ECON 1100 – Global Economics (Section 07) Exam #1 Answer Key – Spring 2011 (Version D) 1. Bridget and Henry produce wheat and chairs. Bridget’s Opportunity Cost for producing a chair is lower than Henry’s Opportunity Cost for producing a chair. As a result, it follows that D. Bridget has a Comparative Advantage in the production of chairs, while Henry has a Comparative Advantage in the production of wheat. 2. In 2009 High School graduates earned $18,250 per year more than non-High School graduates. If this difference had instead been $12,000 per year, then we would expect C. more people to drop out of school before graduating High School. 3. With which of the following statements is there “general agreement” among most economists? B. Imposing rent controls will reduce the quantity and quality of available housing in a market. 4. Within the past month, mudslides in Brazil led to the death of 479 people. Around the same time, the Atlanta Falcons lost to the Green Bay Packers by a score of 48 to 21 in the NFL playoffs. If Falcons quarterback Matt Ryan is more upset about the outcome of the playoff game than about the loss of life in Brazil, it would suggest that he C. is a self-interested individual. 5. Union membership in the U.S. A. peaked around 1955, when about 33% of the workforce was unionized. 6. ____________ is the branch of economics which studies how individual decision-makers behave and interact with each other (often with a focus on how individual households and/or firms behave and interact with each other in markets). C. Microeconomics 7. Suppose Ty paid a total of $50 in order to consume 4 pizzas. It follows that D. his Economic Surplus would be equal to $8. 8. Ty’s “Marginal Benefit” for his 2nd pizza consumed would be A. $14. 9. 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” by itself): D. If the price of a pizza were to decrease from $12 to $9, then Ty would increase his consumption from 2 pizzas to 3 pizzas.10. Paul (a.k.a. DJ Pauly D) and Nicole (a.k.a. Snooki) produce tanning beds and coconut rum. Paul’s Opportunity Cost for producing a tanning bed is less than Nicole’s Opportunity Cost for producing a tanning bed. The________________ suggests that they can increase their total output of these two goods if Paul focuses his production on tanning beds while Nicole focuses her production on coconut rum. C. Principle of Comparative Advantage 11. When resources are scarce, decision makers face tradeoffs. As a result, D. having more of one thing typically means getting by with less of something else. 12. Positive Statements A. are fact based statements which provide predictions about outcomes without any judging of their desirability. 13. Steven and Tyler work at a convenience store. They get paid by the hour. Upon arrival at work and right before leaving, each worker is supposed to type his employee I.D. number into a computerized time clock (which keeps track of exactly how much time he has worked). Tyler often sleeps late in the mornings and rarely gets to work on time. In such instances, Steven often “logs-in” for Tyler before Tyler gets to work. Steven’s behavior is an example of D. a Principal/Agent Problem. 14. 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 C. is used as a basic unit of measuring economic activity. 15. Consider a society consisting of only three people: Andy, Belinda, and Cal. Andy and Belinda spend all day producing clothing and food. At the end of each day they bring their output to Cal, who then divides it between the three individuals. The “basic economic question” that Cal is answering for this society is the D. Distributional Decision. 16. Which of the following combinations of output is “feasible and efficient”? B. “B” (790 Guns and 445 Roses). 17. Supposing that this society is producing an efficient combination of output, the “Opportunity Cost of producing the 435th Gun is ______________ the “Opportunity Cost of producing the 790th Gun.” C. less than 18. If this society wanted to produce 710 Roses, then their maximum output of Guns would be C. more than 435 but fewer than 580 Guns.19. A Corporation is a C. legal entity that can, through the sale of stock, raise capital from a large number of individuals, each of whom shares in the profits of the firm. 20. Mindy argues, “In 2009 the average tuition at a private University was $29,250 per year. Since these costs are so high, nobody should choose to attend college.” The primary problem with this argument is that it A. only focuses on one particular cost and ignores the many benefits of getting a college education. 21. The highest rates of Unionization in the world are currently found D. in Scandinavian countries. 22. Which markets are represented in the simple “Circular Flow Diagram”? C. Markets for “Goods and Services” and markets for “Factors of Production.” 23. Jack and Daniel produce whiskey and cola. In a single day, Jack can make either 10 bottles of whiskey or 20 bottles of cola. Based upon this information alone, we know that A. Jack’s Opportunity Cost for producing a bottle of whiskey is 2 bottles of cola. 24. Last weekend Samantha won $240 at a casino in Biloxi, Mississippi. She decided to use the money to purchase a new MP3 player at Best Buy. She was able to use the money to easily acquire this item since money serves as a B. medium of exchange. 25. Which of the following is NOT one of the “Three Basic Economic Questions” that every society must address? C. “How can we minimize our carbon footprint?” 26. ____________________ 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 to Engage in Economic Activity 27. When considering potential government policies, it is important to recognize that C. 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. 28. In a free market economy, households D. More than one
View Full Document
Unlocking...