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ECON 2100 (Summer 2013 – Section 06)
Exam #1B – Answer Key
1.
I am taking ______________ of the exam.
B.
Version B
2.
The ____________________ states that people have unlimited needs/wants but a limited amount
of resources, implying that people face tradeoffs (i.e., having more of one thing means getting by
with less of something else).
A.
Scarcity Principle
3.
Which of the following is NOT one of the “Three Basic Economic Questions” that every society
must address?
A.
“How can we choose a system of taxation which ensures that the rich pay their ‘fair
share’ of taxes?”
4.
Demand for “Good Z” decreases as a result of an increase in consumer income. This observation
implies that “Good Z” is
B.
an inferior good.
5.
A “Production Possibilities Frontier”
D.
More than one (perhaps all) of the above answers is correct.
6.
When considering potential government policies, it is important to recognize that
D.
if a policy alters the costs and/or benefits for a decision maker, then the decision-maker
might change his behavior as a result of the policy.
7.
With which of the following statements is there “general agreement” among most economists?
A.
“Rent Controls reduce the quantity/quality of available housing.”
8.
In this market there would be _______________ at a price of $10.00.
A.
excess demand
9.
Focusing on the 2,960th unit of peanuts, the buyer of this unit has a reservation price of _____ and
the seller of this unit has a reservation price of _____.
B.
$15.60; $6.50.
10.
At the equilibrium outcome: ______ units would be traded, each at a price of ______.
D.
5,675; $10.40.
11.
Suppose that pretzels are a substitute for peanuts. If the price of pretzels were to decrease, then
(after this change in the price of pretzels) in the market for peanuts
B.
equilibrium quantity and equilibrium price would both decrease.
12.
Which markets are represented in the simple “Circular Flow Diagram”?
A.
Markets for “Goods and Services” and markets for “Factors of Production.”
13.
Recall that the market equilibrium in the model of supply and demand is a “Unique” equilibrium.
This characteristic can be described by noting that
B.
as long as the “Law of Demand” and “Law of Supply” both hold, there is only one
equilibrium outcome in a market.
14.
Normative Statements
B.
attempt to describe how the world should be or how the world could be improved upon.
15.
Kyle’s “Marginal Benefit” for his 6th unit of “Good X” consumed would be
A.
$3.
16.
Suppose each unit of “Good X” costs $15. Kyle should choose to purchase
B.
2 units.
17.
Suppose that instead of being able to purchase “Good X” at a price of $15 per unit, Kyle’s only
purchase option is to pay a flat fee of $50 to consume “as much of ‘Good X’ as he wants.” He
should choose to
C.
pay the $50 fee and consume 7 units of “Good X.”
18.
The “Law of Supply” states that
D.
all other factors fixed, the quantity supplied of a good will be greater when its price is
higher.
19.
___________________ is the branch of economics which studies the behavior of a society’s
economy as a whole (focusing on levels of and changes in things such as unemployment rates,
inflation rates, and GDP growth rates).
A.
Macroeconomics
20.
___________________ refers to the process which transforms scarce resources into useful goods
and services.
C.
Production
21.
____________ has an Absolute Advantage in the production of corn, and ____________ has an
Absolute Advantage in the production of dresses.
C.
Ben; Amy.
22.
Ben’s Opportunity Cost for producing a dress is
B.
3 units of corn.
23.
Suppose that Amy and Ben have decided to maximize their joint output through “specialization in
production.” Further, they want to produce a total of 20 dresses each day. It follows that
B.
Amy should make all 20 of the dresses.
24.
“Voluntary Trade” generally makes buyers __________ and makes sellers __________.
C.
better off; better off.
25.
Tracy has $50 to spend and wants to purchase either a DVD player or an MP3 player. Each good
costs exactly $50, so she can only purchase one of the two items. This scenario illustrates the
basic concept that
B.
people face tradeoffs.
26.
Which of the following combinations of output is “attainable” and “inefficient”?
C.
“D.”
27.
If this society wanted to produce 725 Apples, then its maximum output of Boats would be
C.
more than 1,250 Boats but fewer than 1,800 Boats.
28.
Focusing on points “B” and “C,” the Opportunity Cost of producing one additional Boat is
B.
greater at point “C” than at point “B.”
29.
LeBron James chose to skip college and enter the NBA draft in 2003 straight out of high school.
The fact that he made this choice suggests that
B.
he properly understood that his opportunity cost of attending college was very high.
30.
The “Demand for Shoes”
B.
refers to the entire relationship between the price of shoes and the quantity that
consumers are willing and able to purchase, all other factors fixed.
31.
A.C. and Zack produce surfboards and hair gel. A.C.’s opportunity cost of producing a surfboard
is lower than Zack’s opportunity cost of producing a surfboard. The _________________
suggests that they can increase their total output of these two goods if A.C. focuses his production
on surfboards while Zack focuses his production on hair gel.
B.
Principle of Comparative Advantage
32.
Which of the following statements is a “Positive Statement”?
A.
Guns N’ Roses released two albums (“Use Your Illusion I” and “Use Your illusion II”)
on September 17, 1991.
33.
The “Circular Flow Diagram” illustrates
C.
the general interaction between households and firms in a free market economy (in both
the Markets for Finished Goods/Services and the Markets for Factors of Production).