ECON 1100 – Global Economics (Section 01) Exam #1 – Spring 2009 (Version B) 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. Cost-Benefit Principle b. The Opportunity Cost Principle c. Principle of Comparative Advantage d. Incentive Principle 2. “Voluntary Trade” generally a. makes buyers better off. b. makes sellers better off. c. makes both buyers and sellers worse off. d. More than one of the above answers is correct. 3. Company Unions a. consist of members who perform similar jobs or tasks, regardless of what enterprise they are employed by. b. consist of members who are employed by a single enterprise, irrespective of the task they perform within the enterprise. c. are a type of a Non-Governmental Organization, with the primary goal of “lobbying the government in an attempt to influence government policy.” d. None of the above answers are correct. 4. Armen Alchain and Gordon Tullock a. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. b. argued that automobile accident rates could be decreased by installing “five point harness” seat belts and improved airbags in every car. c. wrote a joint letter to FDR in 1939, advising him to have the U.S. government assist physicists in the U.S. working on research related to the creation of a uranium bomb. d. were the first to argue that “cash payments to welfare recipients would increase the well-being of the recipient to a greater degree than a ‘transfer-in-kind’ of equal cash value.” 5. In a modern economy the behavior of economic decision makers is restricted by a. only the Legal Framework. b. “informal customs,” but not by “formal rules.” c. “formal rules,” but not by “informal customs.” d. both “formal rules” and “informal customs.”6. A “Positive Statement” a. cannot (even in principle) be confirmed or refuted, since such a statement implicitly involves “value judgments.” b. makes a claim that attempts to describe how the world actually is or how the world actually functions. c. is a “fact based statement” which provides a “prediction about an outcome” without any judgment on the desirability of the outcome. d. More than one of the above answers is correct. 7. Suppose that in 2007 High School graduates earned $14,250 per year more than non-High School graduates. If this difference had instead been $8,500 per year, then we would expect a. fewer people to drop out of school before graduating High School. b. more people to drop out of school before graduating High School. c. that everybody would drop out of school before graduating High School. d. More than one of the above answers is correct. 8. With which of the following statements is there “general agreement” among most economists? a. “Trade restrictions usually reduce general economic welfare.” b. “Rent Controls reduce the quantity/quality of available housing.” c. “A minimum wage increases unemployment, particularly among young and unskilled workers.” d. All of the above answers are correct. 9. The restriction that all workers in the United States must be paid at least $6.55 per hour is an example of a. Adam Smith’s “Invisible Hand.” b. a procedure which restricts the behavior of firms. c. a custom or tradition which has a substantial impact on the labor market. d. a law which restricts the behavior of market participants. 10. Joe is a “Self-Interested” person. This means that he a. cares more about the well-being of others than about his own well-being. b. does not care about the well-being of anyone (including himself). c. cares only about his own well-being (and does not care at all about the well-being of any other person). d. cares more about his own well-being than about the well-being of others. 11. A “Rational Decision Maker” should a. take an action if and only if the Marginal Benefit of the action is at least as great as the Marginal Cost of the action. b. never take an action for which there is a positive Marginal Cost. c. take every action for which there is a positive Marginal Benefit. d. More than one of the above answers is correct.12. Which of the following is one of the “Three Basic Economic Questions” that every society must address? a. “How can we reduce the number of ‘self-interested people’ in our society?” b. “What resources should be used to produce which goods and services?” c. “How can we reduce our carbon footprint?” d. More than one of the above is one of the “Three Basic Economic Questions” that every society must address. For Questions 13 though 15, consider a society facing the Production Possibilities Curve illustrated below: 13. Point “A” (i.e., 800 Turkeys and 260 Cars) is a. an attainable (or feasible) but inefficient combination of output. b. an attainable (or feasible) and efficient combination of output. c. an unattainable (or not feasible) combination of output. d. None of the above answers is correct. 14. Starting at Point “B” (i.e., 1,100 Turkeys and 370 Cars), if this society chose to produce 250 more Turkeys, then a. they could also increase their output of Cars by 90 units. b. they could not increase their output of Cars, but they also would not have to decrease their output of Cars at all. c. they would have to decrease their output of Cars by at least 110 units. d. they would no longer be able to produce any Cars whatsoever. 15. If this society wanted to produce 400 Turkeys, then the maximum number of Cars that they could produce is a. fewer than 460 Cars. b. exactly 460 Cars. c. exactly 580 Cars. d. None of the above answers are correct. Cars Turkeys D A B 0 1,100 1,350 460 260 0 580 C 370 80016. _____________ is/are “the currently available stock of machines, factories, and inventories of finished goods available as industrial capital, as well as social capital such as transportation infrastructure, communications infrastructure, and educational institutions.” a. Human Capital b. Natural Assets c. Produced Assets d. The Mixed Economy 17. In which of
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