ECON 1100 – Global Economics (Section 09) Exam #1 – Spring 2008 (Version C) – Answer Key Multiple Choice Questions (212 points each): 1. A “Rational Decision Maker” should a. consider both the benefits and costs of different courses of action. 2. Mike can assemble 10 bicycles in a single day, while Heidi can assemble 8 bicycles in a single day. Based upon this information alone, we know that c. Mike possesses an Absolute Advantage in assembling bicycles. 3. In 2002 College graduates earned $18,750 per year more than High School graduates. If this difference had instead been $15,000 per year, then we would expect b. fewer people to pursue a college education. 4. Company Unions d. More than one of the above answers is correct. 5. John attended the Atlanta Hawks-Los Angeles Lakers basketball game at Philips Arena on Wednesday, February 6, 2008. His Total Benefits from doing so were $150, while his Total Costs from doing so were $130. It follows that his Economic Surplus a. from attending the game was $20. 6. Most modern economies are most accurately described as a. Mixed Economies 7. Privately owned enterprises in a free market economy have a primary goal of c. earning as large a profit as possible. 8. The restriction that all workers in Georgia must be paid at least $5.85 per hour is an example of b. a law which restricts the behavior of market participants. 9. In which of the following countries do individuals enjoy the greatest amount of Economic Freedom? b. Singapore. 10. Last weekend a series of earthquakes in central Africa killed 43 people and the New York Giants beat the New England Patriots in Super Bowl XLII by a score of 17 to 14. If Patriots quarterback Tom Brady is more upset about the outcome of the Super Bowl than about the loss of life in central Africa, then c. it suggests that he is a self-interested individual.11. Under “Command Planning” b. the government directly controls all economic activity, and nearly all production takes place in government owned enterprises. 12. The “Environmental Sustainability Index” discussed in the textbook a. attempts to quantify the “impact of an economy on the environment” and the “long-term environmental sustainability of an economic system.” 13. Based upon this graph, we can tell that in 2006 a. incomes in Canada were distributed more equally than were incomes in Jamaica. 14. Based upon the Lorenz Curves illustrated above, we can tell that c. the value of the Gini-Coefficient in Canada in 2006 was less than the value of the Gini-Coefficient in Jamaica in 2006. 15. _________ is an economic system in which the means of production are privately owned and operated for a profit. c. Capitalism 16. _____________ is/are “the skills, education, and training which individuals in the labor force possess.” d. Human Capital 17. Paula enjoys going to the movies. In January she saw 5 movies in the theatre. Her Marginal Benefit of the 5th movie was $15, while her Marginal Cost of the 5th movie was $12. Based upon this information, we know that c. her Economic Surplus would have been smaller if she had instead gone to the movies only 4 times. 18. _____________ states that a person is more likely to take an action if its benefits become larger or if its costs become smaller. d. The Incentive Principle 19. The National Rifle Association (NRA) is an example of b. a Non-Governmental Agency that exists primarily to “lobby the government in an attempt to influence government behavior.” 20. Which of the following is not an example of a “Natural Asset”? b. The SanDisk manufacturing plant in Shanghai, China. 21. 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 d. More than one of the above answers is correct.22. Brenda manages a fast food Mexican restaurant. While working the register, Paul sometimes doesn’t charge his friends for tacos when they come to the restaurant. This situation is an example of a. A Principal/Agent Problem. 23. Point B in the graph above is a. unattainable 24. If this society chose to produce 900 Guns, then the maximum number of Roses they could produce would be a. more than 120 Roses but less than 255 Roses. 25. One of the three types of “Economic Incentives” is “Coercion,” which could be described as b. the use of “force” or “intimidation” to obtain compliance. 26. When Cindy goes to work at “Carl’s Cell Phone Kiosk” in the Town Center at Cobb, she is acting as c. a member of a household, supplying labor to an enterprise. 27. ___________ traces its philosophical roots to the work of 19th Century Philosopher Karl Marx. c. Communism 28. One of the distinct property rights discussed in lecture was the “control right,” which refers to c. the right to use a resource in the way the owner sees fits. 29. Woody spends each hour of his working day either making blue jeans or growing carrots. In order to increase his output of carrots he must spend more time growing carrots and less time making blue jeans (thereby decreasing his output of blue jeans). This scenario illustrates that b. he faces a tradeoff between carrot output and blue jean output, since his labor time is scarce. 30. Economics is the b. social science that studies decision making in the face of scarcity, and the implications of such decisions on individuals and society. 31. Consider a society consisting of only three people: Alice, Brenda, and Charles. Alice and Brenda spend all day producing clothing and food. At the end of each day they bring their output to Charles, who then decides how much of each good each individual gets to consume. The “basic economic question” that Charles is answering for this society is the d. Distributional Decision.32. The behavior of economic decision makers within an institution is restricted in part by “procedures,” which are a. informal guidelines which dictate how much of the day-to-day behavior of an institution is conducted. 33. The United States was ranked 1st in the ranking of “Economic Competitiveness” presented in the textbook and discussed in lecture. In comparison to the other countries included in the ranking, this ranking suggests that c. the U.S. economy has the greatest capacity to
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