ECON 1100 – Global Economics (Section 08) Exam #1 – Spring 2008 (Version A) – Answer Key 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. d. Cost-Benefit Principle 2. __________ is the subfield of economics that compares the structure and performance of different types of economic organization. c. Comparative Economic Systems 3. Which of the following statements would support a claim that “incomes are distributed more equally in Bulgaria than 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 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. 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. 7. In which of the following countries do individuals enjoy the least amount of “Economic Freedom”? a. Cuba. 8. Which of the points in the graph above is an “attainable, but inefficient” combination of output for this society? c. Point C. 9. If this society used all of its productive resources to produce only Roses, then they could produce d. More than one of the above answers is correct.10. Someone with well defined goals who takes actions to fulfill those goals as best as possible is a. a rational individual. 11. One of the six primary economic institutions is “governments.” “Government” c. plays a role in establishing individual and economic rights, as well as in regulating business and industry. 12. The economy of Canada is best described as a. a Mixed 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. 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 b. rules that are made and enforced by some level of government. 15. _________ refers to “the capacity of the national economy to achieve growth over the medium term, controlling for the current level of development.” b. Economic Competitiveness 16. The Lorenz Curve provides a direct graphical illustration of c. the distribution of income within a society. 17. When resources are scarce, decision makers face tradeoffs. As a result, b. having more of one thing typically means getting by with less of something else. 18. Which of the following is NOT one of the primary economic institutions that characterize a modern economy? b. Natural Assets. 19. “Habitat for Humanity” is an example of a. a Non-Governmental Agency. 20. For the most part, the behavior of decision makers in Market Economies is primarily influenced by d. Material Incentives 21. John owns a 400 acre peanut farm just outside of Tifton, GA. He has decided to stop farming and sell his land to a housing developer. When selling his land, which of the following property rights is he exercising? d. the “Disposal Right.”22. On January 31, 2008, the Pittsburgh Penguins traded center Joe Jensen to the Carolina Hurricanes for left wing David Gove. Since this voluntary trade took place, we can infer that b. the Pittsburgh Penguins thought the trade was in the best interest of their own organization. 23. If Gene were to pay a total of $20 in order to consume 2 pizzas, then b. his Economic Surplus would be $40. 24. Gene’s “Marginal Benefit” for his 4th pizza consumed would be b. 10. 25. If each pizza costs $16, then Gene should c. consume only 2 pizzas. 26. We can see the “Incentive Principle” at work by noting that (hint: all of the statements below are correct observations, however only one of them illustrates the “Incentive Principle”): c. If the price of a pizza were to increase from $14 to $20, then Gene would decrease his consumption from 3 pizzas to only 2 pizzas. 27. Mike argues, “In 2007 the average tuition at a private University was $22,500 per year. Since these costs are so high, nobody should choose to attend college.” The primary problem with this argument is that: b. it only focuses on one particular cost and ignores the many benefits of getting a college education. 28. “Moral Persuasion” refers to b. attempts to convince someone to behave in a certain way because it is “the right thing to do.” 29. _______ refers to an economic system in which the means of production are owned and operated by the government. c. Socialism 30. One of the three basic economic questions that every society must answer is the “distributional decision,” which amounts to answering the question of: c. Which individuals get to consume which goods/services? 31. Which of the following is an example of a “Produced Asset”? c. The Saturn automobile plant in Spring Hill, TN. 32. ___________ refers to an environment in which all decisions are made by a single, central authority. b. Centralization33. Markets d. More than one of the above answers is correct. 34. __________ refers to problems that arise because of difficulties associated with getting workers to take actions that are best for the owners of a firm. c. The Principal/Agent Problem 35. In a modern economy the behavior of economic decision makers is restricted by a. both “formal rules” and “informal customs.” 36. Observing that average annual income per person is $47,800 in Norway, $27,000 in Spain, and $8,600 in Brazil would begin to support a claim that c. the global distribution of incomes is highly skewed, in that there are tremendous differences in average incomes across different countries around the
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