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CU-Boulder ECON 2010 - Exam 1 with answers

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Version 2 Page 2 Name: __________________________ Date: _____________ 1. We are forced to make choices because of: A) efficiency. B) the margin. C) scarcity. D) exploitation. 2. Which of the following statements is not true? A) If an economy is efficient, then it is possible to make only a few people better off without reducing other individuals' economic welfare. B) Economic efficiency exists when an economy realizes the maximum possible gains from trade given the available resources. C) Markets usually lead to efficiency. D) Economic efficiency exists when all opportunities to make people better off have been fully exploited. 3. The cost of going to college is: A) tuition, the cost of housing, the cost of books, and forgone income. B) tuition, the cost of housing, and the cost of books. C) forgone income only. D) tuition and the cost of housing. 4. Which of the following statements is NOT true? Economists typically believe: A) free markets usually lead to a quantity that maximizes total surplus. B) some markets fail. C) free markets ensure the people who value a good most get that good. D) free markets usually require too much government intervention to work efficiently. 5. When building a model, economists: A) are careful to avoid the scientific method. B) ignore the facts, and instead try to determine what the facts should be. C) attempt to duplicate reality in all its complexity. D) simplify reality in order to highlight what really matters.Version 2 Page 3 6. Technological improvements will: A) necessarily lead to increased unemployment. B) shift the production possibility frontier outward. C) shift the production possibility frontier inward. D) leave the production possibility frontier unchanged. 7. Price ceilings lead to all of the following EXCEPT: A) black markets. B) wasted resources . C) deadweight loss. D) Inefficiently high quantity of goods produced. 8. Which of the following is NOT a reason why inefficient policies exist. A) politicians do not understand economics B) politicians care less about passing good policies than passing popular policies C) politicians understand problems more deeply than economists D) voters are often unaware of economic consequences of policies 9. The price of taxicab medallions in NYC is dropping rapidly. A) True B) False 10. All points inside the production possibility frontier represent: A) nonfeasible production points. B) economic growth. C) efficient production points. D) inefficient production points. 11. A production possibility frontier illustrates the ________ facing an economy that ________ only two goods. A) shortages; produces B) prices; sells C) trade-offs; consumes D) trade-offs; producesVersion 2 Page 4 12. Assume that Columbia gives up 3 motorcycles for each ton of coffee it produces, while Bolivia gives up 7 motorcycles for each ton of coffee it produces. A) Columbia has a comparative advantage in coffee production and should specialize in coffee production. B) Columbia has a comparative advantage in motorcycle production and should specialize in coffee. C) Columbia has a comparative advantage in coffee production and should specialize in the production of motorcycles. D) Columbia has a comparative advantage in motorcycle production and should specialize in motorcycle production. Use the following to answer question 13: Figure: DVD Market 13. (Figure: DVD Market) The figure shows the weekend rental market for DVDs in Collegetown. The equilibrium price for DVD rentals is ________ and the equilibrium quantity is ________. A) $3; 30 B) $9; 90 C) $5; 50 D) $6; 40Version 2 Page 5 14. The market for soybeans is initially in equilibrium. Because of “mad cow disease,” producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that: A) the equilibrium price of soybeans will rise, but we can't determine what will happen to the equilibrium quantity. B) the equilibrium price and quantity of soybeans will rise. C) the equilibrium quantity of soybeans will rise, but we can't determine what will happen to the equilibrium price. D) the equilibrium price and quantity of soybeans will fall. 15. The Kansas market for corn is considered a competitive market. This means there are ________ buyers and ________ sellers of corn in Kansas. A) few; few B) few; many C) many; few D) many; many 16. The law of demand states that, other things equal: A) as the price decreases, the demand curve will shift to the right. B) as the price increases, the demand will decrease. C) as the price increases, the quantity demanded will increase. D) as the price increases, the quantity demanded will decrease. 17. Which of the following factors cause a movement along the demand curve? A) change in the population B) change in the prices of related goods C) change in the price of the good D) both a change in the price of the good and a change in the population 18. A newspaper story recently reported that the price of new cars has decreased, and the quantity of new cars sold has dropped. The price and quantity changes were probably caused by: A) a decrease in buyers' incomes. B) a decrease in production costs. C) an increase in buyers' incomes. D) an increase in production costs.Version 2 Page 6 19. If goods A and Z are complements, an increase in the price of good Z will: A) increase the demand for good A. B) decrease the demand for good A and decrease the demand for good Z. C) decrease the demand for good A. D) decrease the demand for good Z. 20. A good is inferior if: A) when income increases, the demand increases. B) income and the demand are unrelated. C) when income increases, the demand remains unchanged. D) when income increases, the demand decreases. 21. A recent news story reported that OPEC is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of the many families driving and flying to vacation sites. What would be the combined effect of these two events on the summer price of gasoline? A) price will increase. B) price will not change. C) the change in price is unpredictable. D) price will decrease. 22. A recent news story reported that OPEC is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of the many families driving and


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