Macroeconomics Exam 1 1 Sean Hunter enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident According to the economic way of thinking Sean is a Making an irrational choice b Making a rational choice c Not fully considering the personal costs and benefits of his decision d Not responding to the incentives he faces 2 When economists say a good is scare they mean a There are only a limited number of consumers who would be interested in purchasing the good b The human desire for the good exceeds the amount freely available from nature c Most people in poorer countries do not have enough of the good d The production of the good has no opportunity cost for society 3 Cupid has heard about the law of demand and wants to test his theory that people will buy less of a good as its price increases He decides to study the relationship between the price of roses and the quantity of roses that people choose to buy He notices that on Friday February 14th Valentine s Day the price of roses increases and yet people choose to buy even more roses He concludes that the law of demand is not a valid theory Which of the following is true a Cupid performed an accurate test and has correctly concluded that the law of demand is not valid b Cupid violated the ceteris parable principle and in doing so probably reached a false conclusion c Cupid has confused the law of demand with the law of supply d Cupid has made the mistake of trying to test a normative rather than positive economic statement 4 Florida State University s football coach Jimbo Fisher grew up in West Virginia studying football and coaching strategies He used his vast talents and education as a head football coach to lead FSU s football team to a national championship last season His ingenuity and skill as a head football coach can be characterized as a a Human resource b Physical resource c Natural resource d None of the above making decisions 5 Because information is costly to acquire a People will rationally choose not to become fully informed when b People will generally choose to become as fully informed as possible when making decisions c People will generally choose to acquire information that would be relevant to their decisions d None of the above are true 6 The resources now going into the war of terrorism and into improved airport security would save more lives if they were invested in medical research This statement most clearly reflects which of the following a We should spend as much money as is necessary to save even one life since a life is priceless and cannot be replaced b There is no such thing as a free lunch the use of scarce resources always has an opportunity cost c Selfishness if people were not selfish we could have more of everything d That when the government provides goods and services they are free and do not have to be paid for by anybody 7 Which of the following is a positive economic statement a The federal minimum wage should be raised to 6 50 per hour b The U S would spends too much on anti terrorism efforts c An increase in investment will lead to a higher rate of economic growth d Economics is twice as interesting to study as philosophy 8 Which of the following is most consistent with economizing behavior a If you derive the same satisfaction from eating pizza and eating ice cream it makes no difference which one of the two you choose even if they cost different amounts b You should always vote and before voting you should invest the time and enedy to become fully informed on all of the issues and candidates It never makes sense to hire someone to do something for you that you could do yourself If you get the same satisfaction from a chicken sandwich and a salad you should purchase the one that costs the least d c 9 When offering to throw money into the loudest section of class Joab noticed that the class got a lot louder when he offered to throw 5 dollars into the loudest section compared to when he offered to throw only a penny into the loudest section Which guidepost of economic thinking does this best represent a Changes in personal costs and benefits generally fail to exert much b c impact on behavior If one individual gains from an economic activity then someone else must lose and in the same proportion Incentives matter individuals respond in predictable ways to changes in personal costs and benefits d This is a trick question No economic guidepost is being represented by this pointless activity 10 All but one of the following are elements of the economic way of thinking Which one is not part of the economic way of thinking Incentives matter a b The value of goods can be determined objectively c Economic thinking is marginal thinking d Information is costly 11 Legislation required pharmaceutical companies to put warning labels on anti depressant medications indicating that taking these anti depressants may lead to an increase in suicidal behavior in an effort to reduce suicide rates Unfortunately this caused many people suffering from depression to decide not to take their prescribed anti depressants and as a result suicide rates may have increased This is an example of which of the following a Association is not causation b The fallacy of composition c The use of ceteris parabis conditions in economic analysis d Good intentions do not always lead to desirable outcomes 12 While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for 3 For Jordan the marginal cost of the third taco would be a zero b 50 cents c 80 cents d 1 13 Private property rights involve a The right to exclusive use of property b Legal protection against those who would seek to use or abuse the property with the owner s permission c The right to transfer sell exchange or mortgage property d All of the above 14 Henry Ford made millions of dollars producing and marketing automobiles Many workers and consumers must have suffered in order for Ford to amass such enormous wealth The person who made this observation a has failed to understand the principle of opportunity cost b has failed to comprehend fallacy of composition c has failed to understand that specialization and exchange generally result in mutual economic gain d has utilized the economic way
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