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Econ 101 Final Review | Complete Solution
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Econ Final Review
Chapter 1
1.    The economic way of thinking will
a.    Lead a person to think in normative terms
b.    Allow you to make better decisions
c.    Have no influence on your decision making
d.    Help you get rich
2.    The economic way of thinking is best described as
a.    The glossary of terms at the back of your textbook
b.    The collected writings of the economics Nobel Prize winners
c.    A set of economic rules handed down from one generation to the next
d.    An analytical framework enabling one to reach informed conclusions
3.    Decisions must frequently be made by individuals, organizations, and even nations. Facilitating better decision-making is a fundamental goal of economics. The analytical framework advocated by economists that enables one to make informed decisions is called
a.    Survival of the fittest
b.    The science of positive economic analysis
c.    The science of enlightenment
d.    The economic way of thinking
4.    Suppose an employer is trying to decide whether or not to hire another worker. Which of the following is not an aspect of the economic way of thinking that would apply in this decision making process?
a.    Flipping a coin
b.    Self-interest
c.    Responding to incentives
d.    Rationality.
5.    A rational, self-interested student decides whether to purchase a textbook required for a particular class based on all of the following, except
a.    Whether the textbook has an attractive dust jacket
b.    The price of the text book
c.    Whether he can borrow the textbook from his friends
d.    His limited resources, such as income and time.
6.    Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider
a.    The fact that raising taxes is generally unpopular and may result in a potential loss in a future election
b.    That taxpayers may prefer to use mass transit and save on gas cost
c.    How to spend the funds for their own individual gain
d.    That taxpayers may prefer to commute in their own cars rather than depend on mass transit.
7.    A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the following, except
a.    The winning potential of the sports team using the stadium
b.    The total cost of building the sports stadium
c.    All other alternative sources of funding the sports stadium
d.    The impact of that tax on possible reduction of tourism in the local region.
8.    To which of the following household-type(s) does the phrase “unlimited wants and unlimited resources” apply?
i.    A low-income household
ii.    A middle-income household
iii.    A high-income household
a.    ii only
b.    i only
c.    both i and ii, but not iii.
d.    i, ii, and iii.
9.    Economics is
a.    The study of how the stock market works
b.    The study of how limited resources are allocated to satisfy unlimited wants
c.    The study of how unlimited resources are allocated to satisfy limited wants
d.    The study of money
10.     The ultimate purpose of economics is
a.    To motivate people so they work harder
b.    To teach us how to make money
c.    To enable one to make predictions on what the stock market is going to do
d.    To study how individuals make choices.
11.    What’s the difference between microeconomics and macroeconomics?
a.    Microeconomics examines the big picture while macroeconomics examines individual units
b.    Microeconomics deals with positive analysis while macroeconomics deals with normative analysis
c.    Microeconomics is the study of decision making undertaken by individuals while macroeconomics looks at the behavior of the economy as a whole
d.    Microeconomics lends itself to empirical analysis while macroeconomics uses the concept of incentives.
12.     One reason that economists use microeconomics as the basis of macroeconomic analysis is
a.    That all choices are made by individuals and firms
b.    Microeconomic analysis was developed before macroeconomic analysis
c.    Macroeconomics is just microeconomics applied to different questions
d.    That the small details are more important than the large overview.
13.    Microeconomics focuses on
a.    Aggregate economic variables like the rate of unemployment or national income
b.    Inflation and growth in our overall economy
c.    All households and firms grouped together and how they interact with the government
d.    Decisions made by individual households and firms


14.    The impact of the national debt on the economy’s unemployment is an example of
a.    Macroeconomics analysis
b.    Behavior economics
c.    Irrational economics
d.    Microeconomic analysis
15.     Each country has a unique system to allocate its scarce resources. However, the economic system of most of the world’s nations are a combination of the central planning system and the price system.
16.    Until 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce.  This represents a shift in the economic system of Dor from
a.    Market System to Central Planning
b.    Central Planning to Market System
c.    Central Planning to Command and Control
d.    Command and Control to Price system.
17.    The three fundamental economic questions that a nation addresses in order to allocate society’s scarce resources include all of the following except:
a.    Why will the items be produced?
b.    For whom will the items be produced?
c.    How will these items be produced?
d.    What and how much will be produced?
18.    A society’s institutional mechanism for determining the way in which scarce resources are used to satisfy human desires refers to its
a.    Economic system
b.    Macroeconomics
c.    Economy
d.    Economic infrastructure
19.    One of your classmates, Sally, is a hardworking student, serious about her classes, and conscientious about her grades.  Sally is also involved, however, in volunteer activities and an extracurricular sport.  Is Sally displaying rational behavior?
a.    Yes, she is devoting some of her time to the benefit and well-being of others even if her grades suffer.
b.    Yes, she is using her time allocated among school, studying, sports, and volunteer work in a manner she deems best.
c.    No, leisure time is preferred—she should devote all of her time to sports.
d.    No, if she is serious about grades, all of her time should be spent studying
20.    The notion that people do not intentionally make decisions that would leave them worse off is known as the rationality assumption.
21.    The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them is known as bounded rationality.


22.    People may appear to use rules of thumb, as suggested by the assumption of bounded rationality, even though they may really be behaving in a manner suggested by the rationality assumption if
a.    They are seen to adjust their behaviors when they face sufficiently altered circumstances
b.    They face very different choices over a short period of time
c.    They face persistently predictable range of choices for a period of time
d.    They are seen to ignore substantial changes in the circumstances they face
For questions 23 and 24, consider two models for estimating, in advance of an election, the shares of votes that will go to rival candidates.  According to one model, pollsters’ surveys of a randomly chosen set of registered voters before an election can be used to forecast the percentage of votes that each candidate will receive.  This first model relies on the assumption that unpaid survey respondents will give truthful responses about how they will vote and that they will actually cast a ballot in the election.  The other model uses prices of financial assets (legally binding IOUs) issued by the Iowa Electronic Market, operated by the University of Iowa, to predict electoral outcomes.  The final payments received by owners of these assets, which can be bought or sold during the weeks and days preceding an election, depend on the shares of votes the candidates actually end up receiving. This second model assumes that owners of these assets wish to earn the highest possible returns, and it indicates that the market prices of these assets provide an indication of the percentage of votes that each candidate will actually receive on the day of the election.
23.    The model for forecasting electoral results that is more firmly based on the rationality assumption of economics is
a.    Either of the two models of estimating the percentage of votes that each candidate will actually receive on the election day.
b.    Neither of the two models of estimating the percentage of votes that each candidate will actually receive on the election day.
c.    The pollsters’ surveys of a randomly chosen set of registered voters bout how they will vote on the election dy.
d.    The Iowa Electronic Market model using prices, as the traders on this exchange have a strong incentive to make the best possible forecast
24.    An economist can evaluate which is the better model for forecasting electoral outcomes by
a.    Comparing the predictions of the two models with actual election results
b.    Evaluating which one of the two methods is easier to understand for the public
c.    Comparing the number of respondents in the opinion poll with the number of the traders in the Iowa Electronic Market
d.    Comparing the cost of collecting information about the predictions of the two models.

 

25.    Based on the recommendation of a friend, you buy a ticket to attend a movie with high expectations. After seeing this movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation
a.    Demonstrates that you behaved irrationally because you didn’t et enough information prior to attending the movie.
b.    Demonstrates that the rationality assumption is false because you were worse off for seeing the movie.
c.    Is consistent with rational behavior because you had though that you were going to like the movie
d.    Has nothing to do with the rationality assumption
26.    Which of the following is a true statement about self-interest as used in the study of economics?
a.    Self-interest means that people want greater levels of wealth more than anything else.
b.    Self-interest implies that people are selfish.
c.    Any action can be based on self-interest if the person has some reason for the action
d.    Self-interest means that people will never perform an act of charity.
27.    Economics
a.    Assumes individuals are rational and respond to different incentives
b.    Assumes individuals really have no choices other than what society imposes on them
c.    Assumes irrationality if people are paid enough
d.    Assumes government involvement in the economy is always beneficial
28.    The rationality assumption as used in economic
a.    Has been proven by experimental analysis
b.    Presumes that everyone can perform sound logical analysis at all times
c.    Is widely accepted by other social science disciplines as well
d.    States that people respond to incentives.
29.    Which of the following statements is true?
a.    Economics is not a science since the models developed are a simplification of the real world
b.    In order for a discipline to be considered a science it must be possible to set up laboratory experiments
c.    Economics is a science since the study of economics uses models and theories that are subject to empirical testing
d.    Economics is not a science since only biology, physics and chemistry can be called a science
30.    The ceteris paribus assumption means
a.    People respond to incentives
b.    More is better
c.    Other things equal
d.    All people are rational

 

31.    An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of a good. Empirical testing of this model would involve
a.    Carefully tracing all steps from the assumptions to the implication to make sure there have been no errors in logic
b.    The collection of data to evaluate the usefulness of the model
c.    Asking a lot of people if they think the model is correct
d.    Checking the assumptions carefully to make sure that they realistically depict human behavior
32.    Which of the following is not true about economic models?
a.    In comparing two models, the simpler one is better, other things equal.
b.    Models are used to explain and predict human behavior
c.    A model is a simplified representation of the real world
d.    A good model must be realistic
33.     A higher minimum wage will reduce employment opportunities for minimum wage workers. Positive Economics
34.    Increasing the earning of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this. Normative economics.
35.    Everyone should enjoy open access to healthcare. Normative economics.
36.    Healthcare subsidies will increase the consumption of health care. Positive economics.
37.    A politician states “taxes should be raised to provide more spending on school lunch programs” this is
a.    A normative economic statement
b.    A positive economic statement
c.    A ceteris paribus assumption
d.    An economic fact
38.    An increase in the price of gasoline will reduce the amount of gasoline purchased. This is
a.    A negative economic statement
b.    A positive economic statement
c.    A normative economic statement
d.    An economic assumption
39.    “We ought to do more for the education of our children.” Statements using words like ought or should are
a.    Irrational statements
b.    Empirical statements.
c.    Positive statements.
d.    Normative Statements.
40.    Consider everything remains constant, and falling gasoline prices will result in additional vacation travel. Which of the following (initially assumed constant) could occur and thus offset the stated outcome?
a.    An increase in hotel taxes at popular resorts
b.    Improved highway safety
c.    Higher unemployment
d.    Lower income taxes
41.    Once you determine the price of a notebook at the bookstore, you will decide how many books to buy
a.    Number of books to buy is the dependent variable
b.    Price of a book is the independent variable
42.    You decide how many credit hours to register for this semester once the university tells you how many work-study hours you will be assigned.
a.    Number of credit hours is the dependent variable
b.    Work-study hours assigned is the independent variable
43.     You anticipate earning a higher grade on your next economics exam because you studied more hours in the weeks receding the exam.
a.    Hours studying is the independent variable.
b.    Your anticipated grade is the dependent variable.
44.    What kind of relationship is shown in the table?
 
a.    An inverse relationship
b.    A direct relationship
c.    A constant relationship
d.    A non-linear relationship
45.    What kind of relationship is shown in the graph?
 
a.    An inverse relationship
b.    A quadratic relationship
c.    A direct relationship
d.    An exponential relationship

Chapter 2
1.    Does the richest person in the world face the problem of scarcity?
a.    No, because having money means that you can buy whatever you want to buy
b.    No, because having money means that you do not have to choose between present and future consumption
c.    Yes, because if the rich were to purchase a lot of goods at one time shortages would result
d.    Yes, because even if you have money you will never be able to satisfy all of your wants and must therefore make choices.
2.    Scarcity
a.    Results from unlimited wants coupled with limited resources
b.    Can be eliminated with improvements in technology
c.    Is the same thing in economic terminology as a shortage
d.    Results from unlimited resources coupled with limited wants.
3.    The existence of scarcity requires
a.    That the government allocates resources
b.    Having unfulfilled wants during times of economic depression
c.    People to make choices and face trade-offs in using their resources
d.    Greater scientific advancements occur to eliminate it.
4.    Any activity that results in the conversion of resources into products that can be used in consumption is called
a.    Substitution
b.    Production
c.    Transformation
d.    Derived demand.
5.    Factors of production include
a.    Hydrogen, oxygen and carbon
b.    Land, labor, physical capital, human capital and entrepreneurship
c.    Land, human capital, financial capital, and technology
d.    Materials, energy, and organization.
6.    Julie goes into a cooking academy to become a chef.  This is an example of
a.    An investment in human capital
b.    Entrepreneurship
c.    An investment in physical capital
d.    In increase in labor
7.    Economic good are
a.    Goods that are scarce
b.    Always tangible goods
c.    Equivalent to all goods and services
d.    Unrelated to human wants
8.    Which of the following is not a factor of production?
a.    Land
b.    Money
c.    Entrepreneurship
d.    Human capital
9.    Why do economists avoid making the distinction between wants and needs?
a.    Individual wants are limited making it easier for economists to address this concept
b.    Every individual has exactly the same set of needs.  Economists consider individual wants because they differ from one individual to another
c.    The term need is subjective making it difficult to distinguish between something someone wants and something they need
d.    Individual needs to not exist so it is necessary to only consider individuals’ wants.
10.    Many state governments claim a shortage of funds because there are “unmet needs.” This claim is
a.    True because higher taxes can eliminate the “unmet needs.”
b.    False because of scarcity
c.    True if most of the people in the state are rich and false if most of the people in the state are poor.
d.    True because with enough money you can eliminate shortages.
11.    Each individual must make choices because
a.    Even if ones wants re completely satisfied, insufficient time exists to fully enjoy all of them.
b.    Resources are limited ad therefore cannot satisfy one’s many competing wants.
c.    Wants are sometimes mixed up with needs
d.    Needs are more important than wants.
12.     When an individual proclaims the need for a new car, the person typically means
a.    They want something they currently do not have
b.    That having such a possession would be nirvana.
c.    That without a new car, their life cannot go on
d.    That their ability to get around will cease.
13.    Opportunity cost is best defined as the next best alternative(s) that must be sacrificed to obtain something or to satisfy a want.
14.    Which of the following would least likely be, for the typical student, the opportunity cost of attending a class at 11:00 a.m.?
a.    Partying with a close circle of friends
b.    Taking a much needed course offered by another department
c.    Accepting work at the mall as a part-time sales associate.
d.    Getting the “jump” on most students by getting to the dining hall for lunch before the mid-day rush
15.    The opportunity cost of attending a class at 11:00 a.m. will likely differ from the opportunity cost of attending a class at 8:00 a.m. because
a.    The number and variety of alternatives at 11 a.m. are likely to differ from those available at 8 a.m.
b.    Nothing is going on at 8 a.m.
c.    A student’s evaluation of any given set of alternatives is likely to be time-sensitive
d.    Both A and C are correct

16.    Recently, a woman named Mary Krawiec attended an auction in Troy, NY. At the auction, a bank was seeking to sell a foreclosed property: a large Victorian house suffering from years of neglect in a neighborhood in which many properties had been on the market for years yet remained unsold.  Her $10 offer was the highest bid in the auction, and she handed over a $10 bill for a title to ownership.  Once she acquired the house, however, she became responsible for all the taxes on the property amounting to $3,500 and for an overdue water bill of $2,000. In addition, to make the house habitable, she and her husband devoted months of time and unpaid labor to renovating the property.  In the process, they incurred explicit expenses totaling $66,898.
a.    Calculate Mary Krawiec’s explicit cost. $72,408.
b.    Mary Krawiec’s total cost is higher than her explicit cost.
c.    If the bank were to own the property, its total costs were likely to be higher than Mary Krawiec’s explicit cost.
d.    The bank was wiling to sell the house at auction to Ms. Krawiec for only $10 because if the bank paid to renovate the property, paid the back taxes and paid the overdue water bill,
i.    The expected selling price for the property would have been higher than Mary Krawiec’s explicit costs.
ii.    The expected selling price for the property would have been only ten percent higher than the bank’s total costs.
iii.    The expected selling price for the property would have been lower than the bank’s total costs
iv.    The expected selling price for the property would have been higher than Mary Krawiec’s total costs.
17.    Opportunity cost
a.    Is only considered for goods in short supply
b.    Is the value of all alternatives forgone as a result of choosing some given alternative
c.    Is the value of the next best alternative as a result of choosing some given alternative
d.    Either B or C.
18.    The following table lists the costs incurred by a student attending a public university for one semester.
 
What is the total opportunity cost that the student incurs by attending college for one semester?
a.    $10,500
b.    $18,000
c.    $19,200
d.    $11,200

19.    Based on the information in the table, the opportunity cost to this student of allocating enough additional study time on economics to move her grade up from a 90 to a 100 is a reduction in her biology grade of 10 points.
    
20.    A production possibilities curve represents
a.    All possible combinations of output that could be produced assuming fixed productive resources and their efficient use.
b.    All possible combinations of output that could be produced at zero opportunity cost
c.    All possible combinations of output that could be produced assuming changing technology.
d.    The notion that greater quantities of all goods may be produced.
21.    The graph shows a production possibilities curve for a student who currently spends 8 hours a week studying.  How could the student get a B in both classes?
                           

a.    The student could spend more time studying marketing than economics
b.    The student could study more than 8 hours a week
c.    The student spends more time studying economics than marketing
d.    The student cannot get a B in both classes.
22.    Farmer McDonald has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn or some combination of both.  The accompanying figure refers to farmer McDonald’s
    

a.    Terms of trade line
b.    Productions possibilities curve
c.    Production function
d.    Budget constraint
23.     In the diagram, a productions possibilities curve (PPC) is shown for a nation facing increasing opportunity costs for producing video games.
 
Show how the PPC changes when new programming language is invented that is less costly to cote and is more memory-efficient, enabling the use of smaller game cartridges.  Properly label this curve.
    
24.    A point inside the PPC means that
a.    This particular economy has no comparative advantage in production any economic good
b.    Resources are not being fully utilized due to unemployment or inefficiency.
c.    One good has no opportunity cost relative to another
d.    Economic growth has taken place
25.    Which of the following statements about PPC is not true?
a.    A linear PPC illustrates the concept of efficiency
b.    A linear PPC illustrates the concept of increasing opportunity costs
c.    A PPC illustrates the concept of opportunity cost
d.    A PPC illustrates the concept of scarcity
26.    A PPC that is bowed outward (from the origin) represents the concept that
a.    Greater quantities of one good can be produced without reducing the production of other goods
b.    Resources are not scarce
c.    Production of additional units of one good requires that increasing quantities of the other good be given up
d.    Opportunity costs are constant.
27.    The PPC curve will shift outward (upward and/or to the right) when
a.    There is a reduction in labor
b.    Corporate profits increase
c.    Resources are used more efficiently
d.    Economic growth occurs

 

28.    Economic growth implies
a.    You can only have more of one good by having less of another
b.    You can now have more of all goods
c.    Opportunity costs are decreasing
d.    Fewer resources are available.
29.    Economic growth can be pictured in a graph by
a.    Making the PPC less bowed out
b.    Shifting the PPC inward
c.    Shifting the PPC upward and outward
d.    Making the PPC more curve or bowed out
30.    Greater economic growth is shown as
a.    A more curved (more bowed) PPC
b.    The distance to the PPC shifts outward
c.    A closer distance to the origin of the PPC
d.    A steeper slope of the PPC
31.    If a country devotes more resources toward the production of capital goods and less toward consumer goods, then
a.    That country will not experience any growth
b.    Scarcity will increase
c.    That country will experience greater economic growth
d.    That country will experience unemployment.
32.    You are investing your resources in a college education because
a.    You have no opportunity cost for the use of your time
b.    Your personal PPC will grow faster by investing in human capital and you will be better off.
c.    There is no trade-off for you between current and future consumption
d.    There is no opportunity cost for money spent on tuition.
33.    Whenever a society forgoes current consumption to invest in capital goods,
a.    The less capital the society can produce in the future
b.    The less society can consume next year
c.    The easier it will be for the society to consume less in the future because people will become accustomed to less
d.    The more society can consume in the future
For questions 34 and 35, consider this situation. You can wash, fold and iron a basket of laundry in two hours and prepare a meal in one hour.  Your roommate can wash, fold and iron a basket of laundry in three hours and prepare a meal in one hour.
34.    The absolute advantage in laundry is held by ____ and in meal prep by ____.
a.    You; neither
b.    Neither; you
c.    Your roommate; you
35.    The comparative advantage in laundry is held by ____ and in meal prep by ___.
a.    Neither; you
b.    Your roommate; you
c.    You; your roommate

36.    A professor with a Ph.D. in Economics can write a short essay in economic in 1 hour and can mow the lawn in 2 hours.  A student in economics can write a short essay in economics in 2 hours and mow the lawn in 2.5 hours.  Which of the following statements is true?
a.    The professor should do both the jobs as he can finish both jobs in a shorter period of time
b.    The student should write the essay since he has the comparative advantage in writing
c.    The professor should write the essay since he has the comparative advantage in writing
d.    The professor should write the essay since he has the absolute advantage in writing
37.    The productivity gains by specialization are due to
a.    Lower opportunity costs from switching production from one good to another
b.    Absolute advantage
c.    Comparative advantage
d.    Scarcity.
38.    What is the difference between absolute and comparative advantage?
a.    Absolute advantage is when someone can produce more of a good using a given quantity of inputs while comparative advantage is when someone can produce a good at a lower opportunity cost
b.    Comparative advantage is when someone can produce more of a good using a given quantity of inputs while absolute advantage is when someone can produce a good at a lower opportunity cost
c.    Comparative advantage applies to all of the resources while absolute advantage only applies to human capital
d.    Absolute advantage is influenced by the law of increasing relative cost while comparative advantage is not.
For questions 39 and 40, consider this situation. Steve can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour.  His roommate Mike can wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour.
39.    The absolute advantage in laundry is held by
a.    Mike
b.    Steve
c.    Neither person
40.    The comparative in meal preparation is held by
a.    Steve
b.    Mike
c.    Neither person

 

 

41.    Ed has an absolute advantage in painting and Joey has an absolute advantage in ironing.  Assuming that the population consists only of Ed and Joey, we know that
a.    Ed has a comparative advantage in painting and Joey has a comparative advantage in ironing
b.    Neither has a comparative advantage in either task
c.    We can’t tell who has a comparative advantage in painting or in irnoning
d.    Ed has a comparative advantage in ironing and Joey ahs a comparative advantage in painting.
42.    Division of labor refers to
a.    Workers being prevented from forming unions
b.    Workers being assigned specific tasks
c.    Separating workers based on demographics
d.    Workers performing multiple tasks
43.    The division of labor increases the output of society by
a.    Allowing specialization based on the concept of absolute advantage
b.    Eliminating decreasing returns
c.    Eliminating scarcity
d.    Allowing resources to specialize in the tasks for which they have a comparative advantage
44.    The division of productive activities among persons and regions so that no one individual or region is totally self-sufficient is known as
a.    Taking advantage of a trading partner
b.    Specialization
c.    Comparative value
d.    International trade
45.    When Adam Smith’s ten pin workers specialized, they were able to increase the output of pins in a day from 200 to 48,000. One reason for the increase in pin production was due to
a.    The threats the supervisor made to fire them if they did not increase output
b.    The bonus they received when they produced more pins
c.    The mastery each worker achieved over his assigned task
d.    The boredom the workers suffered when they stopped making a whole pin and only concentrated on one task such as straightening the wire
46.    Specialization of labor and trade yield greater economic efficiency when applied to interstate trade
a.    But only when specialization is based on absolute advantage
b.    And when applied to international trade
c.    But do not yield greater economic efficiency when applied to international trade
d.    But have no effect on efficiency when applied to international trade
47.    Which of the following statements is true?
a.    Specialization affects international trade but not interstate trade
b.    Everyone can benefit when people specialize where they have a comparative advantage and then trade with one another
c.    Specialization affects interstate trade but not international trade
d.    Comparative advantage applies to nations but not people
48.    Canada goes to considerable lengths to protect its television program and magazine producers from U.S. competitors.  The US often seeks protection from food imports from Canada. From an economy-wide viewpoint, these efforts are
a.    Political motivations to impose government control over various aspects of the two economies.
b.    Desirable since they protect the jobs of entertainment workers in Canada and farmers in the US
c.    Desirable since without them Canadian cultural identity will be weakened and the US will suffer food shortages
d.    Misguided because the enhanced output from specialization based upon comparative advantage is restricted.
49.    Specialization and comparative advantage
a.    Lead to greater productivity
b.    Lead to greater output even if you can do everything better than someone else
c.    Lead to international trade and overall gains for the nations involved
d.    All of the above
Chapter 3
1.    Other things remaining equal, the law of demand says that higher prices will lead to a
a.    Larger quantity demanded and lower prices to a smaller quantity demanded
b.    Larger quantity demanded and lower prices to a larger quantity demanded
c.    Smaller quantity demanded and lower prices to a larger quantity demanded
d.    Smaller quantity demanded and lower prices to a smaller quantity demanded
2.    Which of the following is consistent with the law of demand?
a.    The state of California has less grape regulation than NY and grape production is higher in NY
b.    In increase in supply of MP3 players causes a decrease in the consumption of MP3 players
c.    Airplanes flew with fewer passengers after the terrorist strikes of 9/11
d.    A reduction in the price of salt led to a 5 percent increase in the quantity of salt purchased
3.    Based on the table, which of the following is true?
a.    The money prices of both goods increased, the relative price of hospital rooms increased, and the relative price of hotel suites decreased
b.    The money prices of both goods increased and the relative prices of both goods increased
c.    The money prices of both goods increased and the relative prices of both goods decreased
d.    The money prices of both goods increased, the relative price of hospital rooms decreased and the relative price of hotel suites increase.
 

For questions 4 and 5, suppose a bag of coffee is $15 and a box of tea is $9
4.    what is the relative price of a bag of coffee?
a.    0.600
b.    6.000
c.    1.667
d.    24.000
5.    What is the relative price of a box of tea?
a.    1.667
b.    6.000
c.    0.600
d.    24.000


6.    Suppose that at first the price of a jar of peanut butter is $15 and the price of a jar of jelly is $9. Then, the price of a jar of peanut butter changes to $30 and the price of a jar of jelly changes to $21. What has happened the money prices and relative prices of these two goods?
a.    The money price of a jar of peanut butter and a jar of jelly have risen and the relative price of a jar of peanut butter has fallen while relative price of a jar of jelly has risen
b.    The money and relative prices of a jar of peanut butter and a jar of jelly have not changed
c.    The money price of a jar of peanut butter and a jar of jelly have fallen and the relative price of a jar of jelly and a jar of peanut butter have risen
d.    The money price of a jar of peanut butter and a jar of jelly has risen and the relative prices of a jar of jelly and a jar of peanut butter have fallen.
7.    The following table indicates the demand schedules for four types of consumers: A, B, C, and D and the number of consumers in each group (top row). The quantity demanded by each type of consumer (Qa, Qb, Qc, and Qd) is shown for market prices ranging from $10 down to $4. What is the combined quantity demanded at a market price of $7?
 
a.    329,000
b.    4,750
c.    25,000
d.    4,700
8.    The following table indicates the demand schedules for four types of consumers.  Suppose there are 10,000 consumers, evenly divided between the four types of customers below. (A-D) The quantity demanded at a price of $7 is
 
a.    62,500
b.    42,000
c.    60,000
d.    58,000

 

 

9.    Suppose there are 10,000 consumers, evenly divided between four types (A,B,C, and D) of the consumers in the table below.
 
a.     If the price of a good is $15, what is the quantity demanded in the market?
i.    6
ii.    15,000
iii.    24
iv.    30,000
b.    If the price of the good is $9, what is the quantity demanded in the market?
i.    184
ii.    14
iii.    46
iv.    115,000
For questions 10-13, indicate whether the following events would cause an “increase or decrease in demand” or an “increase or decrease in the quantity demanded” for high-speed satellite Internet access service, which is a normal good.
10.    Firms providing cable Internet access services reduce their prices
a.    Increase in demand
b.    Decrease in demand
c.    Increase in quantity demanded
d.    Decrease in quantity demanded
11.    Firms providing high-speed satellite internet access services reduce their prices
a.    Increase in demand
b.    Decrease in demand
c.    Increase in quantity demanded
d.    Decrease in quantity demanded
12.    There is a decrease in the incomes by consumers of high-speed satellite internet access services
a.    Increase in demand
b.    Decrease in demand
c.    Increase in quantity demanded
d.    Decrease in quantity demanded
13.    Consumers of high-speed satellite Internet access service anticipate a decline in the future price of these services.
a.    Increase in demand
b.    Decrease in demand
c.    Increase in quantity demanded
d.    Decrease in quantity demanded
14.    If the price of bacon rises, and as a result the demand for sausage increases, this implies that these two good are substitutes.
15.    If the price of tennis racquets falls, and as a result the demand for tennis balls increases, this implies that these two good are complements.
16.    If the price of coffee rises, and as a result the demand for sugar falls, this implies that these two goods are complements.
17.    If the price of automobiles falls and as a result the demand for motorbikes falls, this implies that these two good are substitutes.
18.    All of the following pairs of goods are substitutes except
a.    We observe the p

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Econ Final Review Chapter 1 1. The economic way of thinking will a. Lead a person to think in normative terms b. Allow you to make better decisions c. Have no influence on your decision making d. Help you get rich 2. The economic way of thinking is best described as a. The glossary of terms at the back of your textbook b. The collected writings of the economics Nobel Prize winners c. A set of economic rules handed down from one generation to the next d. An analytical framework enabling one to reach informed conclusions 3. Decisions must frequently be made by individuals, organizations, and even nations. Facilitating better decision-making is a fundamental goal of economics. The analytical framework advocated by econ...
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