Economics E201 (Professor Self) Sample Questions for Exam OneYour exam will have two parts covering the topics in chapters 1, 2, 3, and 4 from your textbook and any materialwe discussed in class that is not in your text. Part one will have around 22 to 25 multiple choice questions, parttwo will contain short answer questions.Please bring a #2 pencil and you may use a calculator when taking your exam, but no cell phone.Part One, Multiple Choice: Select the letter that corresponds to the letter of your choice for eachquestion. You should choose the suggested answer that BEST completes the statement or answers thequestion.1. Homer and Teddy are stranded on a desert island. To feed themselves each day they can eithercatch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer couldpick 100 pieces of fruit or catch 150 fish. Which of the following is correct?A) Only Homer would be better off if Homer specialized in picking fruit and Teddy specializedin catching fish.B) Only Homer would be better off if Homer specialized in catching fish and Teddy specializedin picking fruit.C) Both Homer and Teddy would be better off if Homer specialized in picking fruit and Teddyspecialized in catching fish.D) Both Homer and Teddy would be better off if Homer specialized in catching fish and Teddyspecialized in picking fruit.2. Suppose that the government of New York state promises to decrease taxes to a firm if it decidesto stay in New York instead of moving to another state. This policy on the part of the stateconstitutes ________, to make the ________ of the firm remaining in New York.A) a command; marginal cost exceed the marginal benefitB) a command; marginal benefit exceed the marginal costC) an incentive; marginal cost exceed the marginal benefitD) an incentive; marginal benefit exceed the marginal cost1Economics E201 (Professor Self) Sample Questions for Exam One3. "Every time I wear my school's colors on Saturday, our team wins its football game." Thisstatement is an example of ________________________________________A) a normative economic statement.B) fallacy of composition.C) an opportunity cost for wining football games.D)ceteris paribus fallacy.E)post hoc fallacy.4. When the production possibilities frontier is bowed outwards, the opportunity cost of producingmore of one goodA) decreases in terms of the amount foregone of the other good.B) produces a convex shaped curve.C) increases in terms of the amount foregone of the other good.D) cannot be determined.E) remains constant.5. Suppose you are given a free ticket to take a night cruise on the Jordan River, which isnontransferable and has no resale value. The same night there is a concert by your favorite bandthe Marginalists, which is your next best alternative. Tickets to see the Marginalists cost $100.On any given day, you would be willing to pay up to $105 to the Marginalists. Assume there areno other costs for going on the cruise or seeing the concert. Based on this information, what is theopportunity cost of going on the cruise?A) $205 B) $105 C) $100 D) $0 E) $56. Suppose that the price of lettuce decreases after the supply curve for tomatoes increased. You thenobserve that people buy more lettuce at any price. These observations suggest that lettuce andtomatoes are ________.A) substitutes in consumptionB) inferior goodsC) complements in productionD) complements consumptionE) normal goods2Economics E201 (Professor Self) Sample Questions for Exam One7. After you graduate, you have decided to accept a position working at the Bureau of LaborStatistics for $45,000.00 a year. The two other offers you received were working for Wal-Mart for$38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you wouldhave preferred the job at Ernst and Young. What is the opportunity cost of accepting the position atthe Bureau of Labor Statistics?A) the $38,000 you would have been paid working for Wal-MartB) the $42,000 you would have been paid working for Ernst and YoungC) the $42,000 you would have been paid working for Ernst and Young and the $38,000 youwould have been paid working for Wal-MartD) the $45,000 you are paid for working at the Bureau of Labor StatisticsE) None of the above are correct.8. Which of the following is NOT a factor of production?A) The wages paid to workers.B) The effort of farmers raising cattle.C) CattleD) The management skill of a small business owner.E) The water used to cool a nuclear power plant.9. If the U.S. Surgeon General announces in a well believed report that increased wheat consumptioncould cause heightened anxiety levels among children and adults, what happens to the equilibriumprice and quantity of shredded wheat?A) The equilibrium price falls and the equilibrium quantity increases.B) The equilibrium price rises and the equilibrium quantity increases.C) The equilibrium price rises and the equilibrium quantity decreases.D) The equilibrium price falls and the equilibrium quantity decreases.E) Both the equilibrium price and quantity remain the same.10. The opportunity cost of economic growth isA) future consumption that a nation gets if it gives up some present consumption.B) investment that a nation gives up to increase its economic growth.C) present consumption that a nation gives up to accumulate capitalD) future consumption that a nation gives up to consume more today3Economics E201 (Professor Self) Sample Questions for Exam One11. DVDs and CDs are substitutes in production and not related in consumption. If there is anincrease in the demand for DVDs that increases the market price of a DVDs, we would expect tosee ________________________A) a decrease in the supply of CDs.B) an increase in the supply of CDs.C) a decrease in the quantity supplied of CDs but not in the supply.D) an increase in the quantity supplied of CDs but not in the supply.12. In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In aneight-hour day, Adam can produce either 8 loaves of bread or 8 pounds of butter. We know thatAndy has a comparative advantage in the production ofA) bread, while Adam has a comparative advantage in the production of butter.B) bread and neither has a comparative advantage in the production of butter.C) both bread and butter.D) butter, while Adam has a comparative advantage in the production of bread.13. Beef and leather belts are complements in production. If people's concern about health shifts thedemand