ECON 1100 Global Economics (Section 07) Exam #1 Spring 2013 (Version A) Multiple Choice Questions ( 2. points each):

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1 ECON 1100 Global Economics (Section 07) Exam #1 Spring 2013 (Version A) 1 Multiple Choice Questions ( 2 2 points each): 1. Economics is the social science that A. focuses exclusively on determining how businesses can earn larger profits. 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. C. studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy. D. None of the above answers is correct. 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 A. Distributional Decision. B. Production Decision. C. Resource Use Decision. D. Entrepreneurial Decision. 3. The Incentive Principle states that A. the cost of acquiring something is best measured by the value of the next best use of the resources which are used to obtain the item. B. an action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so. C. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity. D. a society can produce a greater amount of total output when individuals focus their production on those activities for which they have a comparative advantage. 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. Mexico B. Chad C. Germany D. the United States

2 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 Statement 1, but disagree with Statement 2. B. agree with Statement 2, but disagree with Statement 1. C. agree with both Statement 1 and Statement 2. D. disagree with both Statement 1 and Statement In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. A. taxpayers; welfare recipients. B. business owners; working class. C. uneducated class; educated class. D. planners; tax collectors. 7. When considering potential government policies, it is important to recognize that A. politicians are self-interested but voters are not. B. most consumers are not rational decision makers. C. voluntary trade generally makes buyers better off but sellers worse off. D. 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. A. The Invisible Hand B. The Cost-Benefit Principle C. Opportunity Cost D. Consumer Sovereignty 9. Communism refers to an economic system in which A. land ownership is restricted to an aristocratic nobility. B. the means of production are collectively owned by all of the people in society (without any intervention by a government or state). C. the means of production are privately owned and operated for profit. D. the means of production are owned by the government. 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 A. was the insight which resulted in Dr. Ditka receiving the Nobel Prize in Economics in B. implicitly assumes that football players are irrational. C. relies heavily upon the Incentive Principle. D. does not make any sense whatsoever when analyzed using the tools of economics.

3 11. Freddie bought a used video camera from Sam. Since this voluntary trade took place, we can infer that it made A. Freddie better off, but Sam worse off. B. Sam better off, but Freddie worse off. C. both Freddie and Sam better off. D. both Freddie and Sam worse 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 A. a self-interested person. B. an irrational person. C. a vile, hateful person that does not care about anyone. D. paid an income that is well in excess of his value to society. 13. The present economic system of the United States would be most accurately described as, while the present economic system of France. A. a Mixed Economy: would be most accurately described as Communism. B. a Mixed Economy; would also be most accurately described as a Mixed Economy. C. Pure Capitalism; would be most accurately described as a Feudalism. D. Pure Capitalism; would be most accurately described as Pure Socialism. 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 A. Command Planning. B. coercion. C. a material reward. D. moral suasion. 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, A. all educated and respected economists opposed the legislation. B. all educated and respected economists supported the legislation. C. no economists expressed any opinion on the legislation (upholding a long standing tradition within the profession of never getting involved in matters of public policy). D. 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).

4 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? A. Consumer Sovereignty. B. The right to control. C. The right to restitution. D. The right to transfer. 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. A. Invisible Hand. B. Incentive Principle C. Principle of Comparative Advantage D. Principle of Absolute Advantage For Questions 18 through 20, consider the following information regarding Total Benefits from pizza consumption (measured in dollars) for Niall and Zayn in the month of January: Pizzas Consumed: Niall s Total Benefits from Consumption: Zayn s Total Benefits from Consumption: Niall s Marginal Benefit for his 3 rd pizza consumed would be A. $225. B. $75. C. $25. D. $ Suppose Zayn paid a total of $60 in order to consume 4 pizzas. It follows that his A. Economic Surplus would be equal to $14. B. Economic Surplus would be equal to $60. C. Economic Surplus would be equal to $74. 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.) A. At a price of $10 per pizza, Zayn would buy more pizza than Niall. B. At a price of $25 per pizza, Zayn would not buy any pizza. C. If pizza were free, Niall would consume 7 pizzas. D. 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.

5 21. Armen Alchain and Gordon Tullock A. were the first to recognize that tariffs and import quotas usually increase the general welfare of society. B. explained why wealthy societies never face tradeoffs due to scarcity. C. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. D. wrote a letter to FDR in 1939, urging him to have the federal government assist physicists in the U.S. working on research related to the creation of a uranium bomb. For Questions 22 through 24, consider a society facing the Production Possibilities Frontier illustrated below: chicken 1,475 1,120 A Which of the following combinations of output is unattainable? A. A (630 shirts and 1,120 units of chicken). B. B (630 shirts and 875 units of chicken). C. C (900 shirts and 550 units of chicken). D. D (450 shirts and 410 units of chicken). D 23. If this society wanted to produce 450 shirts, then their maximum output of chicken would be A. exactly 410 units of chicken. B. some amount more than 550 but fewer than 875 units of chicken. C. some amount more than 875 but fewer than 1,120 units of chicken. D. 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 A. equal at these two points. B. greater at point B than at point C. C. greater at point C than at point B. D. None of the above answers are correct, since this graph does not convey enough information to make a comparison of this nature. B C shirts

6 25. Alec Nove described as when the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel. A. Coercion B. Consumer Sovereignty C. Indicative Planning D. The Invisible Hand 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. most consumers are self-interested. B. society can produce more output when workers specialize in production. C. irrational people never respond to incentives. D. when resources are scarce, people face tradeoffs. 27. Which of the following statements is a Positive Statement? A. The U.S. would be a better country if the legal drinking age was 18. B. American Idol Season 11 winner Phillip Phillips will be performing at KSU Stadium on Sunday, March 24, C. The Hunger Games was the best movie released in D. More than one (perhaps all) of the above answers is correct. 28. first said From each according to his ability, to each according to his need. A. Jonathan Morduch B. Adam Smith C. Gordon Tullock D. Louis Blanc For Question 29, consider the continuum between the economic systems of Pure Socialism and Pure Capitalism illustrated below. Point A Point B Point C Point D Pure Socialism North Korea Cuba Poland Germany Switzerland U.K. Hong Kong Pure Capitalism 29. Based upon the discussion in lecture, along the continuum illustrated above the economy of the United States currently would most accurately lie at. A. Point A B. Point B C. Point C D. Point D

7 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: A. fails to account for the fact that there is only one Justin Beiber, and his fans would therefore be willing to pay any price to see him up close in concert. B. only focuses on one particular cost and ignores the potential benefits of seeing Justin Bieber in concert. C. implicitly assumes that people behave rationally when making consumption decisions, which is clearly not true. D. it ignores the fact that Justin Bieber is lame, and that nobody not even an eight year old girl would ever want to pay any money to see him in concert. 31. Which of the following is a basic characteristic of Capitalism? A. Every able-bodied adult is guaranteed a job. B. Economic decisions occur in markets. C. The government directly owns and operates all factors of production. D. More than one (perhaps all) of the above answers is correct. For Questions 32 through 34, consider a society consisting of only two workers, Jim and John, who spend their workdays producing either footballs or sweatshirts. The productive ability of each worker for each task is summarized in the table below (which states the number of units of each good that the worker could produce in a full day): footballs sweatshirts Jim 40 footballs per day 20 sweatshirts per day John 15 footballs per day 5 sweatshirts per day 32. has an Absolute Advantage in the production of footballs; has an Absolute Advantage in the production of sweatshirts. A. Jim; Jim. B. Jim; John. C. John; Jim. D. John; John. 33. From the given information, Jim s Opportunity Cost for producing a sweatshirt is A. 2 footballs. B. 3 footballs. C. 4 footballs. D. 20 footballs. 34. John has a Comparative Advantage in A. the production of both footballs and sweatshirts. B. the production of neither footballs nor sweatshirts. C. the production of footballs (but not in the production of sweatshirts). D. the production of sweatshirts (but not in the production of footballs).

8 35. According to the results of the Economic Freedom of the World study, the level of economic freedom in the United States is A. higher than every other country in the world. B. 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). C. relatively low but not lower than every other country in the world (illustrated by the fact that the U.S. ranked 112 th out of the 141 countries in the study, ahead of countries such as Singapore, Germany, Spain, and Mexico). D. lower than every other country in the world. 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 A. a Comparative Advantage. B. an Absolute Advantage. C. a produced asset. D. a natural asset. 37. A Positive Statement is A. supported (either implicitly or explicitly) by the priorities, goals, and value judgments of the person making the statement. B. the only type of statement that any reputable economist will ever make. C. scientific in nature, in that given enough research, evidence, and data, it can potentially be shown to be either true or false. D. More than one (perhaps all) of the above answers is correct. 38. Adam Smith was A. a 20 th century American President. B. a 19 th century German philosopher, economist, and revolutionary. C. an 18 th century Scottish economist. D. a 17 th century British monarch. 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. A. Opportunity Cost B. A Contract C. Absolute Advantage D. The Distributional Decision 40. In a free market economy, households are A. never rational or self-interested. B. the primary suppliers of labor to firms. C. the ultimate consumers of most finished goods/services. D. More than one (perhaps all) of the above answers is correct.

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