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ECON 2100 (Summer 2016 – Sections 10 and 11)
Exam #1C – Answer Key
Multiple Choice Questions: (3 points each)
1.
I am taking ______________ of the exam.
C.
Version C
2.
Brad has $250 to spend and wants to purchase either a mountain bike or TV. Each item costs
exactly $250, so he can only purchase one of the two items. This scenario illustrates that
C.
when resources are scarce, people face tradeoffs.
3.
The “Principle of Comparative Advantage” states that
D.
a society can produce a greater amount of total output when individuals focus their
production on those activities for which they possess a Comparative Advantage.
4.
The Cleveland Cavaliers lost the first two games of the NBA Finals to the Golden State Warriors
by a combined score of 216 to 166. Around this same time, an earthquake in Chile killed 37
people. If LeBron James of the Cleveland Cavaliers is more upset his team’s performance in the
NBA Finals than the loss of life in Chile, it would seem to suggest that he is
C.
self-interested.
5.
Economics is the social science that
B.
studies decision making in the face of scarcity, and the implications of such decisions on
individuals and society.
6.
Andy and Bob produce corn and shirts. It is impossible for Andy to
B.
have a Comparative Advantage in both activities.
7.
An increase in supply is graphically illustrated by
D.
a rightward shift of the entire supply curve.
8.
When considering potential government policies, it is important to recognize that
C.
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.
9.
Which of the following demonstrates the “Law of Demand”?
B.
After the price of donuts decreased by $1 per dozen, Sabrina chose to buy more donuts.
10.
Suppose Kyle paid a total of $40 in order to consume 2 pizzas. It follows that his
D.
Economic Surplus would be equal to $14.
11.
Kyle’s “Marginal Benefit” for his 5th pizza consumed would be
A.
$8.
12.
We can see the “Incentive Principle” at work by noting that (hint: even if a statement below is
correct, it need not illustrate the “Incentive Principle”):
B.
If the price of a pizza were to decrease from $18 to $10, then Kyle would increase his
consumption from 2 pizzas to 4 pizzas.
13.
Positive Statements
A.
are “fact based statements” which provide “predictions about outcomes” without any
judging of their desirability.
14.
Which of the following combinations of output is attainable but inefficient?
A.
380 Jets and 8,000 Shoes (Point “C”).
15.
If this society were at Point “D,” the Opportunity Cost of producing another Jet would be
B.
15 shoes.
16.
If this society wanted to produce 100 Jets, then its maximum output of Shoes would be
C.
13,200
17.
A “rational” decision maker
A.
has well defined goals and takes actions to fulfill those goals as best as possible.
18.
Suppose that “Good X” is a normal good. If the economy goes into a recession and incomes
decline, what will happen to the equilibrium price and quantity in the market for “Good X”?
B.
both equilibrium price and equilibrium quantity will decrease.
19.
In regards to a Production Possibilities Frontier, which of the following statements is true?
C.
“A combination of goods is Unattainable if it cannot possibly be produced with the
currently available resources and technology.”
20.
Which worker has an Absolute Advantage in the production of cigarettes?
A.
Noel (for all values of “X”).
21.
Liam’s Opportunity Cost for producing a carton of cigarettes
B.
is (40/4) = 10 ounces of alcohol.
22.
For which of the following values of “X” would Noel have a Comparative Advantage in the
production of cigarettes?
A.
X=45.
23.
A “Voluntary Trade” generally makes
B.
both the buyer and seller better off.
24.
Consider the following two statements: (I) “The worst Guns N’ Roses album ever recorded is The
Spaghetti Incident” and (II) “The Guns N’ Roses album Chinese Democracy sold over one
million copies in both the United States and Europe.” Statement (I) is a __________ statement,
and Statement (II) is a __________ statement.
D.
normative; positive.
25.
Focusing on the 660th 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.
$8.45; $2.80.
26.
At the equilibrium outcome: ______ units would be traded, each at a price of ______.
C.
1,295; $5.35.
27.
Suppose that pretzels are a substitute for peanuts. If the price of pretzels were to increase, then
(after this change in the price of pretzels) in the market for peanuts
A.
equilibrium quantity and equilibrium price would both increase.
28.
The “Circular Flow Diagram”
B.
illustrates the general interaction between households and firms in both the Markets for
Finished Goods/Services and the Markets for Factors of Production.
29.
Consider a society consisting of only three people: Larry, Moe, and Curly. Larry spend all day
producing food and clothing. At the start of each day, Moe tells Larry how much of each good to
make. At the end of each day Curly decides who gets to consume how much of each good.
Which of the following “fundamental economic questions” is Moe answering for this society?
C.
“What to produce?”
30.
Consider a market in which supply is given by the function S(p) = 50p – 300 (for p > 6) and
demand is given by the function D(p) = 1,000 – 40p (for p < 25). In this market there would be
_____________ at a price of p = 10.
B.
excess demand
31.
Recall that the market equilibrium in the model of supply and demand is a “self-enforcing”
outcome. This characteristic can be described by noting that
C.
if a market is currently not at equilibrium, market forces will push us toward an
equilibrium (since there is downward pressure on price at prices above the equilibrium
price, and there is upward pressure on price at prices below the equilibrium price).
32.
Which of the following could never lead to a decrease in the demand for milk?
A.
an increase in the price of milk.
33.
Consider the two following statements. Statement 1: “Rent controls increase the quantity and
quality of available housing.” Statement 2: “The U.S. should not prevent firms from outsourcing
work to foreign countries.” A majority of economists would
D.
disagree with Statement 1 but agree with Statement 2.