ECON 4. Microeconomics.
Directions. Select the best answer. Use a 50 item Scantron Answer Sheet. Write your name, "Micro Test 1," and class day and time on the front side of the Answer Sheet. Use a #2 pencil. The grading machine will pick up incomplete erasures. Erase completely or get a new Answer Sheet. Do this test at home, including putting your name on it. Do NOT work on this in class. Hand the Answer Sheet in as soon as you come into class. Mail the Answers in if you cannot make it to class. (See Class Rules.) 50 questions. 10 points.
For Questions 1-4:
A) scarcity B) economics C) microeconomics D) macroeconomics
E) factors of production
1. The social science that seeks to understand the choices people make in using scarce resources to meet their wants.
2. The basic inputs of labor, capital, and natural resources used in producing all goods and services.
4. A situation in which there is not enough of a resource to meet all of everyone's wants.
5. What is not the one of the four basic economic choices?
A) How to produce it. B) For whom to produce it. C) When to produce it.
D) What to produce. E) Who will produce it.
For Questions 6-9:
A) labor B) capital C) natural resources D) opportunity cost E) economic efficiency
6. The contributions to production made by people working with their minds and muscles.
7. A state of affairs in which it is impossible to make any change that satisfies one person's wants more fully without causing some other person's wants to be satisfied less fully.
8. All means of production that are created by people, including tools, industrial equipment, and structures.
9. The cost of a good or service measured in terms of the forgone opportunity to pursue the best possible alternative activity with the same time or resources.
10. What is the difference between out-of-pocket costs and opportunity costs in Applying Economic Ideas (AEI) 1.1?
A) forgone income B) room and board C) personal expenses D) all of the above E) NOTA
11. A situation in which it is not possible, by redistributing existing supplies of goods, to satisfy one person's wants more fully without causing some other person's wants to be satisfied less fully.
12. The process of looking for new possibilities - making use of new ways of doing things, being alert to new opportunities and overcoming old limits.
13. The ability to produce a good or service at a relatively lower opportunity cost than someone else.
14. A situation in which it is not possible, given available knowledge and productive resources, to produce more of one good without forgoing the opportunity to produce some of another good.
For Questions 15 - 18:
A) positive economics B) normative economics C) market D) theory E) model
15. The area of economics that is concerned with facts and the relationships among them.
16. A synonym for theory; in economics, often applied to theories that are stated in graphical or mathematical form.
17. A representation of the way in which facts are related to one another.
18. The area of economics that is devoted to judgments about whether economic policies or conditions are good or bad.
19. Who coined the term, "the invisible hand"?
A) Smith B) Malthus C) Ricardo D) Mill E) Marx
For Questions 20-23:
A) production possibility frontier B) empirical C) econometrics D) conditional forecast
20. The statistical analysis of empirical economic data.
21. A graph that shows possible combinations of goods that can be produced by an economy given available knowledge and factors of productions.
22. A prediction of future economic events in the form "If A, then B, other things being equal."
23. For a straight line, the ratio of the change in the y value to the change in the x value between any two points on the line.
For Questions 24-27:
A) positive slope B) direct relationship C) negative slope D) inverse relationship
24. A relationship between two variables in which an increase in the value of one variable is associated with an increase in the value of the other.
25. A slope having a value greater than zero.
26. A slope having a value less than zero.
27. A relationship between two variables in which an increase in the value of one variable is associated with a decrease in the value of the other.
28. What was the unemployment rate (1992-2003) for people with no high school diploma?
A) 2.4% B) 3.9% C) 4.8% D) 8.5% E) 12.1%
29. What is the death rate per 100,000 for 50 year old men producing 300 (mg/dl) of serum cholesterol?
A) 250 B) 500 C) 700 D) 850 E) 1000
For Questions 30-33:
A) supply B) demand C) law of demand D) demand curve
E) change in quantity demanded
30. The principle that an inverse relationship exists between the price of a good and the quantity of that good that buyers demand, other things being equal.
31. The willingness and ability of sellers to provide goods for sale in a market
32. A graphical representation of the relationship between the price of a good and the quantity of that good that buyers demand.
33. A change in the quantity of a good that buyers are willing and able to purchase that results from a change in the good's price, other things being equal; shown by a movement from one point to another along a demand curve.
34. What does Figure 2.2, Graph (a), illustrate?
A) change in price B) change in quantity C) change in the quantity demanded
D) change in demand E) change in tastes
For Questions 35-38:
A) substitute goods B) complementary goods C) normal goods D) inferior good
E) supply curve
35. A graphical representation of the relationship between the price of a good and the quantity of that good that sellers are willing to supply.
36. A good for which an increase in consumer incomes results in a decrease in demand.
37. A good for which an increase in consumer incomes results in an increase in demand.
38. A pair of goods for which an increase in the price of one results in a decrease in demand for the other.
39. What does Figure 2.3 illustrate?
A) price effect B) quantity effect C) taste effect D) income effect E) total effect
For Questions 40-43:
A) change in quantity supplied B) change in supply C) equilibrium D) shortage
40. A change in the quantity of a good that suppliers are willing and able to sell that results from a change in some condition other than the good's price; shown by a shift in the supply curve.
41. A stock of a finished good awaiting sale or use.
42. A change in the quantity of a good that suppliers are willing and able to sell that results from a change in the good's price, other things being equal; shown by a movement along a supply curve.
43. A condition in which buyers' and sellers' plans exactly mesh in the marketplace, so that the quantity supplied exactly equals the quantity demanded at a given price.
44. In Figure 2.7, at a price of $3.50 there is:
A) shortage B) equilibrium C) surplus D) cannot be determined
45. A condition in which the quantity of a good supplied at a given price exceeds the quantity demanded.
A) excess quantity demanded B) excess price established C) excess quantity supplied
D) surplus E) C and D
46. In Figure 2.8, which graph illustrates a supply shift?
A) graph (a) B) graph (b) C) graphs (a) and (b) D) neither graph
47. What contributed to high prices in Economics in the News (EN) 2.1?
A) increase in demand B) decrease in supply C) mad cow disease
D) high protein diets E) all of the above
48. What results from a price support?
A) shortage B) surplus
49. What results from a price ceiling?
A) shortage B) surplus
50. What did Marshall study at Cambridge?
A) economics B) theology C) philosophy D) math E) law
This solution is comprised of answers related with ECO MULTIPLE CHOICE.
1. Consider the following demand table and the graph below.
Which of the demand curves best reflects the demand table?
2. Two economists are debating whether or not to remove a tariff on luxury vehicles. They agree that consumers will benefit by $5 billion and that the harm done to domestic businesses and workers will only be $4 billion. One argues these facts make it obvious that the tariff should be removed. The other disagrees. What would be a likely reason for the second economist to disagree?
a. There is no good reason because the benefits outweigh the costs.
b. He is using a different economic model to understand the world.
c. He has a different interpretation of the empirical evidence.
d. He has different value judgments about the weights that should be put on the benefits and costs.
3. Refer to the graph below.
Floods in the U.S. Midwest in the early 1990s reduced the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?
4. Refer to the table above. The marginal physical product of the sixth worker is _____ and the average product of six workers is _____.
a. 15; 6.
b. 6; 15.
c. 13; 2.
d. 2; 13.
5. Owen runs a delivery business and currently employs three drivers. He owns three vans that employees use to make deliveries, but he is considering hiring a fourth driver. If he hires a fourth driver, he can schedule breaks and lunch hours so that all three vans are in constant use, allowing him to increase deliveries per day from 60 to 75. It will cost an additional $75 per day to hire the fourth driver. The marginal cost per delivery of increasing output beyond 60 deliveries per day:
a. is $0 since Owen does not have to purchase another van.
b. is $5.
c. is $75.
d. cannot be calculated without knowing Owen's total fixed costs.
6. Refer to the graph above. The profits earned by the monopolistically competitive firm represented in the above graph equal:
7. If a production possibility curve representing a tradeoff between a grade in English and a grade in math has a negative slope we know that:
a. there is a direct relationship between grades in English and grades in math.
b. there is no relationship between grades in English and grades in math.
c. there is an inverse relationship between grades in English and grades in math.
d. one can get better grades in English only if one gets better grades in math.
8. Chuck offers $70,000 for a house. The seller turns down the offer but says she will sell the house for $72,000. However, Chuck refuses to pay the higher price. If Chuck was following the economic decision rule, the marginal benefit of the house to:
a. Chuck must be less than $72,000.
b. Chuck must be greater than $72,000.
c. the seller must be less than $72,000.
d. the seller must be less than $70,000.
9. Once vaccinated, a person cannot catch a cold nor give a cold to someone else. As a result the marginal social benefit resulting from consumption of the vaccine:
a. exceeds the marginal benefit received by consumers of the vaccine.
b. equals the marginal social cost of producing the vaccine in a competitive equilibrium.
c. equals the marginal benefit received by consumers of the vaccine in a competitive equilibrium.
d. is less than the marginal benefit received by consumers of the vaccine.
10. Jack Sprat could eat no fat, his wife could eat no lean. And so betwixt them both, they licked the platter clean, which of the following is true about Jack and his wife?
a. Marginal utility of fat is negative for Jack; marginal utility of lean is negative for his wife.
b. Marginal utility of fat is falling for Jack; marginal utility of lean is falling for his wife.
c. Marginal utility of lean is negative for Jack; marginal utility of fat is negative for his wife.
d. Marginal utility of lean is rising for Jack; marginal utility of fat is rising for his wife.
11. World trade declined in the 1930s. Which of the following is the best explanation of that decline?
a. World income shrank and trade restrictions increased.
b. World income shrank but there were few changes in trade restrictions.
c. Trade restrictions increased but there was little change in world income.
d. Income of most nations increased allowing them to become more self-sufficient.
12. You bought one share of McDonalds stock for $10, one share of Coca-Cola for $15, and one share of Pepto-Bismol for $20. Currently, each stock is priced at $15. Assuming no tax issues and you cannot predict the price of either in the future stock, if you needed $15, which stock would you sell?
d. It doesn't matter which one you sell.
13. One study of the distribution of wealth indicates that the bottom 40% of households hold 1% or less of total marketable wealth in the U.S. Which of the following people is most likely to be in the bottom 40%?
a. Ann is 29 years old, earns $120,000 a year, has no financial assets but still has student loans of $4,000.
b. Betty is 29 years old, earns $40,000 a year, has $80,000 in a savings account, and has credit card debt of $4,000.
c. Carol is 69 years old, disabled, living on Social Security and dividends from her mutual funds. She has no debt.
d. Debra is 45 years old and the only money she gets is $40,000 of rental payments from an apartment building she owns that is worth $250,000. She owes the bank $50,000.
14. Refer to the graph below.
Suppose this represents a monopolist with a patent. Up to how much is the monopolist willing to spend to defend its patent?
a. Area A
b. Area B
c. Area A and B.
d. Area D.