ECON 1100 – Global Economics (Section 09) Exam #1 – Spring 2010 (Version C) Multiple Choice Questions (212 points each): 1. ______________ refers to “the degree to which decision makers in an economy experience a real system that differs from the nominally defined system.” a. Economic Competitiveness b. Economic Freedom c. Corruption d. Coercion. 2. The current economic system of the United States is best described as a. a Mixed Economy. b. a Perfect Economy. c. Pure Capitalism. d. Pure Socialism. 3. Matt and Ryan spend each workday assembling bicycles and fixing computers. Matt can assemble 20 bicycles in a single day, while Ryan can assemble 30 bicycles in a single day. Based upon this information alone, we know that a. Ryan possesses an Absolute Advantage in assembling bicycles. b. Matt possesses an Absolute Advantage in assembling bicycles. c. Matt must possess an Absolute Advantage in fixing computers (since every worker must have an Absolute Advantage in the production of something). d. More than one of the above answers is correct. 4. A “Self-Interested” person a. does not care about the well-being of anyone (including themselves). b. cares only about their own well-being (and does not care at all about the well-being of others). c. cares about their own well-being more than the well-being of others. d. cares about the well-being of others more than their own well-being. 5. The Incentive Principle 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. a person is more likely to take an action if its benefits rises, and less likely to take an action if its cost rises. c. 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. d. having more of one thing usually means getting by with less of something else.6. The behavior of economic decision makers is restricted in part by the “Legal Framework.” The “Legal Framework” refers to a. informal guidelines which dictate how much of the day-to-day behavior of an institution is conducted. b. actions by firms which serve the sole purpose of making working conditions for employees as bad as possible. c. formal rules that are made and enforced by some level of government. d. self imposed rules which limit behavior that are written and codified. 7. From the discussion of “Structure Based Classifications” in lecture and the text a. individuals have more “economic freedom” in Cuba than in Singapore. b. the U.S. damages the environment more than any other country in the world. c. the U.S. has a greater “capacity to achieve growth over the medium term, controlling for the current level of development” than any other country (i.e., the U.S. was 1st in the ranking of “economic competitiveness”). d. More than one of the above answers is correct. 8. 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 obviously does not understand the value of a college education. b. he properly understood that his opportunity cost of attending college was very high. c. he probably could not have gotten accepted into any college. d. he is irrational, since the marginal benefits of attending college always outweigh the marginal costs of doing so. 9. With which of the following statements is there “general agreement” among most economists? a. “Trade restrictions usually reduce general economic welfare.” b. “Imposing Rent Controls will increase the quantity of available housing.” c. “Fiscal Policy has no impact whatsoever on the performance of an economy.” d. More than one of the above answers is correct. 10. Armen Alchain and Gordon Tullock a. wrote a letter to the editor of the New York Times in 2001, arguing that the tax cuts then being proposed by President George W. Bush would put the U.S. economy into a recession within ten years. b. were the first to recognize that increasing the minimum wage would increase profits for small businesses. c. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. d. wrote a 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.11. Asher owns a 200 acre peanut farm just outside of Ashburn, GA (one of several towns that are a self proclaimed “Peanut Capital of the World”). He has decided to stop farming, sell his land, and retire in Cabo Rojo, Puerto Rico. When selling his land, which of the following property rights is he exercising? a. The “Right of Absolute Advantage.” b. The “Control Right.” c. The “Disposal Right.” d. The “Cash-Flow Right.” 12. “Voluntary Trade” generally a. makes buyers better off, but sellers worse off. b. makes sellers better off, but buyers worse off. c. makes both buyers and sellers worse off. d. makes both buyers and sellers better off. 13. In which of the countries listed below do individuals enjoy the least amount of Economic Freedom? a. New Zealand. b. North Korea. c. United Kingdom. d. Germany. 14. One of the six primary “economic institutions” in any society is “households.” Households are the a. primary producers of goods/services within a society. b. primary suppliers of labor within a society. c. ultimate consumers of most finished goods/services within a society. d. More than one of the above answers is correct. 15. For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to a. have an Absolute Advantage in both activities. b. have a Comparative Advantage in both activities. c. gain from trading with the other individual. d. More than one of the above answers is correct. 16. The economy of the former Soviet Union a. functioned so efficiently that the country was able to produce combinations of goods beyond their production possibilities curve year after year. b. achieved Karl Marx vision of “the ideal communist society,” since the ownership and use of all resources was in the hands of “the people”
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