ECON 1100 – Global Economics (Section 02) Exam #1 – Spring 2009 (Version D) 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. b. Incentive Principle. c. Irrational Behavior Principle. d. Principle of Comparative Advantage. 2. ________________ is the subfield of economics that compares the structure and performance of different types of economic organization. a. Comparative Economic Systems b. International Trade c. The Structure-Conduct-Performance Paradigm d. Public Finance 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 a. Ed’s Opportunity Cost for Coats is exactly equal to his own Opportunity Cost for Shirts. b. Fred has an Absolute Advantage in the production of Coats. c. Fred has a Comparative Advantage in the production of Coats. d. Ed has a Comparative Advantage in the production of both Coats and Shirts. 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 a. from attending the game was ($100)-($130)=(-$30) (that is, negative $30). b. from attending the game was ($130)-($100)=($30). c. from attending the game was ($100)+($130)=($230). d. None of the above answers are correct, since more information is needed to calculate her realized Economic Surplus from attending the game. 5. For the most part, the behavior of decision makers in Market Economies is primarily influenced by a. the government, through the mandates of Command Planning. b. Coercion. c. Material Incentives. d. Moral Persuasion.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 a. that every High School graduate would pursue a College degree. b. the High School graduation rate to increase to 100%. c. fewer High School graduates to enroll in College. d. 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. a. Fascism b. Communism c. Capitalism d. Socialism 8. With which of the following statements is there “general agreement” among most economists? a. “The U.S. government should not prevent firms from outsourcing work to foreign countries.” b. “Trade restrictions usually reduce general economic welfare.” c. “A minimum wage increases unemployment, particularly among young and unskilled workers.” d. All of the above answers are correct. 9. A “Rational Decision Maker” should a. consider the costs, but not benefits, of different courses of action. b. consider the benefits, but not costs, of different courses of action. c. consider both the benefits and costs of different courses of action. d. None of the above answers are correct. 10. Privately owned enterprises in a free market economy have a primary goal of a. making working conditions of employees as bad as possible. b. earning as large a profit as possible. c. damaging the environment. d. providing maximum benefits to the consumers of their products. 11. The Incentive Principle states that a. having more of one thing usually means getting by with less of something else. b. directly provides an explanation for why unskilled workers are easily exploited in a Capitalist economic system. c. a person is more likely to take an action if its benefits rises, and less likely to take an action if its cost rises. d. 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.12. The current economic system of Great Britain is best described as a. Pure Capitalism. b. Pure Socialism. c. a Mixed Economy. d. None of the above answers are correct. 13. One of the six primary “economic institutions” in any society is “Households.” Households a. are the ultimate consumers of most finished goods/services in a society. b. are the primary producers of goods/services within a society. c. specifically refer to groups of people that unite in order to collectively negotiate for improved terms of employment (including compensation and working conditions). d. More than one of the above answers is correct. 14. Which of the following provides an example of government establishing a law which is relevant for the functioning of a modern economy? a. Health Codes. b. A specification of obligations under the tax system. c. Environmental Regulations. 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. a. The Principal/Agent Problem b. The Mixed Economy c. The Incentive Principle d. Economic Surplus 16. A “Normative Statement” a. makes a claim that attempts to describe how the world actually is or how the world actually functions. b. involves “value judgments” and attempts to make an explicit comparison of the relative desirability of alternative options based upon these values. c. can (in principle) be confirmed or refuted by gathering and examining data and other evidence. d. More than one of the above answers is correct. 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 a. is not as nice of a person as Steelers quarterback Ben Roethlisberger. b. is a self-interested individual. c. is an irrational individual. d. does not understand the “Principle of Comparative Advantage.”18. When considering potential government policies, it is important to recognize that a. wealthy
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