ECON 1100 – Global Economics (Section 02) Exam #1 – Spring 2009 (Version C) Multiple Choice Questions (212 points each): 1. The __________________ states that 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. a. 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. Ed and Fred produce Coats and Shirts. In any single day, Ed can make either 40 Coats or 10 Shirts. If Fred spends an entire day making Coats, he can make 50 Coats. Based upon this information alone, we know that c. Fred has an Absolute Advantage in the production of Coats. 4. Mary attended the Hawks-Magic game at Philips Arena on Wednesday, 1/7/09. Her Total Benefits from doing so were $100, while her Total Costs from doing so were $130. From this information alone, it follows that her Economic Surplus b. from attending the game was ($100)-($130)=(-$30) (that is, negative $30). 5. For the most part, the behavior of decision makers in Market Economies is primarily influenced by d. Material Incentives. 6. Suppose that in 2005 College graduates earned $12,150 per year more than High School graduates. If this difference had instead been $14,900 per year, then we would likely expect b. more High School graduates to enroll in College. 7. __________________ is an economic system in which the means of production are privately owned and operated for a profit. b. Capitalism 8. With which of the following statements is there “general agreement” among most economists? d. All of the above answers are correct. 9. A “Rational Decision Maker” should a. consider both the benefits and costs of different courses of action.10. Privately owned enterprises in a free market economy have a primary goal of c. earning as large a profit as possible. 11. The Incentive Principle states that 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. 12. The current economic system of Great Britain is best described as a. a Mixed Economy. 13. One of the six primary “economic institutions” in any society is “Households.” Households b. are the ultimate consumers of most finished goods/services in a society. 14. Which of the following provides an example of government establishing a law which is relevant for the functioning of a modern economy? d. All of the above answers are correct. 15. ____________ 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 16. A “Normative Statement” a. involves “value judgments” and attempts to make an explicit comparison of the relative desirability of alternative options based upon these values. 17. Within the last month, flooding in Fiji directly led to the death of 7 people and the Pittsburgh Steelers beat the Arizona Cardinals in Super Bowl XLIII by a score of 27 to 23. If Cardinals quarterback Kurt Warner is more upset about the outcome of the Super Bowl than about the loss of life in Fiji, then it suggests that he c. is a self-interested individual. 18. When considering potential government policies, it is important to recognize that a. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy. 19. Zack and A.C. produce surfboards and oranges. Zack possesses an Absolute Advantage in the production of both surfboards and oranges. Further, Zack’s opportunity cost of producing a surfboard is lower than A.C.’s opportunity cost of producing a surfboard. The Principle of Comparative Advantage suggests that they can increase their total output of these two goods if a. Zack focuses his production on surfboards while A.C. focuses his production on oranges.20. One of the three types of “Economic Incentives” is “Coercion,” which could be described as c. the use of “force” or “intimidation” to obtain compliance. 21. The “Mixed Economy” a. refers to an economic system in which there are both privately owned/operated enterprises and government owned/operated enterprises. 22. ______________ broadly refers to rights related to the ability of an individual to seek employment in the occupation and location of their choosing. c. Freedom of Mobility and Employment 23. The “Environmental Sustainability Index” discussed in lecture and in the textbook d. More than one of the above answers is correct. 24. Based upon this graph, we can tell that in 2008 a. incomes in Canada were distributed more equally than were incomes in Australia. 25. Based upon the Lorenz Curves illustrated above, we can infer that c. the value of the Gini-Coefficient in Canada in 2008 was less than the value of the Gini-Coefficient in Australia in 2008. 26. Which of the following is not an example of a “Natural Asset”? c. The Kia Motors plant currently under construction in West Point, GA. 27. Which of the following combinations of output is “feasible and efficient”? b. “B” (115 Tanks and 1,600 bushels of Corn). 28. Suppose that starting at Point “B” (i.e., 115 Tanks and 1,600 bushels of Corn), this society wanted to increase Tank production by 60 units. Based upon the graph above a. they could not do so, even if they produced zero bushels of Corn. 29. If this society wanted to produce 1,800 bushels of Corn, then a. the maximum number of Tanks they could produce is some number greater than 80 but less than 115. 30. Jane enjoys going to the movies. This past December she saw 4 movies in the theatre. Her Marginal Benefit of the 4th movie was $9, while her Marginal Cost of the 4th movie was $12. Based upon this information, we know that a. her Economic Surplus would have been larger if she had instead gone to the movies only 3 times.31. Laurie spends each hour of her work day making soup or baking bread. In order to increase her output of soup she must spend more time making soup and less time baking bread (thereby decreasing her output of bread). This scenario illustrates that d. she faces a tradeoff between soup output and bread output, since her labor time is
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