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EC0 2302
Klaus Becker
Spring 2016
DC
Exam 1
Tuesday, March 2'd
NAME:
≦b10お oの 51′
Indicate the answer choice that best completes the statement or answers the question.
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Economics is the study of how society manages its
a. limited wants and unlimited resources.
b. unlimited wants and unlimited resources.
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c. limited wants and limited resources.
d. unlimited wants and limited resources.
2. Making rational decisions "at the margin" means that people
a. make those decisions that do not impose a marginal cost.
b. evaluate how easily a decision can be reversed
if problems arise.
c. compare the marginal costs and marginal benefits of each decision.
d. always calculate the dollar costs for each decision.
3. Factors ofproduction are
a. used to produce goods and services.
b. also called outout.
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c. abundant in most economies.
d. assumed to be owned by firms in the circular-flow diagram.
Figure 2-I
4. Refer to Figure 2-1. Which arow represents the flow of goods and services?
a.A
b.B
C.C
d.D
5. On a bowed production possibilities frontier, as you move down along the curve
a. more of one good must be given up to receive one unit of the other good.
b. the available production technology does not change.
c. the opportunity cost increases.
d.
All of the above are correct.
Figure 2-5
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6. Refer to Figure 2-5. Efficient production is represented by which point(s)?
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a.A,B
b.A,B,D
c.A,B,C
d.c
7. When can two countries gain from trading two goods?
a. when the first country can only produce the first good and the second country can only
produce the second good
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b. when the first country can produce both goods, but can only produce the second good at great
cost, and the second country can produce both goods, but can only produce the first good at
great cost
c. when the first country is better at producing both goods and the second country is worse at
producing both goods
d. Two countries could gain from trading two goods under all of the above conditions.
8. The opportunity cost of an item is
a. the number of hours that one must work in order to buy one unit of the item.
b. what you give up to get that item.
c. always less than the dollar value of the item.
d. always greater than the cost of producing the item.
Table 3-38
Assume that England and Spain can switch between producing cheese and producing bread at a constant
rate.
I Unit of
Labor Hours Needed to Make
Cheese
England
Spain
4
Number of Units Produced in 40 Hours
Bread
Cheese
Bread
4
40
10
8
10
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9. Refer lo Table 3-38. England should export
a. cheese and import bread.
at
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b- bread and imoort cheese-
c. both goods and import neither good.
d. neither good and import both goods.
10. [n a market economy, supply and demand are important because they
a. play a critical role in the allocation ofthe economy's scarce resources.
b. determine how much ofeach good gets produced.
c. can be used to predict the impact on the economy ofvarious events and policies.
d.
All ofthe
above are correct.
I l. ln a competitive market, the quantity
determined by
ofa product produced
and the price
ofthe product are
a. buyers.
b. sellers.
c. both buyers and sellers.
d- None
ofthe above is correct.
12. An increase in quantity demanded
a. results in a movement downward and to the right along a demand curve.
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b. results in a movement upward and to the left along a demand curve.
c. shifis the demand curve to the left.
d. shifts the demand curve to the right.
13. The law of supply states that, other things equal, when the price of a good
a. falls, the supply ofthe good rises.
b. rises, the quantity supplied
ofthe good rises.
c. rises, the supply ofthe good falls.
d. falls, the quantity supplied
ofthe good rises.
14.
At the equilibrium price, the quantity ofthe good that buyers are willing and able to buy
a. is greater than the quantiry that sellers are willing and able to sell.
b. exactly equals the quantity that sellers are willing and able to sell.
c. is less than the quantity that sellers are willing and able to sell.
d. Either
a.;
or c) could be correct.
15. Equilibrium quantity must increase when demand
a. increases and supply does not change, when demand does not change and supply increases,
and when both demand and supply increase.
b. increases and supply does not change, when demand does not change and supply increases,
and when both demand and supply decrease.
c. decreases and supply does not change, when demand does not change and supply decreases,
and when both demand and supply increase.
d. decreases and supply does not change, when demand does not change and supply decreases,
and when both demand and supply decrease.
Scenario
1-l
Suppose the demand schedule in a market can be represented by the equation
8'
= 500 - l0P, where
Q'
is the quantity demanded and P is the price. Also, suppose the supply schedule can be represented by the
equation Cs = 200 + l0P, where Qs is the quantity supplied.
16.
Refer to Scenario 4-1. What is the equilibrium price in this
market? ? ' t S
17. Refer to Scenario 4-1. What is the equilibrium quantity in this
market? Q
: 3-{'A
Refer to Scenario 4-1. Suppose the price is currently equal to l0 in this market. Is there a shortage or
surplus inthis marke! and how large isthe shortage/surplus?
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18.
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Indicate the answer choice that best compleles the statemenl or answers the question.
19. The price elasticity ofdemand measures how much
a. quantity demanded responds to a change in price.
A
b. quantity demanded responds to a change in income.
c. price responds to a change in demand.
d. demand responds to a change in supply.
20. Minimum-wage laws dictate
a. the exact wage that firms must pay workers.
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d. both a minimum wage and a maximum wage that firms may pay workers.
Zt. a ."rutt of welfare economics is that the equilibrium price of a product is considered to be the best
price because it
a. maximizes both the total revenue for firms and the quantity supplied of the product.
b. maximizes the combined welfare of buyers and sellers.
c. minimizes costs and maximizes output.
d. minimizes the level of welfare payments.
22. Consumer surplus is
a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for
it.
A
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b. the amount a buyer is
willing to pay for a good minus the cost of producing the good.
c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the
good.
d. a buyer's willingness to pay for a good plus the price of the good.
23. What is the fundamental basis for trade among nations?
a. shortages or surpluses in nations that do not trade
b. misguided economic policies
c. absolute advantage
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d. comparative advantage
24.lf a country allows trade and, for a certain
good, the domestic price without trade is lower than the
world price,
a. the country will be an exporter of the good.
b. the country will be an importer of the good.
I* ' c. the country will be neither an exporter nor an importer of the good.
d. Additional information is needed about demand to determine whether the country will be an
exporter of the good, an importer of the good, or neither.
25. When a country allows trade and becomes an exporter of a good,
a. domestic producers gain and domestic consumers lose.
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b. domestic producers lose and domestic consumers gain.
c. domestic producers and domestic consumers both gain.
d. domestic producers and domestic consumers both lose.
26. When a country allows trade and becomes an exporter of a good, which of the followingis not a
consequence?
a. The price paid by domestic consumers of the good increases.
b. The price received by domestic producers of the good increases.
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c. The losses of domestic consumers of the good exceed the gains of domestic producers of the
good.
d. The gains of domestic producers of the good exceed the losses of domestic consumers of the
good.
Figure 9-l
The figure illustrates the market for coffee in Guatemala.
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27. Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area
a.A tt B tt C.
b.A+B+C tt D+F.
c.A tt B+C tt D+F+G.
d.A+B tt C+D tt F+G+H.
28. Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala
a. increases by the area B + D.
b. increases by the area C + F.
c. decreases by the area B + D.
d. decreases by the area D + G.
29.
Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala
a. increases by the area B
*
D.
b. increases by the area B + D + G.
c. decreases by the area C + F.
d. decreases by the area G.
30 Refer to Figure 9‐ 1 ヽVith trade,total surplus in the Guatcmalan comcc markct amounts to
a l,250
こ [￨:::
d l,980