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KSU ECON 1100 - Exam 1 ECON 1100

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ECON 1100 – Global Economics (Section 05) Exam #1 – Fall 2010 (Version B) Multiple Choice Questions (212 points each): 1. A “Self-Interested” person A. cares about the well-being of others more than their own well-being. B. cares about their own well-being more than the well-being of others. C. cares only about their own well-being (and does not care at all about the well-being of others). D. None of the above answers are correct. 2. Under “Command Planning” A. the government directly controls nearly all economic activity, and almost all production takes place in government owned enterprises. B. the government relies upon the voluntary response of the private sector to a set of guidelines jointly formulated by government, industry, and labor. C. rational, “profit maximizing” firms decide which goods to produce and in what quantities. D. rational, “utility maximizing” consumers freely decide which goods to purchase and in what quantities. 3. ________________ refer to the “informal guidelines which dictate how much of the day-to-day behavior of an institution is conducted.” A. Enterprises B. Procedures C. Rules within an Organization D. Laws (or, more broadly, the Legal Framework) 4. Consider the following two statements. Statement 1: “Fiscal Policy has a significant stimulative impact on a less than fully employed economy.” Statement 2: “The Federal budget should be balanced in every single year.” Most economists would A. disagree with both Statement 1 and Statement 2. B. agree with both Statement 1 and Statement 2. C. agree with Statement 1, but disagree with Statement 2. D. agree with Statement 2, but disagree with Statement 1. 5. Which of the following statements is true? A. “All Attainable combinations of output are Inefficient.” B. “A combination of goods is Attainable so long as it can possibly be produced with the currently available resources and technology.” C. “A combination of goods is Unattainable if it cannot possibly be produced with the currently available resources and technology.” D. More than one of the above answers are correct.6. On September 4, 2009, Gov. Arnold Schwarzenegger offered a $100,000 reward for anyone who could provide information leading to the arrest and conviction of the arsonists who set a wildfire which was then burning in southern California (a fire which claimed the lives of two firefighters). In this situation, Gov. Schwarzenegger was attempting to obtain the desired information by A. offering a material incentive. B. moral persuasion. C. consumer sovereignty. D. coercion. For Questions 7 though 9, consider a society facing the Production Possibilities Curve illustrated below: 7. Which of the following output combinations is “not feasible” or “unattainable”? A. “A” (300 Tanks and 375 bushels of Corn). B. “B” (420 Tanks and 800 bushels of Corn). C. “C” (600 Tanks and 1,000 bushels of Corn). D. More than one of the above answers is correct. 8. If this society wanted to produce 475 bushels of Corn, then their maximum output of Tanks would be A. more than 600 Tanks. B. exactly 600 Tanks. C. more than 420 but fewer than 600 Tanks. D. exactly 420 Tanks. 9. Supposing that this society is producing efficiently, it follows that the Opportunity Cost of producing the 420th Tank is A. greater than the Opportunity Cost of producing the 200th Tank. B. exactly equal to the Opportunity Cost of producing the 200th Tank. C. less than the Opportunity Cost of producing the 200th Tank. D. None of the above answers are necessarily correct (since we do not have enough information to make such a comparison between the Opportunity Cost of the 200th Tank and the Opportunity Cost of the 420th Tank). Corn Tanks D A B 0 300 420 600 1,000 500 375 0 1,350 C 80010. The Principle of Comparative Advantage states that A. an action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so. B. having more of one thing usually means getting by with less of something else. C. a person is more likely to take an action if its benefits rises, and less likely to take an action if its cost rises. D. 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. For questions 11 and 12, refer to the graph below, which illustrates the Lorenz Curve in Brazil in 1998, 2005, and 2010. 11. Based upon this graph, we can tell that A. income in Brazil was distributed more equally in 2010 than in 2005. B. the unemployment rate in Brazil was higher in 2010 than in 1998. C. a greater amount of output was produced in Brazil in 2005 than in 2010. D. average incomes in Brazil were higher in 1998 than in 2005. 12. Based upon the Lorenz Curves illustrated above, we can infer that for Brazil the value of the Gini-Coefficient A. was exactly equal to zero in 1998 and exactly equal to one in 2010. B. increased between 1998 and 2005, but then decreased between 2005 and 2010. C. increased between 1998 and 2005, and then increased further between 2005 and 2010. D. decreased between 1998 and 2005, and then decreased further between 2005 and 2010. Cumulative fraction of total income Cumulative fraction of total population 0 1 1 0 2010 Lorenz Curve for Brazil 2005 Lorenz Curve for Brazil 1998 Lorenz Curve for Brazil13. Economics is A. the social science that studies decision making in the face of scarcity, and the implications of such decisions on individuals and societies. B. the social science that studies human mental functions and behavior, with a focus on phenomena such as perception, cognition, personality, and interpersonal relationships. C. the social science that studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy in a society. D. None of the above answers are correct. 14. LeBron James chose to skip college and enter the NBA draft in 2003 straight out of high school. The fact that he made this choice suggests that A. he could not have gotten accepted into any college. B. he would have realized no benefits whatsoever from getting a college education. C. he properly understood that his opportunity cost of attending college was very high. D. he is


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KSU ECON 1100 - Exam 1 ECON 1100

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