Test Questions Things to Know 02 01 2016 MAKE SURE YOU ARE ABLE TO DRAW GRAPHS APPROPRAITELY WITH TITLE AXIS LABELS LABELED CURVE PRICE AND QUANTITY EQUILIBRIUM ARROWS SHIFTING SLIDING and THERE WILL BE 5 QUESTIONS ON THE DIFFERENCE BETWEEN DEMAND SUPPLY QUANTITY SUPPLIED AND QUANTITY DEMANDED 1 Economics is primarily the study of 2 Review the statements and determine which if they are true or false I The opportunity cost of an activity is the lowest value foregone as the result of choosing that activity II Opportunity cost is subjective it can be determined only by the person who chooses among the alternatives 3 What is rational ignorance 4 What is the difference between Macroeconomics and Microeconomics 5 True or False Economic theory stresses that good intentions lead to sound economic policy 6 What is scarcity 7 What is objective vs subjective 8 What is normative and positive economics 9 What is statistical murder 10 What are the four resources human physical nature 11 What are the four returns of resources 12 Define utility 13 What is ceteris paribus 14 True or False Because it is cold out people are wearing sweaters 15 What is the fallacy of composition 16 Describe countries A B and C Which country has the highest standard of living Which one will be better off in the future 17 Why does the US imports coffee from Colombia even though the price to import the coffee is expensive 18 Using this chart please answer the following questions Nigeria Chicken 6 4 2 0 Corn 0 2 4 6 South Africa Chicken 0 1 2 3 Corn 12 8 2 0 a Which country has the comparative advantage in chicken b Which country has the comparative advantage in corn c If Nigeria only produces chicken how much corn will they produce 19 What is comparative advantage 20 Which of the following most accurately states the economic significance of exchange a Physical goods have value because they exist exchange can neither increase nor decrease their value b Production of physical goods creates value exchange merely redistributes this value c Exchange reduces value since it consumes resources without adding to the physical supply of goods d Exchange creates value by moving goods from parties who value them less to parties who value them more 21 If a motorist is stranded in front of a pay phone and has only dollar bills and he ends up buying a quarter from a passerby for a 1 so he can sue the pay phone 22 What happens in a country that does not enforce private property rights a Little incentive to improve property b Little incentive to conserve property c Little incentive to take care of property d All of the above e None of the above 23 Draw a graph of a non linear productions possibilities curve Point A is a country producing more INVESTMENT GOODS and point B is a country producing more CONSUMER goods 24 Economies that produce more consumer goods and fewer investment goods 25 Which of the following can cause the productions possibilities frontier to shift out a New technology b Increase in resources c Increase in education d Increase in job training 26 The law of comparative advantage implies that a nation individual or region should produce those things for which it is a opportunity cost producer and trade for those things for which it is a opportunity cost producer 27 The law of comparative advantage suggests that 28 What is a middleman 29 What is a transaction cost 30 What s the difference between liner and non linear PPC s 31 Describe the Graph 32 Who is better off from trade 33 If the reservation price is below the market price the consumer surplus is 34 Why does the demand curve slope down 35 Your income has risen ceteris paribus what would you expect of market prices of Is this supply or demand 36 Why is the demand for one good elastic but for another inelastic 37 Ceteris Parabius if the demand for automobiles increases what would you expect to happen to tire market a Demand for tires will decrease b Demand for tires will increase c Quantity demanded for tires will increase d Quantity demanded for tires will decrease 38 Ceteris Paribus if the price of gasoline increases and continues to rise over time what would you expect to happen in the market for large less fuel efficient cars a Demand for cars will decrease b Demand for cars will increase c Quantity demanded for cars will increase d Quantity demanded for cars will decrease Answer Key 02 01 2016 1 how humans make choices as a result of scarcity 2 I is false II is true 3 remaining ignorant about something where the cost of obtaining the knowledge is greater than the benefit of learning it 4 Microeconomics is only small sectors of economics Macroeconomics is the big picture of aggregate demand and aggregate supply 5 FALSE Good intentions lead to bad outcomes EX seatbelts on a bus 6 Not abundant in nature Limited amount 7 Objective is not influenced by feelings Subjective is based off of personal feelings 8 Normative economics is subjective and value based Positive economics is objective and fact based 9 Continuing implementing an action even though the statistical numbers provide evidence that said action would be more harmful rather than more beneficial a EX seatbelts in buses cost 2 000 The county decides to invest 6 000 to give 3 buses seatbelts even though statistics show that more children are at harm after getting off the bus getting hit by a bus car walking across the road etc b The county could have spent 6 000 on building a new park in low income areas to improve county appearance and provide a safe place for children to hang out instead of putting money into a less beneficial place c Now children will still be harmed at the same rate as before but the county is now left without the 6 000 spent on seatbelts 10 LAND LABOR CAPITAL ENTRPRENUERHSIP 11 rent wages interest profit 12 Utility is the amount of worth or benefit someone receives from an object or thing 13 All things constant 14 True The cold CAUSES people wear sweaters 15 What is good for the individual is not necessarily mean it is true for the group 16 Country C is the best economy for the present with the highest standard of living Country A has the highest potential for improvement and will have higher standards of living in the FUTURE 17 It is still cheaper than making coffee domestically in the US higher opportunity cost to make coffee in the US than import it from another country 18a Nigeria SA OppCost chicken 1 chicken for every 4 corn Nig OppCost chicken 1 chicken for every 1 corn 18b South
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