Download Principles of Microeconomics EXAM 1A

Principles of Microeconomics
EXAM 1A - Spring 2004
This exam is the first of four exams given this semester. The exam consists of 31 multiple choice
problems. Clearly print your name and mark your multiple choice answers on the provided answer
key. Completely erase all marks other than the answers you choose. Cheating will not be tolerated.
Anyone caught cheating will face disciplinary action. Good luck on the exam!
1.
The concept of scarcity as used by economists refer to
a.
surpluses.
b.
a situation in which the available resources do not satisfy everyone's wants.
c.
a situation in which an item is available only in very small quantities.
d.
a situation in which an item is very expensive.
2.
Which of the following statements is correct?
a.
Positive economics deals with what ought to be.
b.
Positive economics is subjective.
c.
Normative economics tries to refrain from opinions.
d.
Normative economics expresses someone's opinion.
3.
In economics, assumptions
a.
make economic theory useless.
b.
are used to simplify reality.
c.
are positive statements.
d.
are reliable predictors about economic events.
4.
Which of the following is an example of a marginal question?
a.
How much will my chances of a job improve if I raise my GPA from a C to a
C+?
b.
What is the average cost of a college education?
c.
How many students borrow money to attend college?
d.
What is the average income of a college graduate?
5.
If you have a choice of consuming either two apples, three oranges, or one candy bar, the
opportunity cost of the candy bar is
a.
two apples.
b.
three oranges.
c.
two apples and three oranges.
d.
two apples or three oranges, whichever you most prefer.
6.
If available resources are being used efficiently,
a.
scarcity is no longer a problem.
b.
resources are no longer limited.
c.
a society can increase the production of one good or service only by decreasing
the production of some other good or service.
d.
society need no longer worry about trade-offs.
Use the following PPC to answer questions 7 and 8.
Choice
Good A
Good B
1
200
0
2
180
30
3
140
60
4
80
90
5
0
120
7.
Which of the following statements is true?
a.
This economy could produce 180 units of A and 120 units of B.
b.
The opportunity cost of producing more of B decreases as B increases.
c.
This economy could produce 180 units of A and 20 units of B.
d.
If this economy were to fully and efficiently employ all its resources, it could
provide 200 units of A and 120 units of B.
8.
Which of the following statements is true?
a.
Moving from choice 2 to 3, the opportunity cost of 30 more B is 90 units of A.
b.
There are increasing opportunity costs associated with producing more B.
c.
Moving from choice 3 to 4. the opportunity cost of 30 more B is 140 units of A.
d.
Moving from choice 1 to 2, the opportunity costs of 30 more B is 30 units of A.
9.
A point lying inside the production possibilities curve
a.
illustrates resources being used to their fullest potential.
b.
indicates that resources are not being fully or efficiently used.
c.
is not an attainable combination.
d.
requires more resources than are presently available.
10.
An increase in technology will cause the production possibilities curve to
a.
shift to the left.
b.
bow in.
c.
shift to the right.
d.
not change.
11.
What accounts for specialization?
a.
People specialize where opportunity costs are at a maximum.
b.
People specialize where their opportunity costs are lowest.
c.
People specialize in the activity that pays the highest wage.
d.
People specialize in the activity that they enjoy the most, no matter what the salary
is.
12.
The production possibilities curve represents which of the following?
a.
the amount of goods attainable with variable resources.
b.
the maximum amount of goods attainable with variable resources.
c.
maximum combinations of goods attainable with fixed resources.
d.
the amount of goods attainable if prices decline.
13.
The country of Two produces shoes and hats. All of the following will allow for greater
production of shoes without a reduction in hats EXCEPT when
a.
idle resources are once again employed in the production of shoes.
b.
at full production Two decides to produce more shoes.
c.
a new source of leather is discovered.
d.
the assembly line process is streamlined.
14.
“At peak earning potential, the average undergraduate degreed worker earns twice as
much as a high school graduate, and the average graduate degreed worker earns nearly
three times as much as a high school graduate.” This statement is
a.
unbelievable. Good thing I am getting a college degree!!
b.
a normative statement.
c.
a positive statement.
d.
an opportunity cost statement.
15.
“Since fast food contains many grams of fat and fat is linked to heart disease and death,
Congress should ban all fast food."” This is
a.
a normative statement.
b.
a positive statement.
c.
a macroeconomic statement.
d.
an opportunity cost statement.
16.
Which of the following is not considered a resource?
a.
a college professor.
b.
a sander in a carpenters shop.
c.
a copper mine.
d.
money wages.
e.
lobsters from the Keys.
17.
Suppose that Yugo automobiles are inferior goods. When income falls the equilibrium
quantity of Yugos will______ and the equilibrium price will______.
a.
rise, rise.
b.
fall, fall.
c.
fall, rise.
d.
rise, fall.
18.
Jon can produce 6 houses or 10 apples. Yoon-bai can produce 11 houses or 15 apples.
a. Jon should produce apples.
b. Yoon-bai should produce apples.
c. Jon should produce neither.
d. Yoon-bai should produce both.
e. None of the above.
19.
Which of the following would increase the price of sugar?
a.
less buyers
b.
less producers
c.
lower wages
d.
less consumer income
20.
Prior to a hurricane people want to purchase plywood to protect their windows. What
will happen in an unregulated plywood market?
a.
Demand will rise and there will be a plywood surplus.
b.
demand will rise and there will be a plywood shortage if price isn’t adjusted.
c.
Supply and Demand will be not be in equilibrium.
d.
Supply will shift in.
21.
The law of demand states that as a products price ______ the quantity consumers will
purchase ________.
a.
rises, rises.
b.
falls, falls.
c.
rises, falls.
d.
falls, remains unchanged.
22.
If consumers have less income
a.
demand will fall for normal goods.
b.
demand will rise for normal goods.
c.
demand will rise for inferior goods.
d.
both a. and c. are correct.
23.
A fall in the price of good X causes a drop in the demand for good Z. How are the goods
related?
a.
unrelated
b.
substitutes
c.
compliments
d.
correlated.
24.
How will a rise in farmland rent for farmers affect the equilibrium price and output of the
cotton market?
a.
lower price, raise output
b.
lower price, lower output
c.
raise price, lower output
d.
raise price, raise output
25.
Which of the following will NOT shift demand for a good(x)?
a.
price of substitute good y
b.
expectations
c.
income
d.
number of buyers
e.
education level of workers
26.
What type of shift reduces prices while increasing output?
a.
rise in demand
b.
fall in demand
c.
rise in supply
d.
fall in supply
27.
Which of the following would cause supply to increase?
a.
higher wages.
b.
tastes increase.
c.
a worldwide plague
d.
new, cheaper resources
e.
lower income.
28.
The Shift illustrated by graph 25 on the board would result in
a. P rising, Q rising
b. P falling, Q rising
c. P falling, Q falling
d. P rising, Q falling
e. Cannot be determined
29.
The shift in graph 25 would be caused by a
a. rise in income
b. the product not being preferred by consumers anymore.
c. increased cost of labor
d. better educated, more productive workers
e. fall in the products price.
30.
31.
Which of the following is best described by the statement “As the price of a product rises,
consumers shift their purchases to the other products whose prices are now relatively
lower”
a. the law of demand
b. the principle of normal goods
c. the income effect
d. the substitution effect
If supply falls and demand rises simultaneously what will be the effect on price and
quantity.
a. price rises, quantity uncertain
b. price falls, quantity uncertain
c. price uncertain, quantity rises
d. price uncertain, quantity falls