MULTIPLE CHOICE. the one that best completes the Room... · 14) Suppose you notice that the market…

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IVYTECHSTATECOLLEGEREGION14-BLOOMINGTONECN101ECONOMICSFUNDAMENTALSFall2006Midterm_03Name___________________________________MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementoranswersthequestion.Usethefigurebelowtoanswerthefollowingquestions.1) JoerunsabusinessinwhichhismarginalbenefitofstayingopenforanadditionalhourisillustratedinFigure1.3.SupposethatweobserveJoestayingopen5hoursperday.Ifheisfollowingthemarginalprinciple,whatmusthismarginalcostbe?A) $32 B) $16 C) $40 D) $241)2) Whichofthefollowingismostlikelytohaveaspillovercost?A) Asmokersneaksacigaretteinapublicrestroom.B) Anindividualeatstoomuchandgetsindigestion.C) Astudentwritesapaperinsteadofgoingtoaconcert.D) Noneoftheaboveislikelytohaveanegativespillover.2)Usethefigurebelowtoanswerthefollowingquestions.3) Figure1.5illustratestherelationshipbetweenthepriceofpizzaandthenumberofpizzasapersonchoosestoconsume.Onthisfigure,asthepriceofpizzasrisesthispersonsconsumptionofpizzaswill:A) decrease. B) remainconstant.C) increase. D) noneoftheabove3)4) Supposethatyourtuitiontoattendcollegeis$8,000peryearandyouspend$5,000peryearonroomandboard.Ifyouwereworkingfulltime,youcouldearn$22,000peryear.Whatisyouropportunitycostofattendingcollege?A) $35,000 B) $13,000 C) $30,000 D) $27,0004)5) Thesetofallattainablecombinationsofgoodsandservicesisillustratedbythe:A) productionpossibilitiescurve. B) scarcitycurve.C) setofinfeasibleproduction. D) efficiencyfrontier.5)UnitsofCapitalNumberofWorkersOutput/Day5 0 05 1 1005 2 1805 3 2405 4 2805 5 300Table1.26) ThefirmdepictedinTable1.2isfacingashort-runchoicebecause:A) capitalisfixed.B) thenumberofworkerscanonlybeincreasedto5.C) capitalandlaborarebothvariable.D) capitalandlaborarebothfixed.6)7) Theproductionpossibilitiescurveillustratestheeconomicconceptof:A) marginalanalysis. B) spilloverbenefits.C) supplyanddemand. D) scarcity.7)8) Supposeaninsurancecompanydeterminesthathalfofalllawyersarereckless.Theyestimatethattheaverageannualmalpracticecostis$25,000forrecklesslawyersand$3,000forcarefullawyers.Ifcarefullawyersarenotwillingtopaymorethat$5,000forinsurance,thecompanywillearnzeroeconomicprofitifthepriceofinsuranceis:A) $3,000. B) $14,000. C) $25,000. D) $5,000.8)9) Andydoesnotbothertolockthedoortohishousebecausehehastheftinsurance.Thisisanexampleof:A) apositivespillover. B) moralhazard.C) irrationalbehavior. D) adverseselection.9)10) Anexampleofagoodthatisrivalinconsumptionis:A) aradioprogram. B) publictransportation.C) acopyofaneconomicstextbook. D) aneconomicswebpage.10)SCENARIO1:Table8.1showstheamountofwastedischargedpermonthandproductioncostsfortwodifferenttypesoffirms,HandL.Supposethegovernmentissues3marketablepollutionpermitspermonthtoeachfirm.Eachpermitenablesthebearertodischargeonetonofwastepermonth.Accordingly,ifafirmusesall3ofitspermits,itcandischarge3tonsofwasteinthatmonth.Waste/ton FirmH:Totalcost/tonFirmL:Totalcost/ton5 80 804 95 903 125 1012 180 1131 250 1260 350 150Table8.111) SupposefirmHhastogenerate4tonsofwaste,insteadof3tons,inonemonth.FirmH,therefore,hastobuya4thpermitfromanotherfirm,suchasL.WhatisthelowestpricethatfirmLwouldacceptinordertoselloneofitspermitstofirmH?A) $125 B) $12 C) $95 D) $3011)12) Coasebargainingsolutionsapplywhenthereare:A) alargenumberofaffectedpartiesandthetransactionscostsofbargainingarelow.B) asmallnumberofaffectedpartiesandthetransactionscostsofbargainingarelow.C) asmallnumberofaffectedpartiesandthetransactionscostsofbargainingarehigh.D) alargenumberofaffectedpartiesandthetransactionscostsofbargainingarehigh.12)13) Aconsequenceofglobalwarmingislikelytobe:A) adecreaseintheearthstotalagriculturaloutput.B) noeffectonpopulatedlandareas.C) adecreaseintotalrainfall.D) anincreaseinthedepthandwidthofthepolaricecaps.13)14) Supposeyounoticethatthemarketforusedbikesisdominatedbylemons(low-qualitybikes).Insuchasituation,ifyouareabuyerofusedbikes,youarefacedwith:A) perfectinformation. B) anadverseselectionproblem.C) apositiveexternality. D) symmetricinformation.14)Usethefigurebelowtoanswerthefollowingquestions.15) RefertoFigure9.2.WhatwouldcausefirmZtomovefromPointBtopointA?A) adecreaseinworkerproductivityB) anincreaseinthepriceoftheproductwhichisproducedbyfirmZC) adecreaseinwagesfrom$7to$5D) anincreaseinwagesfrom$5to$715)16) Adecreaseinthedemandformusicians________thenumberofmusiciansemployed,and________thewagespaidtomusicians.A) decreases;increases B) increases;increasesC) decreases;decreases D) increases;decreases16)17) Therelationshipbetweenthewageandthequantityoflaborthatall workersarewillingtoprovideiscalled:A) marketlabordemand. B) individuallaborsupply.C) individuallabordemand. D) marketlaborsupply.17)18) Iftheminimumwageissetbelowtheequilibriumwage:A) thequantitydemandedofworkerswillbegreaterthanthequantitysupplied.B) wageswillriseandtotalemploymentwillrise.C) thequantitydemandedofworkerswillbelessthanthequantitysupplied.D) thequantitydemandedofworkerswillequalthequantitysupplied.18)Usethefigurebelowtoanswerthefollowingquestions.19) RefertoFigure9.2.WhatwouldcausefirmZtomovefrompointBtopointA?A) adecreaseinthepriceoftheproductwhichisproducedbyfirmZB) anincreaseinwagesfrom$5to$7C) adecreaseinwagesfrom$7to$5D) anincreaseinworkerproductivity19)20) Alaborunioncomposedofbakerswouldmostlikelybea:A) industrialunion. B) unionofunions.C) cartel. D) craftunion.20)21) Onereasonthatcollegegraduatesearnhigherwagesthannon-graduatesisbecause:A) collegeattendanceservesasasignaloftheindividualsproductivity.B) collegegraduatesarelessequippedtodealwithtechnologicalchange,astheirskillsaretechnology-specific.C) collegegraduatesarealwayslessintelligentthannon-collegegraduates.D) therearenoadditionalskillslearnedincollegethatincreaseproductivity.21)SCENARIO1:Imaginethataneconomyproducestwogoods,hotdogsandbaseballs.Intheyear2000theeconomyproduces20hotdogsand15baseballs,andthepricesofhotdogsandbaseballswere$2and$5,respectively.Intheyear2001theeconomyproduces25hotdogsand20baseballs,andthepricesofhotdogsandbaseballswere$3and$6,respectively.22) BasedonScenario1,realGDPgrewbyabout________percentfrom2000to2001.A) 30 B) 1.30 C) 222 D) 130 E) 12.222)23) IfrealGDPwere100inyear1and90inyear2,thegrowthrateofrealGDPbetweentheseyearswouldbe:A) 0percent.B) 90percent.C) 5percent.D) 10percent.E) noneoftheabove23)24) Realgrossdomesticproduct(GDP)isameasureofGDPthat:A) controlsfordifferencesinunitsofmeasurement.B) accountsforchangesovertimeinthemixofgoodsandservicesproducedinaneconomy.C) takesintoaccountallaspectsoftheeconomy.D) adjustsforpricechanges.E) alloftheabove24)25) GDPunderstatesthevalueofoutputproducedbyaneconomybecauseit:A) excludesenvironmentaldegradationcausedbyincreasedoutputproduction.B) excludestransactionsthatdonottakeplaceinorganizedmarkets,suchashome-cookedmeals.C) includesvalueaddedfromtheundergroundeconomy,suchastipstakenunderthetable.D) Alloftheabovearecorrect.E) Noneoftheaboveiscorrect.25)26) ThedifferencebetweenU.S.GDPandU.S.GNPisthatGDPincludes________andexcludes________.A) incomeofdomesticfirmsproducingintheU.S.;incomeofU.S.firmsproducinginforeigncountriesB) incomeofforeignfirmsproducingintheU.S.;incomeofU.S.firmsproducinginforeigncountriesC) incomeofdomesticfirmsproducingintheU.S.;incomeofforeignfirmsproducinginforeigncountriesD) incomeofU.S.firmsproducinginforeigncountries;incomeofforeignfirmsproducingintheU.S.E) noneoftheabove26)27) Supposeaneconomyconsistsof300,000individuals16yearsandolder,160,000areemployed,and18,000areunemployedbutactivelyseekingwork.Inthisexamplethelaborforceis:A) 140,000.B) 160,000.C) 300,000.D) 178,000.E) Cannotbedeterminedfromtheinformationgiven.27)ThefollowingtableliststhebasketofgoodsintheCarnivorePriceIndex.Assume1993isthebaseyear.1993Quantity1993Price1994Quantity1994Price1995Quantity1995PriceSteak 4 $3 4 $3.5 4 $4PorkChops 5 $2 5 $3.0 5 $3Liver 3 $2 3 $1.0 3 $1.5Table11.128) UsingtheinformationinTable11.1,theCarnivorePriceIndexfor1993is:A) 100. B) 114. C) 109. D) 28. E) 41.28)29) Economistssaythattheeconomyisatfullemploymentwhenthe:A) structuralunemploymentrateiszero.B) totalunemploymentrateiszero.C) naturalunemploymentrateiszero.D) frictionalunemploymentrateiszero.E) noneoftheabove29)ThefollowingtableliststhebasketofgoodsintheCarnivorePriceIndex.Assume1993isthebaseyear.1993Quantity1993Price1994Quantity1994Price1995Quantity1995PriceSteak 4 $3 4 $3.5 4 $4PorkChops 5 $2 5 $3.0 5 $3Liver 3 $2 3 $1.0 3 $1.5Table11.130) UsingtheinformationinTable11.1,theinflationratefrom1994to1995is:A) 127%. B) 41%. C) -23%. D) 109%. E) 11%.30)31) TheprincipalreasonwhytheGDPdeflatorandtheCPIbothoverstateactualchangesinpricesisthat:A) thebasketofgoodspurchasedbyconsumerschanges.B) itishardtomeasurequalitychanges.C) pricedataisofteninaccurate.D) alloftheaboveE) Noneoftheabove;thetwopriceindicesdonotoverstateactualpricechanges.31)Usethefigurebelowtoanswerthefollowingquestions.32) Sotolandisasmallcountrythatproducestwotypesofproducts,airconditionersandsnowmobiles.ItsproductionpossibilitiesfrontierisillustratedinFigure1.2.Whichcombinationofairconditionersandsnowmobilesisattainable?A) 400airconditionersand300snowmobilesB) 200airconditionersand800snowmobilesC) 600airconditionersand500snowmobilesD) 400airconditionersand600snowmobiles32)33) Sotolandisasmallcountrythatproducestwotypesofproducts,airconditionersandsnowmobiles.ItsproductionpossibilitiesfrontierisillustratedinFigure1.2.Whichcombinationofairconditionersandsnowmobilesisattainableandefficient?A) 600airconditionersand0snowmobilesB) 200airconditionersand800snowmobilesC) 200airconditionersand500snowmobilesD) 600airconditionersand300snowmobiles33)34) Theobservationthatsomeairlinesrunflightswhicharemostlyemptysuggeststhat:A) airlinesconsideronlyimplicitcostswhendecidingtorunaflight.B) airlinesconsiderbothfixedandmarginalcostswhendecidingwhethertorunaflight.C) airlinesconsideronlythefixedcostswhendecidingwhethertorunaflight.D) airlinesconsideronlythemarginalcostswhendecidingwhethertorunaflight.34)HoursofoperationMarginalcost1 42 83 124 165 206 247 28Table1.135) JuliannerunsabusinessinwhichhermarginalcostofstayingopenforanadditionalhourisillustratedintheTable1.1.SupposethatJuliannestaysopen5hoursperday.Ifsheisfollowingthemarginalprinciple,whatmusthermarginalbenefitbe?A) $16 B) $24 C) $10 D) $2035)36) Anadvantageofpollutiontaxesthatisnotofferedbycommand-and-controlpoliciesisthat:A) therearedecreasesinthedemandsforgoodsthatcausepollution.B) apollutiontaxdecreasesthepriceofthepollutinggood.C) zeropollutionisproduced.D) taxrevenuesaregeneratedthatmaybeusedtocleanuppollution.36)37) Adistinguishingfeatureofapublicgoodisthatit:A) ispossibletoexcludepeoplewhopayforthepublicgood.B) mayhaveexternalbenefits.C) mayhaveexternalcosts.D) isnotpossibletoexcludepeoplewhodontpayforthepublicgood.37)38) Buyersinthemarketforusedguitarsaregettingmorepessimisticaboutthepossibilityofgettingagoodguitar.Thiswillcausethepriceofusedguitarsto________andthepercentageofgoodusedguitarsto________.A) increase;increase B) decrease;decreaseC) decrease;increase D) increase;decrease38)39) Supposethatthepriceofsteelincreases.Whatshouldhappeninthelabormarket?A) Fewersteelworkerswillbeemployed,atahigherwage.B) Moresteelworkerswillbeemployed,atalowerwage.C) Moresteelworkerswillbeemployed,atahigherwage.D) Fewersteelworkerswillbeemployed,atalowerwage.39)40) Thelong-runlabordemandcurveis:A) mightbemoreorlesselasticthantheshortrunlabordemandcurve.B) perfectlyelastic(horizontal).C) lesselasticthantheshortrunlabordemandcurve.D) moreelasticthantheshortrunlabordemandcurve.40)41) Ifaneconomyproduced10bushelsofcornat$20eachand20jarsofpeanutbutterat$3eachin1995,realgrossdomesticproduct(GDP)wouldbe:A) $60. B) $2,600. C) $260. D) $200.41)42) Supposethatin2004acountryproduced20computersatapriceof$2,000eachand4carsatapriceof$5,000each.In2005acountryproduced15computersatapriceof$3,000eachand5carsatapriceof$6,000each.Whatdoweknowhashappened?A) NominalGDPhasincreased,andrealGDPhasincreased.B) NominalGDPhasincreased,andrealGDPhasdecreased.C) NominalGDPhasdecreased,andrealGDPhasincreased.D) WeonlyknowthatnominalGDPhasincreased.E) NominalGDPhasdecreased,andrealGDPhasdecreased.42)43) WhichoneofthefollowingstatementsistrueoftheConsumerPriceIndex?A) Itunderstatesthetruerateofinflation.B) Itdoesnottakeaccountofthepriceofimportedgoodsandservices.C) Thegoodsusedtoconstructtheindexdonotchangefrommonthtomonth.D) Itdoesnottakeintoaccountthepriceofusedgoods.E) Alloftheabovearetrue.43)44) Unemploymentthatnaturallyoccursduringthenormalworkingsofaneconomyaspeoplechangejobsandmoveacrossthecountryiscalled:A) naturalunemployment.B) cyclicalunemployment.C) structuralunemployment.D) functionalunemployment.E) frictionalunemployment.44)Usethefigurebelowtoanswerthefollowingquestions.45) ConsiderFigure8.1,whichdepictsthesupplyanddemandforcoal.Assumecoalproductioncreatesexternalcosts.Ifthegovernmentimposesapollutiontaxoncoalproductionthe:A) demandcurveforcoalwouldshifttotheleft.B) demandandsupplycurvesforcoalwouldshifttotheleft.C) supplycurveofcoalwouldshifttotheright.D) supplycurveofcoalwouldshifttotheleft.45)46) Inproductmarkets:A) householdandfirmsdemandinputs.B) firmssupplyproductswhichhouseholdsdemand.C) householdsdemandinputswhichfirmssupply.D) householdssupplygoodsandserviceswhichbusinessesdemand.E) householdssupplyinputswhichfirmsdemand.46)ThefollowingtableliststhebasketofgoodsintheCarnivorePriceIndex.Assume1993isthebaseyear.1993Quantity1993Price1994Quantity1994Price1995Quantity1995PriceSteak 4 $3 4 $3.5 4 $4PorkChops 5 $2 5 $3.0 5 $3Liver 3 $2 3 $1.0 3 $1.5Table11.147) UsingtheinformationinTable11.1,theinflationratefrom1993to1995is:A) 54%. B) 27%. C) 41%. D) 14%. E) 9%.47)48) Ifrealsalariesdecreasebutnominalsalariesdonot,thismeansthat:A) priceshavefallen.B) thepurchasingpowerofmoneyhasincreased.C) priceshaverisen.D) priceshavenotchanged.48)NumberofworkersUnitsofoutput2 1003 1604 2105 2506 2807 3008 310Table9.1:ProductionofTonystulips49) RefertoTable9.1.Themarginalproductoftheeighthunitoflaboris:A) 10. B) 310. C) 38.75. D) 1.25.49)50) Anintermediategoodis:A) agoodusedonlyintheproductionofotherproducts.B) countedaspartofGDP.C) agooddirectlyconsumedbyindividuals.D) BothAandCarecorrect.E) BothBandCarecorrect.50)AnswerKeyTestname:MIDTERM__031) A2) A3) A4) C5) A6) A7) A8) C9) B10) C11) B12) B13) A14) B15) A16) C17) D18) D19) A20) D21) A22) A23) E24) D25) B26) B27) D28) A29) E30) E31) B32) A33) D34) D35) D36) D37) D38) B39) C40) D41) C42) B43) C44) E45) D46) B47) B48) C49) A50) A

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