6. In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. D. business owners; working class.

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1 ECON 1100 Global Economics (Section 07) Exam #1 Spring 2013 (Version B) Answer Key 1. Economics is the social science that B. studies how people make decisions in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein. 2. Consider a society consisting of only three people: Randy, Nicki, and Mariah. Randy and Nicki spend all day producing clothing and food. At the end of each day Mariah decides how much of their output each person in society gets to consume. The fundamental economic question that Mariah is answering for this society is the B. Distributional Decision. 3. The Incentive Principle states that D. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity. 4. The results of the Ease of Doing Business study suggest that (of the countries included in the study) the costs of complying with bureaucracy are highest in, where in order to start a new business 11 procedures must be followed, taking at least 66 days, and costing 208.5% of the annual per capita income in the country. A. Chad 5. Consider the following two statements. Statement 1: A minimum wage increases unemployment among young and unskilled workers. Statement 2: Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. Most economists would A. agree with both Statement 1 and Statement In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. D. business owners; working class. 7. When considering potential government policies, it is important to recognize that A. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy. 8. refers to the freedom of an individual to buy or not buy a good/service at a price determined in an unfettered market. B. Consumer Sovereignty

2 9. Communism refers to an economic system in which A. the means of production are collectively owned by all of the people in society (without any intervention by a government or state). 10. As discussed on Page 1 of the Economics textbook, Mike Ditka has speculated that football related injuries could likely be reduced by have participants play without helmets (or at least without facemasks on their helmets). This conjecture D. relies heavily upon the Incentive Principle. 11. Freddie bought a used video camera from Sam. Since this voluntary trade took place, we can infer that it made A. both Freddie and Sam better off. 12. Within the last week 23 people died in an earthquake in China and the San Francisco 49 ers lost the Super Bowl against the Baltimore Ravens. If 49ers quarterback Colin Kaepernick is more upset about the outcome of the Super Bowl than about the loss of life in China, it would reveal that he is B. a self-interested person. 13. The present economic system of the United States would be most accurately described as, while the present economic system of France. D. a Mixed Economy; would also be most accurately described as a Mixed Economy. 14. Amy is concerned that her son Gabe is not performing up to his full potential in school. In order to give him an additional reason to bring up his grades, she offers to pay Gabe $25 for every A that he gets on his next report card. Amy is trying to alter Gabe s behavior by way of B. a material reward. 15. The Patient Protection and Affordable Care Act was signed into law by President Barack Obama on 3/23/10. As this legislation was being debated, C. educated and respected economists had differing opinions on the legislation (evidenced by the fact that 40+ economists wrote a letter to President Obama in support of the legislation, while 130+ economists wrote a letter to Rep. John Boehner opposing the legislation). 16. Ralphie got a Red Ryder BB Gun for Christmas last year. He has decided to sell this item to Grover for $30 in order to have some money to buy a new baseball glove. When selling his BB Gun to Grover, Ralphie is exercising which of the following sub-dimension of property rights? C. The right to transfer.

3 17. A.C. and Zack produce surfboards and oranges. A.C. s opportunity cost of producing a surfboard is higher than Zack s opportunity cost of producing a surfboard. The suggests that they can increase their total output of these two goods if A.C. focuses his production on oranges while Zack focuses his production on surfboards. D. Principle of Comparative Advantage 18. Niall s Marginal Benefit for his 3 rd pizza consumed would be A. $ Suppose Zayn paid a total of $60 in order to consume 4 pizzas. It follows that his D. Economic Surplus would be equal to $ Which of the following observations by itself illustrates the Incentive Principle? (Note, just because a statement is true does not mean that it illustrates the Incentive Principle.) B. If the price of pizza were to decrease from $16 down to $12, Zayn would increase his pizza consumption from 3 pizzas up to 5 pizzas. 21. Armen Alchain and Gordon Tullock D. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. 22. Which of the following combinations of output is unattainable? A. A (630 shirts and 1,120 units of chicken). 23. If this society wanted to produce 450 shirts, then their maximum output of chicken would be A. some amount more than 1,120 but fewer than 1,475 units of chicken. 24. Focusing on points B and C in the graph above, the opportunity cost of producing an additional shirt is B. greater at point C than at point B. 25. Alec Nove described as when the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel. A. Indicative Planning 26. Bob has $45 to spend and wants to buy a new pair of jeans and a carton of cigarettes. Each item costs exactly $45, so he can only purchase one of the two. This scenario directly illustrates the basic concept that A. when resources are scarce, people face tradeoffs. 27. Which of the following statements is a Positive Statement? C. American Idol Season 11 winner Phillip Phillips will be performing at KSU Stadium on Sunday, March 24, 2013.

4 28. first said From each according to his ability, to each according to his need. B. Louis Blanc 29. Based upon the discussion in lecture, along the continuum illustrated above the economy of the United States currently would most accurately lie at. C. Point C 30. Scott states that, A front row ticket to a Justin Bieber concert can resell for as much as $800. At such a high price, no rational person would ever buy these tickets. The primary problem with this statement is that it: C. only focuses on one particular cost and ignores the potential benefits of seeing Justin Bieber in concert. 31. Which of the following is a basic characteristic of Capitalism? C. Economic decisions occur in markets. 32. has an Absolute Advantage in the production of footballs; has an Absolute Advantage in the production of sweatshirts. D. Jim; Jim. 33. From the given information, Jim s Opportunity Cost for producing a sweatshirt is D. 2 footballs. 34. John has a Comparative Advantage in A. the production of footballs (but not in the production of sweatshirts). 35. According to the results of the Economic Freedom of the World study, the level of economic freedom in the United States is C. relatively high but not higher than every other country in the world (illustrated by the fact that the U.S. ranked 10 th out of the 141 countries in the study, behind countries such as Hong Kong, New Zealand, Canada, and the United Kingdom). 36. The U.S. presently has an estimated 2,203 trillion cubic feet of known recoverable natural gas reserves in the ground within its borders. This resource is C. a natural asset. 37. A Positive Statement is A. scientific in nature, in that given enough research, evidence, and data, it can potentially be shown to be either true or false. 38. Adam Smith was B. an 18 th century Scottish economist.

5 39. is a general concept that refers to the cost of giving up the best alternative that must be foregone in order to do or acquire something. C. Opportunity Cost 40. In a free market economy, households are D. More than one (perhaps all) of the above answers is correct.