real assets and wealth.
achieve full employment and price level stability.
contribute to a more equal distribution of income.
reallocate resources from less desired to more desired uses.
total revenue to be zero.
economic profits to be zero.
total opportunity cost to be zero.
more resources to flow to that industry.
The competitive market system:
a) encourages innovation because government provides tax breaks and subsidies to those
who develop new products or new productive techniques.
b) discourages innovation because it is difficult to acquire additional capital in the form of
new machinery and equipment.
c) discourages innovation because firms want to get all the profits possible from existing
machinery and equipment.
d) encourages innovation because successful innovators are rewarded with economic profits.
26.
Answer the question using the following data, which show all available techniques for
producing 20 units of a particular commodity:
Refer to the data. In view of the indicated resource prices, the economically most efficient
production technique(s) is (are) technique(s):
6
a)
b)
c)
d)
27.
"Consumer sovereignty" means that:
a)
b)
c)
d)
28.
buyers can dictate the prices at which goods and services will be offered.
advertising is ineffective because consumers already know what they want.
buyers control the quality of goods and services through regulatory agencies.
buyers determine what will be produced based on their "dollar votes" for the goods and
services offered by sellers.
A market:
a)
b)
c)
d)
29.
reflects upsloping demand and downsloping supply curves.
entails the exchange of goods, but not services.
is an institution that brings together buyers and sellers.
always requires face-to-face contact between buyer and seller.
Graphically, the market demand curve is:
a)
b)
c)
d)
30.
steeper than any individual demand curve that is part of it.
greater than the sum of the individual demand curves.
the horizontal sum of individual demand curves.
the vertical sum of individual demand curves.
Economists use the term "demand" to refer to:
a)
b)
c)
d)
31.
#1.
#2 and #4.
#3.
#1 and #3.
a particular price-quantity combination on a stable demand curve.
the total amount spent on a particular commodity over a fixed time period.
an upsloping line on a graph that relates consumer purchases and product price.
a schedule of various combinations of market prices and amounts/quantities demanded.
The equation for the demand curve in the below diagram:
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a)
b)
c)
d)
is P = 70 - Q.
is P = 35 - 2Q.
is P = 35 - .5Q.
cannot be determined from the information given.
32.
If the demand curve for product B shifts to the right as the price of product A declines,
then:
a)
b)
c)
d)
both A and B are inferior goods.
A is a superior good and B is an inferior good.
A is an inferior good and B is a superior good.
A and B are complementary goods.
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33.
Refer to the diagram. A decrease in quantity demanded is depicted by a:
a)
b)
c)
d)
move from point x to point y.
shift from D1 to D2.
shift from D2 to D1.
move from point y to point x.
34.
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Refer to the diagram. A decrease in supply is depicted by a:
a)
b)
c)
d)
35.
move from point x to point y.
shift from S1 to S2.
shift from S2 to S1.
move from point y to point x.
The equation for the supply curve in the below diagram is approximately:
a)
b)
c)
d)
P = 4 + 1/3Q.
P = 4 + 2Q.
P = 4 + 3Q.
P = 4 - 3Q.
36.
Assume product A is an input in the production of product B. In turn, product B is a
complement to product C. We can expect a decrease in the price of A to:
a)
b)
c)
d)
increase the supply of B and increase the demand for C.
decrease the supply of B and increase the demand for C.
decrease the supply of B and decrease the demand for C.
increase the supply of B and decrease the demand for C.
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37.
Refer to the table. If demand is represented by columns (3) and (2) and supply is represented by
columns (3) and (5), equilibrium price and quantity will be:
a)
b)
c)
d)
$10 and 60 units.
$9 and 50 units.
$8 and 60 units.
$7 and 50 units.
38. Answer the question on the basis of the given supply and demand data for wheat:
Refer to the data. Equilibrium price will be:
a)
b)
c)
d)
$4.
$3.
$2.
$1.
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39.
Refer to the diagram. The equilibrium price and quantity in this market will be:
a)
b)
c)
d)
$1.00 and 200.
$1.60 and 130.
$0.50 and 130.
$1.60 and 290.
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40.
Refer to the diagram, which shows demand and supply conditions in the competitive market for
product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity
will be:
a)
b)
c)
d)
F and C, respectively.
G and B, respectively.
F and A, respectively.
E and B, respectively.
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ECO 2013.018 Principles of Macroeconomics – Spring 2016
Practice Test #1 – Answer Key
1. C
2. A
3. A
4. A
5. B
6. B
7. B
8. A
9. A
10. C
11. A
12. C
13. B
14. C
15. B
16. A
17. C
18. A
19. C
20. A
21. B
22. D
23. D
24. B
25. D
26. B
27. D
28. C
29. C
30. D
31. C
32. D
33. D
34. C
35. A
36. A
37. C
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38. C
39. A
40. A
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