ECO 212 Final Exam 7
ECO 212 Final Exam 7
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Date Created: 11/16/15
1) Economics does not study correct or incorrect behaviors, but rather it assumes that economic agents make the best decisions given their knowledge of the costs and benefits. What term best describes this behavior? A. equitably B. rationally C. emotionally D. selfishly 2) According to economics, what causes us to have to make choices? A. unemployment. B. scarcity. C. greed. D. unlimited resources. 3) What is the term in economics by which a group of buyers and sellers of a product come together to trade? A. collective B. cooperative C. market D. tradeoff 4) If a commercial dairy farm wants to raise funds to purchase feeding troughs, in which market does it do so? A. output market. B. product market. C. factor market. D. dairy products market. 5) Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this? A. There is a decrease in the supply of pool maintenance services. B. There is a decrease in the quantity of pool maintenance services supplied. C. There is a decrease in the demand for pool maintenance services. D. There is an increase in the supply of pool maintenance services. 6) What might you call an outward shift of a nation's production possibilities frontier? A. economic growth. B. rising prices of the two goods on the production possibilities frontier model. C. an impossible situation. D. a situation in which a country produces more of one good and less of another. 7) If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is A. unitelastic. B. perfectly elastic. C. relatively inelastic. D. relatively elastic. 8) Suppose the value of the price elasticity of demand is 3. What does this mean? A. A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. B. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C. A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. D. A $1 increase in price causes quantity demanded to fall by 3 units. 9) Price elasticity of demand measures A. how responsive suppliers are to price changes. B. how responsive quantity demanded is to a change in price. C. how responsive sales are to a change in buyers' incomes. D. how responsive sales are to changes in the price of a related good. 10) Which of the following countries is not close to the free market benchmark? A. North Korea. B. Canada. C. Singapore. D. Germany. 11) Which of the following is the correct way to describe equilibrium in a market? A. At equilibrium, demand equals supply. B. At equilibrium, market forces no longer apply. C. At equilibrium, scarcity is eliminated. D. At equilibrium, quantity demanded equals quantity supplied. 12) A decrease in the price of GPS systems will result in A. a smaller quantity of GPS systems supplied. B. a decrease in the demand for GPS systems. C. an increase in the supply of GPS systems. D. a larger quantity of GPS systems supplied. 13) Marginal revenue product of labor for a competitive seller is A. the change in total product from hiring one more worker. B. the output price multiplied by the quantity sold. C. the marginal revenue of the product multiplied by the output price. D. equal to the marginal product of labor multiplied by the output price. 14) Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is A. P × MP = W. B. P × MP > W. C. P × W > MP. D. P × MP < W. 15) Marginal revenue product for a perfectly competitive seller is equal to A. the output price multiplied by the total product of labor. B. the change in total revenue that results from hiring another worker. C. the marginal cost of production. D. the output price multiplied by the number workers hired. 16) An individual's labor supply curve shows A. the maximum wage rates offered to that individual by various potential employers. B. the relationship between the quantity of hours worked and total income earned by that individual. C. the relationship between wages and the quantity of labor that a firm is willing to employ. D. the relationship between wages and the quantity of labor that she is willing to supply. 17) The labor supply for an industry would decrease if A. the wage rate falls. B. a greater percentage of women want to work outside the home. C. the government welcomes foreign workers into the country. D. the percentage of the population from age 16 to 65 decreases. 18) How will an increase in population affect the labor market? A. It will shift the market supply curve. B. It will increase the opportunity cost of leisure. C. It will increase the supply of jobs. D. It will cause a decrease in the quantity of labor demanded. 19) Which of the following displays these two characteristics: rivalry and nonexcludability? A. a public good B. a common resource C. a quasipublic good D. a private good 20) Which of the following displays rivalry and excludability in consumption? A. public goods B. common resources C. quasipublic goods D. private goods 21) Which of the following best explains why unemployment rates are higher in the European economies than in the United States? A. Unemployment benefits are more generous in Europe than in the United States. B. More Europeans go to school fulltime and are therefore not able to participate in the labor market. C. European industries pay a lower wage rate than industries in the United States. D. Workers in Europe are less productive than workers in the United States. 22) The key characteristics of a monopolistically competitive market structure include A. many small (relative to the total market) sellers acting independently. B. sellers have no incentive to advertise their products. C. barriers to entry are strong. D. all sellers sell a homogeneous product. 23) A monopoly is a seller of a product A. with many substitutes. B. without a welldefined demand curve. C. with a perfectly inelastic demand. D. without a close substitute. 24) A characteristic found only in oligopolies is A. break even level of profits. B. interdependence of firms. C. independence of firms. D. products that are slightly different. 25) The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion. You should conclude A. a typical person in Vietnam is 10 times as well off as the typical person in the Philippines. B. a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines. C. a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines. D. it is not possible to make a good comparison of the economic well being of a typical individual in the 2 countries without additional information. 26) Gross domestic product is calculated by summing up A. the total quantity of goods and services in the economy. B. the total quantity of goods and services produced in the economy during a period of time. C. the total market value of goods and services in the economy. D. the total market value of final goods and services produced in the economy during a period of time. 27) Which of the following goods is directly counted in GDP? A. the plastic bags that Subway purchases to wrap its sandwiches B. the lettuce that Subway purchases for its sandwiches C. the bread that Subway purchases for its sandwiches D. a 12inch Subway sandwich purchased by a student 28) If the economy is slipping into a recession, which of the following would be an appropriate fiscal policy? A. an increase in the money supply and a decrease in interest rates B. a decrease in government purchases C. a decrease in taxes D. a decrease in oil prices 29) Fiscal policy refers to changes in A. state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. B. federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C. federal taxes and purchases that are intended to fund the war on terrorism. D. the money supply and interest rates that are intended to achieve macroeconomic policy objectives. 30) Before the Great Depression of the 1930s, the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________. A. state and local levels; federal level B. local level; federal level C. federal level; state and local levels D. federal level; state level 31) Which of the following functions of money would be violated if inflation were high? A. unit of account B. store of value C. certificate of gold D. medium of exchange 32) Economists estimate that ________ of U.S. currency is outside the United States and held primarily by ________. A. over half; households and firms in countries where there is little confidence in the local currency B. over half; foreign banks and foreign governments C. less than one quarter; households and firms in countries where there is little confidence in the local currency D. less than one quarter; foreign banks and foreign governments 33) If credit card balances rise in the economy, then M1 will ________ and M2 will ________. A. not change; increase B. decrease; increase C. not change; not change D. increase; increase E. increase; decrease 34) In an economy with ________, there are more prices than in an economy with ________. A. barter; money B. money; barter C. fiat money;commodity money D. fiat money; barter 35) Which of the following is one of the most important benefits of money in an economy? A. Money allows for the exchange of goods and services. B. Money allows for the accumulation of wealth. C. Money makes exchange easier, leading to more specialization and higher productivity. D. Money encourages people to produce all of their own goods (selfsufficiency) and therefore increases economic stability. 36) The M1 measure of the money supply equals A. paper money plus coins in circulation. B. currency plus checking account balances. C. currency plus checking account balances plus traveler's checks. D. currency plus checking account balances plus traveler's checks plus savings account balances. 37) Which of the following determines the amount of money the banking system as a whole can create? A. the quantity of bank reserves B. the quantity of vault cash held by banks C. the gold reserves held by the Federal Reserve D. the limit on profits by banks imposed by the U.S. Congress 38) Open market operations refer to the purchase or sale of ________ to control the money supply. A. corporate bonds and stocks by the Federal Reserve B. U.S. Treasury securities by the Federal Reserve C. corporate bonds and stocks by the U.S. Treasury D. U.S. Treasury securities by the U.S. Treasury 39) If the central bank can act as a lender of last resort during a banking panic, banks can A. call in their loans to their customers and eventually restore the public's faith in the banking system. B. satisfy customer withdrawal needs and eventually restore the public's faith in the banking system. C. borrow more and more money from the central bank, and this will lower its reserves and decrease the public's faith in the banking system. D. encourage the public to borrow directly from the central bank, and this will worsen the banking panic. 40) The goals of monetary policy tend to be interrelated. For example, when the Fed pursues the goal of ________, it also can achieve the goal of ________ simultaneously. A. high employment; economic growth B. economic growth; a low current account deficit C. stability of financial markets; a low current account deficit D. high employment; lowering government spending 41) Toll Brothers, a residential home builder, did well during the recession in 2001 but did not do so well in 2007 after the housing bubble burst. The reason for this is A. the Fed lowered interest rates in 2001 but did not believe that cutting the interest rate in 2007 would be enough to revive the housing market. B. the Fed raised interest rates in 2001 but lowered interest rates in 2007 to revive the housing market. C. the Fed raised interest rates in 2001 but did not believe that cutting the interest rate in 2007 would be enough to revive the housing market. D. the Fed lowered interest rates in 2001 but raised interest rates in 2007 to help fight inflation. 42) The Federal Reserve System's four monetary policy goals are A. low government budget deficits, low current account deficits, high employment, and a high foreign exchange value of the dollar. B. price stability, high employment, economic growth, and stability of financial markets and institutions. C. price stability, low government budget deficits, low current account deficits, and low rate of bank failures. D. low rate of bank failures, high reserve ratios, price stability, and economic growth. 43) Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except A. engage in mutually beneficial trade with other nations. B. consume a combination of goods that lies outside its own production possibilities frontier. C. produce a combination of goods that lies outside its own production possibilities frontier. D. increase the variety of products that it can consume with no increase in resources. 44) Comparative advantage means the ability to produce a good or service A. at a lower selling price than any other producer. B. of a higher quality than any other producer. C. at a higher profit level than any other producer. D. at a lower opportunity cost than any other producer. 45) Table 23 Serena Haley Bracelets 8 9 Necklaces 16 12 Refer to Table 23. What is Haley's opportunity cost of making a bracelet? A. 3/4 of a bracelet B. 1 1/3 necklaces C. 2 necklaces D. 3 bracelets 46) If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market? A. The dollar will appreciate. B. There will be a decrease in the demand for dollars. C. There will be a decrease in the supply of dollars. D. The dollar will depreciate. 47) Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market? A. Demand for dollars will increase, and supply of dollars will decrease. B. Demand for dollars will decrease, and supply of dollars will increase. C. Demand for dollars will decrease, and supply of dollars will decrease. D. Demand for dollars will increase, and supply of dollars will increase. 48) When the market value of the dollar rises relative to other currencies around the world, we say that A. the dollar has appreciated. B. the supply of dollars has increased. C. the demand for dollars has increased. D. the dollar has depreciated. 49) The gold standard is an example of A. a floating exchange rate system. B. a flexible exchange rate system. C. a fixed exchange rate system. D. a managed float exchange rate system. 50) Pegging a country's exchange rate to the dollar can be advantageous if A. the country does not trade much with the United States. B. imports are not a significant fraction of the goods the country's consumers buy. C. a country wishes to conduct independent monetary policy. D. investors believe the dollar to be more stable than the domestic country's currency. 51) If the purchasing power of the dollar is greater than the purchasing power of the euro, purchasing power parity predicts that the exchange rate will A. be equal to the relative purchasing power across the currencies in the long run. B. not fluctuate and stay constant in the long run. C. increase if the exchange rate is greater than 1 euro per dollar. D. decrease if the exchange rate is less than 1 euro per dollar. 52) If interest rates in the United States rise, A. the value of the dollar will fall as foreign investors sell their U.S. investments. B. the value of the dollar will rise as foreign investors sell their U.S. investments. C. the value of the dollar will fall as foreign investors increase their holdings of U.S. investments. D. the value of the dollar will rise as the foreign investors increase their holdings of U.S. investments. 53) If the U.S. government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will ________ and the demand for the undervalued currency will ________. A. rise; rise B. fall; fall C. fall; rise D. rise; fall 54) China has been accused of deliberately undervaluing its currency, the yuan, in order to A. increase its exports. B. maintain purchasing power parity. C. prevent deflation. D. increase its imports.
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