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KSU ECON 1100 - Exam 1 ECON 1100

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ECON 1100 – Global Economics (Section 06) Exam #1 – Summer 2011 (Version D) Multiple Choice Questions (212 points each): 1. One of the principle functions of money is that it serves as a “unit of account.” This role could be described by recognizing that money A. is an asset used as payment when purchasing goods and services. B. is used as a basic unit of measuring economic activity. C. is an asset that can be used as a means to hold wealth. D. None of the above answers are correct. 2. 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 mix of goods and services should be produced?” C. “How can we reduce the amount of industrial pollution in our society?” D. More than one of the above is one of the “Three Basic Economic Questions” that every society must address. 3. In general, a Production Possibilities Curve A. should be upward sloping and get steeper as one moves up the curve. B. should be downward sloping and get flatter (i.e., become less negatively sloped) as one moves down the curve. C. should be downward sloping and get steeper (i.e., become more negatively sloped) as one moves down the curve. D. can be either upward sloping or downward sloping, but must always be a straight line. 4. ____________________ broadly refers to rights related to the ability to undertake economic activity as desired (such as the choice by an individual to seek employment in the occupation and location of their choosing). A. Freedom of Association B. Freedom of Comparative Advantage C. Freedom to Engage in Economic Activity D. Freedom of Incentives 5. When making recommendations regarding public policy, an Economist A. would only ever make Positive Statements and never make Normative Statements. B would only ever make Normative Statements and never make Positive Statements. C. would never make either Positive Statements or Normative Statements. D. would possibly make both Positive Statements and Normative Statements.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. B. a society should produce a good if and only if they possess an Absolute Advantage in the production of the good. C. having more of one thing means having to get by with less of something else. D. a person is less likely to take an action if its costs rise or benefits decrease. 7. __________________ is the study of the behavior of a society’s economy as a whole, focusing on levels and changes in things such as unemployment rates, inflation rates, and GDP growth rates. A. Microeconomics B. Macroeconomics C. Comparative Economic Systems D. Political Science For questions 8 to 10, consider the following scenario. Andy and Beth spend their workday producing Corn and Drums. Their productive abilities are such that in each single workday they could produce the following levels of output: Corn: Drums: Andy 20 per day 60 per day Beth 10 per day 50 per day For example, if Andy spent a quarter of a day making Corn and three quarters of a day making Drums, then he would produce 5 units of Corn and 45 Drums. 8. __________ has an Absolute Advantage in the production of Corn; __________ has an Absolute Advantage in the production of Drums. A. Andy; Andy. B. Andy; Beth. C. Beth; Andy. D. Beth; Beth. 9. Beth’s Opportunity Cost for producing a unit of Corn is A. (0.20) Drums. B. 3 Drums. C. 5 Drums. D. 50 Drums. 10. Suppose that Andy and Beth wanted to maximize their combined production by specialization. Which of the following combinations is Feasible and Efficient? A. 15 units of Corn and 45 Drums. B. 25 units of Corn and 25 Drums. C. 30 units of Corn and 110 Drums. D. More than one (perhaps all) of the above answers is correct.11. Mike argues, “In 2009, average college tuition was $16,750 per year. Since these costs are so high, nobody should go to college.” The primary problem with this argument is that: A. it only focuses on one particular cost and ignores the many benefits of a college education. B. it fails to recognize that when making important decisions (such as whether or not to attend college) rational people do not base their behavior on things such as “benefits” and “costs.” C. it fails to recognize that all rational people will attend State Universities, since they offer tuition lower than the “overall average tuition.” D. None of the above answers are correct (since there is no flaw with this statement). 12. With which of the following statements is there “general agreement” among most economists? A. “Transfers-in-kind (e.g., food stamps) increase the well-being of a recipient to a greater degree than would a cash payment of equal value.” B. “Rent controls reduce the quantity/quality of available housing.” C. “Fiscal policy can never have any stimulative impact on overall macroeconomic performance.” D. More than one (perhaps all) of the above answers is correct. 13. Which markets are represented in the simple “Circular Flow Diagram”? A. Markets for “Production Possibilities” and markets for “Factors of Production.” B. Markets for “Government Services” and markets for “Financial Assets.” C. Markets for “Goods and Services” and markets for “Imports and Exports.” D. Markets for “Goods and Services” and markets for “Factors of Production.” 14. _________________ broadly refers to any asset that is socially and legally accepted as payment for goods or services. A. A Contract B. Money C. Corporate Governance D. An Incentive 15. Union membership in the U.S. A. peaked around 1955, when about one-third of the workforce was unionized. B. is no longer necessary, since the minimum wage has been increased to $15.00 per hour. C. was made illegal by President George W. Bush, when he signed the “Unskilled Worker Starvation Act of 2007.” D. is currently at an all-time high, with over 95% of the workforce unionized.16. Jane enjoys golfing. This past April she played 12 rounds of golf. Her Marginal Benefit for her 12th round of golf was $35, while her Marginal Cost for her 12th round of golf was $29. Based


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KSU ECON 1100 - Exam 1 ECON 1100

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