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Miami Dade College
ECO 2013.0046 Principles of Macroeconomics - Fall 2016
Practice Test #1
1. The study of economics:
A) primarily considers the stock market.
B) is about people's decisions regarding their use of scarce resources.
C) doesn't apply to decisions made by businesses.
D) states efficiency and equity don't conflict.
2. Because of scarcity:
A) resources are limitless.
B) wants are limited.
C) choices are unlimited.
D) we face tradeoffs in nearly every choice we make.
3. Economists tend to look:
A) at costs but not at benefits.
B) at benefits but not at costs.
C) for rational responses to incentives.
D) only at macroeconomic topics.
4. Paying a salesperson more for increased sales is an example of:
A) an incentive.
B) an opportunity cost.
C) efficiency.
D) equity.
5. Which of the following is a macroeconomic topic?
A) a study of the business cycle
B) the price of a pair of Nike shoes
C) the total sales for GE in 2009
D) the labor market for computer analysts
6. Production efficiency occurs when goods are:
A) produced with the lowest possible resource cost.
B) allocated equally.
C) delivered to those who have the greatest willingness and ability to acquire them.
D) allocated to those with the greatest need.
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7. A common definition of economics is that it is the study of:
A) the allocation of scarce resources to competing wants.
B) maximizing net personal disposable income.
C) the factors underlying financial markets.
D) maximizing personal financial wealth.
8. There would be no economic problems in a world where all resources are:
A) unlimited.
B) privately owned.
C) owned by the government.
D) scarce.
9. What would be a possible opportunity cost of you going to a doctor for a check-up?
A) the cost of getting nontraditional care
B) the opportunity to make an acquaintance in the waiting room
C) lost income due to not being at work for those hours
D) the cost of the insurance reimbursing the doctor
10. Opportunity costs exist because:
A) using resources for one activity means that their use elsewhere must be given up.
B) sellers are unwilling to give up their product without a price.
C) there are opportunities to find ways to reduce costs.
D) buyers always have an opportunity to go to another seller.
11. Which is an example of a “bad” incentive?
A) charging drivers a gasoline tax to fund green energy projects
B) offering factories tax credits for reducing pollution
C) rewarding students for studying and earning high grades
D) raising homeowners' property taxes on home improvements
12. Rational behavior:
A) means incentives don't matter.
B) requires people to consider the total costs and total benefits of their decisions.
C) requires thinking at the margin.
D) requires perfect information.
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13. Private markets will typically maximize production efficiency because they provide:
A) incentives for profit.
B) equity.
C) market information.
D) tax revenue for the government sector.
14. A market economy is also known as a _____ economy, and decisions are made by _____.
A) capitalist; the government
B) capitalist; private individuals
C) socialist; the government
D) socialist; private individuals
15. Which is an example of capital in the production process of an amusement park?
A) the electricity used at the park
B) the mechanics who maintain the equipment
C) the roller coaster
D) the ticket-taker
16. Capital includes all of the following, EXCEPT:
A) dollar bills in a bank vault.
B) copy machines in an insurance company.
C) backhoes of a construction firm.
D) drilling equipment at a tool-and-die company.
17. “Production efficiency” is described as:
A) goods and services are being produced at their lowest resource cost.
B) the mix of goods and services produced is just what the society desires.
C) when one country has a lower opportunity cost of producing a good than another
country.
D) when one country can produce more of a good than another country.
18. Zetaland produces widgets and gadgets. At current levels of output, it can produce more
of both. We can conclude that:
A) Zetaland is at full employment.
B) opportunity cost is maximized.
C) some resources are not being used.
D) the economy is on the PPF.
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Use the following to answer question 19:
Figure: Production Possibilities
19. (Figure: Production Possibilities) Which of the following is NOT correct regarding
combination X?
A) The combination is productively efficient.
B) Society might judge other combinations on the line to be preferable to X.
C) Because it is on the line, combination X has no opportunity cost.
D) The combination might not be allocatively efficient.
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Use the following to answer question 20:
Figure: Tanks and Health Care
20. (Figure: Tanks and Health Care) Which of the following points in the figure is obtainable
but NOT efficient?
A) point a
B) point b
C) point f
D) point g
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Use the following to answer question 21:
Figure: Bran Muffins and Corn Flakes PPF
21. (Figure: Bran Muffins and Corn Flakes PPF) The graph shows the possibilities frontier
for a bakery that makes corn flakes and bran muffins. Which of the following is NOT
correct?
A) The opportunity cost of increasing production of corn flakes from 200 to 300 pounds
is 50 pounds of bran muffins.
B) Due to limited resources, there is a tradeoff between producing corn flakes and bran
muffins.
C) The graph implies that resources well-suited for making corn flakes are not as
well-suited for producing bran muffins.
D) The company faces decreasing opportunity costs.
Use the following to answer question 22:
E
F
G
H
Bananas Apples
12
2
9
4
5
6
0
8
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22. (Table) Given the production possibilities schedule shown in the table, what is the
opportunity cost of moving from E to F?
A) 2 bananas
B) 3 bananas
C) 2 apples
D) 4 apples
Use the following to answer question 23:
Figure: Bread and Honey
23. (Figure: Bread and Honey) Which point in the graph represents unemployed resources?
A) point a
B) point b
C) point f
D) point g
24. Absolute advantage is defined as:
A) goods and services are produced at their lowest resource (opportunity) cost.
B) the mix of goods and services produced is just what the society desires.
C) one country has a lower opportunity cost of producing a good than another country.
D) one country can produce more of a good than another country.
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25. Suppose the country of Alphaland can produce more cars than Omegaland can produce.
An economist would conclude that Alphaland has a(n) ___________ in producing cars.
A) absolute advantage
B) comparative advantage
C) higher opportunity cost
D) higher resource cost
Use the following to answer question 26:
Figure: Ships and Autos in Countries A and B
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26. (Figure: Ships and Autos in Countries A and B) Two countries manufacture automobiles
and ships. Based on the graphs, which statement is correct?
A) The opportunity cost in Country A of producing 1 ship is 2 cars.
B) The opportunity cost in Country B of producing 1 ship is 10 cars.
C) Country B is more efficient at ship building.
D) Both countries are equally efficient at ship building because the PPFs are linear.
27. Which of the following is NOT an example of a market?
A) neighborhood lemonade stand
B) painting one's house
C) ticket scalping
D) New York Stock Exchange
28. Prices:
A) allow sellers to determine what goods to sell.
B) help buyers find possible substitute goods.
C) contain information useful for all people involved in a transaction.
D) allow sellers to determine what goods to sell, help buyers find possible substitute
goods, and contain information useful for all people involved in a transaction.
29. Willingness-to-pay is the:
A) price a consumer pays for a good or service.
B) price that all the consumers in a market pay for a good or service.
C) highest value that a consumer believes a good or service is worth.
D) highest value that a producer believes consumers will pay for his product.
Use the following to answer question 30:
First Doughnut
Second Doughnut
Third Doughnut
Fourth Doughnut
Willingness to Pay for
One, Two, Three,
Doughnuts
Person A
Person B
$5
$8
$3
$6
$2
$4
$1
$0
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30. (Table) According to the table, in a two-person market that includes Person A and Person
B, the willingness to pay for the second doughnut is:
A) $3.
B) $5.
C) $6.
D) $8.
Use the following to answer question 31:
Figure: Individual and Market Demand Curves
31. (Figure: Individual and Market Demand Curves) According to the graph, the market
quantity demanded at $20 is:
A) 1.
B) 10.
C) 3.
D) 6.
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Use the following to answer question 32:
Figure: Interpreting Supply Shifts 2
32. (Figure: Interpreting Supply Shifts 2) A shift to the right of the supply curve could be
caused by a(n):
A) improvement in production technology.
B) increase in the costs of resources.
C) increase in the price of a complement.
D) decrease in the number of sellers.
33. Which of the following will cause an increase in the supply of yogurt?
A) an increase in the price of yogurt
B) an increase in the number of sellers in the market for yogurt
C) an increase in taxes on the sale of yogurt
D) an increase in the costs of production of yogurt
34. An increase in the cost of coffee beans, which is used to make coffee, will cause the
____________ for coffee to shift __________.
A) demand; right
B) supply; right
C) demand; left
D) supply; left
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Use the following to answer question 35:
Figure: Predicting Supply Shifts
35. (Figure: Predicting Supply Shifts) The shift from supply curve 1 to supply curve 2 might
be caused by an increase in:
A) the prices of other goods made by firms.
B) expected future costs of labor.
C) resource costs.
D) subsidies.
Use the following to answer question 36:
Figure: Interpreting Supply Shifts
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36. (Figure: Interpreting Supply Shifts) The shift of the supply curve from A to B is an
example of:
A) a price-induced shift.
B) a change in quantity supplied.
C) a change in supply.
D) a demand-induced shift.
37. A decrease in the quantity supplied of iPads is caused by a(n):
A) drop in the price of iPads.
B) increase in labor costs to produce iPads.
C) reduction in the number of iPad producers.
D) increase in the taxes on the sale of iPads.
38. When quantity demanded exceeds quantity supplied, a:
A) shortage occurs and prices are bid up toward equilibrium.
B) shortage occurs and prices are pushed down toward equilibrium.
C) surplus occurs and prices are bid up toward equilibrium.
D) surplus occurs and prices are pushed down toward equilibrium.
Use the following to answer question 39:
Figure: Supply and Demand for Shoes
39. (Figure: Supply and Demand for Shoes) If the price of shoes is $40, then the market:
A) is in equilibrium.
B) experiences a shortage of shoes.
C) experiences a surplus of shoes.
D) There is not enough information to answer this question.
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Use the following to answer question 40:
P
Qd
Qs
$10
3
20
$8
7
15
$6
10
10
$4
14
7
$2
20
3
$0
30
0
40. (Table) Using the data for the market for lattes in the table, at a price of $10:
A) there is a surplus of lattes.
B) there is a shortage of lattes.
C) the price of lattes will rise.
D) the price of lattes will stay the same.
41. Consumer surplus is the difference between the:
A) minimum price the buyer is willing to pay and the market price.
B) maximum price the buyer is willing to pay and the market price.
C) minimum price the seller is willing to pay and the market price.
D) maximum price the seller is willing to pay and the market price.
42. Producer surplus is the difference between the:
A) minimum price the buyer is willing to accept and the market price.
B) maximum price the buyer is willing to accept and the market price.
C) market price and the minimum price the seller is willing to accept.
D) maximum price the seller is willing to accept and the market price.
43. Suppose that a customer's willingness to pay for a product is $79, and the seller's
willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?
A) $4
B) $11
C) $15
D) $21
44. Suppose that a customer's willingness to pay for a product is $1,480, and the seller's
willingness to sell is $1,210. If the negotiated price is $1,300, how much is consumer
surplus?
A) $90
B) $180
C) $220
D) $270
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45. Suppose that a customer's willingness to pay for a product is $1,480, and the seller's
willingness to sell is $1,210. If the negotiated price is $1,300, how much is producer
surplus?
A) $90
B) $210
C) $220
D) $270
46. If you are willing to sell your old bicycle for $30, but someone offers you $40 for it, the
results of the transaction would yield:
A) $10 worth of producer surplus and unknown consumer surplus.
B) $10 worth of consumer surplus and unknown producer surplus.
C) $30 worth of consumer surplus and $10 worth of producer surplus.
D) $30 worth of producer surplus and $10 worth of consumer surplus.
47. Consumer surplus and producer surplus are maximized at:
A) a price below equilibrium in the market.
B) a price above equilibrium in the market.
C) the market equilibrium price.
D) the price of $0.
48. Suppose the market price is $5. There are three consumers in the market. The consumer
who purchases the first unit of output is willing to pay $12; the consumer purchasing the
second unit of output is willing to pay $8; and the consumer buying the third unit of
output is willing to pay $7. Total consumer surplus is:
A) $27.
B) $11.
C) $12.
D) $32.
49. Suppose the market price is $5. The producer who sells the first unit of output has a
willingness-to-sell equal to $1; the producer who sells the second unit of output has a
willingness-to-sell equal to $2; and the producer who sells the third unit of output has a
willingness-to-sell equal to $4. Total producer surplus is:
A) $7.
B) $8.
C) $4.
D) $5.
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Use the following to answer question 50:
Figure: Determining Surplus
50. (Figure: Determining Surplus) In the graph, which shape represents consumer surplus?
A) the triangle hjk
B) the line hij
C) the line hi
D) the triangle hik
Use the following to answer question 51:
Figure: Determining Surplus 2
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51. (Figure: Determining Surplus 2) In the graph, how much is producer surplus?
A) $12
B) $15
C) $25
D) $30
Use the following to answer question 52:
Figure: Determining Surplus 6
52. (Figure: Determining Surplus 6) We can calculate the total surplus as:
A) $10,000.
B) $20,000.
C) $40,000.
D) $80,000.
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Use the following to answer questions 53-54:
Figure: Determining Surplus and Loss
53. (Figure: Determining Surplus and Loss) In the graph, consumer surplus is _____ in
equilibrium and _____ at a price of $12.
A) $40; $160
B) $80; $80
C) $160; $40
D) $320; $210
54. (Figure: Determining Surplus and Loss) In the graph, how much is producer surplus at a
price of $5?
A) $30
B) $90
C) $170
D) $300
55. Which is one of the four major reasons why markets fail?
A) too much competition
B) no externalities
C) a mismatch of information
D) private ownership of resources
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56. Which of the following is the BEST example of a pure public good?
A) welfare programs
B) highways
C) mail delivery
D) national defense
57. Which of the following goods is NOT typically considered a public good?
A) a lighthouse
B) national defense
C) bottled water
D) clean air
58. An effective price ceiling results in:
A) a surplus.
B) equilibrium in the market.
C) quantity supplied exceeding quantity demanded.
D) a shortage.
Use the following to answer question 59:
Figure: Determining Surplus and Loss
59. (Figure: Determining Surplus and Loss) In the graph, if the government sets a price of $5,
this is an example of an:
A) effective price ceiling.
B) effective price floor.
C) efficient price ceiling.
D) efficient price floor.
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Use the following to answer question 60:
Figure: Understanding Price Ceilings and Floors
60. (Figure: Understanding Price Ceilings and Floors) In the graph, which price would NOT
allow for an effective price floor?
A) $80
B) $70
C) $60
D) $50
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ECO 2013.0046 Principles of Macroeconomics - Fall 2016
Practice Test #1 - Answer Key
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B
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A
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D
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D
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B
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B
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D
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