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KSU ECON 1100 - Exam 1 ECON 1100

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ECON 1100 – Global Economics (Section 08) Exam #1 – Spring 2008 (Version A) Multiple Choice Questions (212 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. a. The Principal/Agent Problem b. Incentive Principle c. Principle of Comparative Advantage d. Cost-Benefit Principle 2. __________ is the subfield of economics that compares the structure and performance of different types of economic organization. a. The Structure-Conduct-Performance Paradigm b. Monetary Economics c. Comparative Economic Systems d. Industrial Organization 3. Which of the following statements would support a claim that “incomes are distributed more equally in Bulgaria than in Mexico”? a. Per Capita GDP is $10,800 in Bulgaria and is $10,600 in Mexico. b. Life expectancy at birth is 72.6 years in Bulgaria and is 75.6 years in Mexico. c. The unemployment rate is 9.6% in Bulgaria and is3.2% in Mexico. d. The value of the Gini-Coefficient is (0.31) in Bulgaria and is (0.54) in Mexico. 4. A ___________ is a labor organization consisting of all workers that perform a similar job task, regardless of what company they are employed by. a. Craft Union or Occupational Union b. Company Union c. Non-Governmental Agency d. Monopolist 5. Joe and Mo produce raincoats and shirts. Joe’s Opportunity Cost for producing a raincoat is “5 shirts”; Mo’s Opportunity Cost for producing a raincoat is “12 shirts.” Based upon this information alone, we know that a. Joe has a Comparative Advantage in the production of raincoats. b. Mo has a Comparative Advantage in the production of raincoats. c. Mo has an Absolute Advantage in the production of shirts. d. None of the above answers are correct.6. The “Principle of Comparative Advantage” states that a. 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. b. developed countries are able to enjoy a Comparative Advantage in the production of all goods. c. a society should produce a good if and only if they possess an Absolute Advantage in production of the good. d. None of the above answers are correct. 7. In which of the following countries do individuals enjoy the least amount of “Economic Freedom”? a. Cuba. b. United States. c. Japan. d. Singapore. For questions 8 and 9, consider the Production Possibilities Curve illustrated below: 8. Which of the points in the graph above is an “attainable, but inefficient” combination of output for this society? a. Point A. b. Point B. c. Point C. d. Point D. 9. If this society used all of its productive resources to produce only Roses, then they could produce a. exactly 300 Roses. b. more than 300 Roses. c. exactly zero Guns. d. More than one of the above answers is correct. Guns Roses D A B 0 120 240 300 2,200 1,200 800 0 C 19510. Someone with well defined goals who takes actions to fulfill those goals as best as possible is a. a rational individual. b. a self interested individual. c. an exploiter of labor. d. None of the above answers are correct. 11. One of the six primary economic institutions is “governments.” “Government” a. is the ultimate consumer of most finished goods and services. b. plays no role whatsoever in the modern mixed economy. c. plays a role in establishing individual and economic rights, as well as in regulating business and industry. d. More than one of the above answers is correct. 12. The economy of Canada is best described as a. a Mixed Economy. b. a Pure Communist Economy. c. a Pure Socialist Economy. d. a Pure Capitalistic Economy. 13. Under “Indicative Planning” a. the government relies upon the voluntary response of the private sector to a set of guidelines jointly formulated by government, industry, and labor. b. the government directly controls all economic activity, and nearly all production takes place in government owned enterprises. c. rational, “utility maximizing” consumers freely decide which goods to purchase and in what quantities. d. rational, “profit maximizing” firms decide which goods to produce and in what quantities. 14. The behavior of economic decision makers is restricted by the “Legal Framework,” “Rules within Organizations,” “Procedures,” and “Custom, Culture and Tradition.” The “Legal Framework” refers to a. self imposed rules which limit behavior that are written and codified. b. rules that are made and enforced by some level of government. c. informal guidelines which dictate how much of the day-to-day behavior of an institution is conducted. d. behavioral norms that individuals in society follow due to custom and tradition. 15. _________ refers to “the capacity of the national economy to achieve growth over the medium term, controlling for the current level of development.” a. Corruption b. Economic Competitiveness c. Economic Freedom d. Environmental Sustainability16. The Lorenz Curve provides a direct graphical illustration of a. the number of individuals within a society who are currently unable to find jobs. b. the different combinations of two different goods that a society could produce, with a certain amount of productive resources. c. the distribution of income within a society. d. the level of corruption within a society. 17. When resources are scarce, decision makers face tradeoffs. As a result, a. only poor countries need to follow the “Cost-Benefit Principle” in order to make good decisions. b. having more of one thing typically means getting by with less of something else. c. wealthy individuals can purchase any combination of goods and services that they wish. d. wealthy societies can produce combinations of output beyond their Production Possibilities Curve. 18. Which of the following is NOT one of the primary economic institutions that characterize a modern economy? a. Households. b. Natural Assets. c. Labor Organizations. d. Enterprises. 19. “Habitat for Humanity” is an example of a. a Non-Governmental Agency. b. a Governmental Agency. c. a Labor Organization. d. an Enterprise. 20. For the most part, the behavior of decision makers in Market Economies is primarily


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KSU ECON 1100 - Exam 1 ECON 1100

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