Download Exam #1 Answer Key – Fall 2007 (Version A)

ECON 1100 – Global Economics (Section 01)
Exam #1 Answer Key – Fall 2007 (Version A)
Multiple Choice Questions ( 2 12 points each):
1.
The ______________ states that an individual should undertake an action if and
only if the additional benefits from doing so are at least as great as the additional
costs of doing so.
c.
Cost-Benefit Principle
2.
Mike can assemble 5 bicycles in a single day, while Nancy can assemble 8
bicycles in a single day. Based upon this information alone, we know that
b.
Nancy possesses an Absolute Advantage in assembling bicycles.
3.
In 2002 College graduates earned $18,750 per year more than High School
graduates. If this difference had instead been $30,000 per year, then we would
expect
a.
more people to pursue a college education.
4.
The “Principle of Comparative Advantage” states that
b.
a society can produce a greater amount of total output when individuals
focus their production on those activities for which they have a
Comparative Advantage.
5.
“Voluntary Trade” generally
b.
makes everyone better off.
6.
Supply refers to
b.
the entire relationship between the price of a good and the quantity that
firms are willing and able to sell, all other factors fixed.
7.
Chris’ reservation price for purchasing a ticket to see “Velvet Revolver” in
concert is $200. If the price of a ticket is $60, then he will
c.
buy a ticket, and realize a Consumer’s Surplus of $140 from the purchase.
8.
Point B in the graph above is
b.
attainable and efficient
9.
If this society used all of its productive resources to produce only Guns, then they
could produce
d.
more than 1,100 Guns.
10.
One of the principle functions of money is that it serves as a “medium of
exchange.” This role could be described by recognizing that money
b.
is an asset used as payment when purchasing goods and services.
11.
Which of the following conditions is necessary for the free market outcome to be
efficient?
d.
All of the above are necessary for the free market outcome to be efficient.
12.
One of the desirable features of a free market system is that “disequilibria are self
correcting.” This characteristic can be best described as follows:
d.
if market conditions change, market forces will lead to a “new
equilibrium,” without the need for a central authority to redirect
resources.
13.
This past Monday Amanda watched the Braves beat the Marlins at Turner Field.
While at the game she ate 3 hotdogs. Her Marginal Benefits for the third hotdog
was $2. Each hotdog cost $4. Based upon this information, we can tell that
a.
her Economic Surplus would have been greater if she had instead eaten
only two hotdogs.
14.
__________ states that all other factors fixed, a greater quantity of a good will be
demanded at lower prices.
c.
The “Law of Demand”
15.
__________ is the subfield of economics that compares the structure and
performance of different types of economic organization.
c.
Comparative Economic Systems
16.
In equilibrium, _____ units would be traded each at a price of _____.
b.
7,250; $4.00.
17.
If 3,700 were traded, then the resulting Deadweight-Loss
b.
would be equal to “area (f) plus area (g).”
18.
If demand were to increase, the new equilibrium price
a.
would be greater than $4.00 per unit.
19.
__________ is an economic system in which the means of production are owned
by the government, and the government decides how to allocate productive
resources across competing uses.
a.
Socialism
20.
In which of the following countries do individuals enjoy the least amount of
“Economic Freedom”?
c.
Cuba.
21.
The value of the Gini-Coefficient in Bulgaria is (.26), while the value of the GiniCoefficient in Mexico is (.48). These values directly suggest that
b.
there is a more even distribution of income in Bulgaria than in Mexico.
22.
Company Unions
b.
consist of members who are employed by a single enterprise, irrespective
of the task they perform within the enterprise.
23.
Under “Indicative Planning”
b.
the government relies upon the voluntary response of the private sector to
a set of guidelines jointly formulated by government, industry, and labor.
24.
The economy of Canada is best described as
c.
a Mixed Economy.
25.
For the most part, the behavior of decision makers in Market Economies is
primarily influenced by
b.
Material Incentives
26.
_________ refers to “the degree to which decision makers in an economy
experience a real system that differs from the nominally defined system.”
a.
Corruption
27.
Suppose that pizza is a Normal Good and that Tacos are a substitute for pizza.
Which of the following would likely lead to an increase in demand for pizza?
b.
An increase in the price of tacos.
28.
An entrepreneur
b.
is someone who organizes and manages a business, typically with
considerable initiative and exposure to risk.
29.
When resources are scarce, decision makers face tradeoffs. As a result,
d.
having more of one thing typically means getting by with less of something
else.
30.
Which of the following is NOT one of the primary economic institutions that
characterize a modern economy?
c.
Deadweight-Loss.
31.
In a free market economy, households
c.
interact with firms in both “Markets for Factors of Production” and
“Markets for Goods and Services.”
32.
Bobby owns a one of a kind “Kitty Karry-All” doll. His reservation price as a
seller of this item is $50. Cindy’s reservation price as a buyer of this item is
$120. If Bobby sells this doll to Cindy, the resulting Social Surplus would
b.
be equal to $70.
33.
The Sierra Club is a good example of
c.
a Non-Governmental Agency.
34.
The behavior of economic decision makers is restricted by the “Legal
Framework,” “Rules within Organizations,” “Procedures,” and “Custom, Culture
and Tradition.” “Procedures” refer to
a.
informal guidelines which dictate how much of the day-to-day behavior of
an institution is conducted.
35.
John owns a 500 acre peanut farm just outside of Tifton, GA. He has decided to
stop farming and sell his land to a housing developer. When selling his land,
which of the following property rights is he exercising?
b.
the “Disposal Right.”
36.
A “Rational Decision Maker” refers to
d.
an individual with well defined goals who takes actions to fulfill those
goals as best as possible.
37.
An Increase in Supply is graphically illustrated as
c.
a rightward shift of the entire Supply Curve.
38.
The Lorenz Curve provides a graphical illustration of
b.
the distribution of income within a society.
39.
Total Social Surplus
a.
is equal to the sum of Total Consumers’ Surplus and Total Producers’
Surplus.
40.
Consider a market in which there is currently “Inefficiency from too little trade.”
This observation suggests that
d.
More than one of the above answers is correct.