ECON 1100 – Global Economics (Section 03) Exam #1 – Summer 2008 (Version B) Multiple Choice Questions (212 points each): 1. A “Rational Decision Maker” refers to a. someone who convinces themselves that bad decisions are in fact good decisions. b. an individual who cares more about their own well-being than about the well-being of others. c. an individual with well defined goals who takes actions to fulfill those goals as best as possible. d. a government with the single goal of making sure all citizens have equal levels of income and wealth. 2. __________ is the subfield of economics that compares the structure and performance of different types of economic organization. a. Money and Banking b. Industrial Organization c. Comparative Economic Systems d. The Structure-Conduct-Performance Paradigm 3. This past Sunday John watched the Braves lose to the Phillies at Turner Field. While at the game he ate 4 hotdogs. His Marginal Benefits for the fourth hotdog was $2.75. Each hotdog cost $4.50. Based upon this information, we can tell that a. he ate the number of hotdogs that maximized his Economic Surplus. b. his Economic Surplus would have been greater if he had instead eaten only 3 hotdogs. c. his Economic Surplus would have been greater if he had instead eaten 5 hotdogs. d. None of the above answers is correct. 4. The economy of Germany is best described as a. a Pure Capitalistic Economy. b. a Pure Socialist Economy. c. a Mixed Economy. d. a Third World Economy. 5. Lea manages a fast food restaurant. While working the register, Paul sometimes doesn’t charge his friends for cheeseburgers and French fries when they come to the restaurant. This situation is an example of a. The Principle of Comparative Advantage. b. Governmental Redistribution of Income. c. A Principal/Agent Problem. d. None of the above answers are correct.6. The behavior of economic decision makers is restricted by the “Legal Framework,” “Rules within Organizations,” “Procedures,” and “Custom, Culture and Tradition.” “Procedures” refer to a. formal rules that are made and enforced by some level of government. b. informal guidelines which dictate how much of the day-to-day behavior of an institution is conducted. c. self imposed rules which limit behavior that are written and codified. d. tradeoffs that must be made because resources are scarce. 7. The restriction that all workers in Georgia must be paid at least $5.85 per hour is an example of a. coercion. b. a custom or tradition which has a substantial impact on the labor market. c. a law which restricts the behavior of market participants. d. a procedure which restricts the behavior of firms. 8. _________________ refer(s) to “the skills, education, and training which individuals in the labor force possess.” a. Household Income b. Human Capital c. Produced Assets d. Natural Assets 9. In which of the following countries do individuals enjoy the greatest amount of “Economic Freedom”? a. Mexico. b. Cuba. c. Hong Kong. d. India. 10. Which of the following economic resources is NOT an example of a “Natural Asset”? a. The 1.7 trillion tons of coal reserves in the United States. b. The 900,000 square foot Anheuser-Busch Brewery in Cartersville, GA. c. The Mississippi River, a principle navigable river in the central and southern United States. d. The San Diego Bay, a natural harbor adjacent to San Diego, CA. 11. Under “Indicative Planning” a. rational, “profit maximizing” firms decide which goods to produce and in what quantities. b. the government relies upon the voluntary response of the private sector to a set of guidelines jointly formulated by government, industry, and labor. c. the government directly controls all economic activity, and nearly all production takes place in government owned enterprises. d. None of the above answers are correct.12. Economic Surplus refers to a. the outcome which arises when a society is able to produce a combination of goods beyond its Production Possibilities Curve. b. the total benefits that consumers get from purchasing goods and services. c. the difference between Marginal Benefits and Marginal Costs of an activity. d. the difference between Total Benefits and Total Costs of an activity. 13. Consider a society consisting of only three people: Albert, Bob, and Candice. Albert and Bob spend all day producing shirts and fruit. At the end of each day they bring their output to Candice who then decides how it will be divided among the three individuals in the society. The “basic economic question” that Candice is answering for this society is the a. “Distributional Decision.” b. “Choice of Technique.” c. “Production Decision.” d. “Principal/Agent Problem.” 14. The “Cost-Benefit Principle” 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. an individual should take an action if and only if the additional benefits from doing so are at least as great as the additional costs from doing so. c. an individual is more likely to take an action if its benefits rise or if its costs fall. d. More than one of the above answers is correct. 15. On February 6, 2008, the Miami Heat traded Shaquille O’Neal to the Phoenix Suns in exchange for Shawn Marion and Marcus Banks. Since this voluntary trade took place, we can infer that a. the Phoenix Suns thought the trade was in the best interest of their own organization. b. the Miami Heat thought the trade was NOT in the best interest of their own organization. c. NBA Commissioner David Stern thought the trade was NOT in the best interest of either the Heat or the Suns, but rather that it would be “good for the league.” d. the Phoenix Suns would be playing the NBA Finals if they had not made the trade. 16. A “Nongovernmental Organization” may exist in order to a. lobby the government in order to influence government policy. b. provide goods/services to a particular group of individuals. c. serve as a center of common interest among its members. d. All of the above answers are correct.17. Privately owned enterprises in a free market economy have a primary goal of a. earning as large a profit as possible. b. providing maximum benefits to the consumers
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