Question Details

ECO 212 FINAL EXAM
1) The decision of which assumptions to make is 
	A.
 	Usually regarded as an art in scientific thinking.
	B.
 	Not a particularly important decision for an economist.
	C.
 	Usually regarded as the easiest part of the scientific method.
	D.
 	An easy decision for an economist, but a difficult decision for a physicist or a chemist.


2) Economic models 
	A.
 	Must incorporate all aspects of the economy if those models are to be useful.
	B.
 	Were once thought to be useful, but that is no longer true.
	C.
 	Can be useful, even if they are not particularly realistic.
	D.
 	Cannot be useful if they are based on false assumptions.


3) When studying the effects of public policy changes, economists 
	A.
 	Always refrain from making assumptions.
	B.
 	Consider only the short-run effects of those policy changes and not the long-run effects.
	C.
 	Sometimes make different assumptions about the short run and the long run.
	D.
 	Consider only the direct effects of those policy changes and not the indirect effects.


4) A competitive market is a market in which 
	A.
 	An auctioneer helps set prices and arrange sales.
	B.
 	No individual buyer or seller has any significant impact on the market price.
	C.
 	There are only a few sellers.
	D.
 	The forces of supply and demand do not apply.


5) In a market economy, 
	A.
 	Supply determines demand and, in turn, demand determines prices.
	B.
 	Supply and demand determine prices and, in turn, prices allocate scarce resources.
	C.
 	Demand determines supply and, in turn, supply determines prices.
	D.
 	The allocation of scarce resources determines prices and, in turn, prices determine supply and demand.


6) Which of the following statements is correct? 
	A.
 	Buyers determine supply and sellers determine demand.
	B.
 	Buyers and sellers as one group determine demand, but only sellers determine supply. 
	C.
 	Buyers determine demand and sellers determine supply.
	D.
 	Buyers and sellers as one group determine supply, but only buyers determine demand.


7) If a decrease in income increases the demand for a good, then the good is 
	A.
 	A substitute good.
	B.
 	An inferior good.
	C.
 	A complement good.
	D.
 	A normal good.


8) A likely example of substitute goods for most people would be 
	A.
 	Peanut butter and jelly.
	B.
 	Pencils and pens.
	C.
 	Tennis balls and tennis rackets.
	D.
 	Televisions and subscriptions to cable television services.


9) Economists in general 
	A.
 	Do not try to explain people's tastes, but they do try to explain what happens when tastes change.
	B.
 	Incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.
	C.
 	Believe that they must be able to explain people's tastes in order to explain what happens when tastes change.
	D.
 	Do not believe that people's tastes determine demand and therefore they ignore the subject of tastes.


10) A decrease in input costs to firms in a market will result in 
	A.
 	A decrease in equilibrium price and an increase in equilibrium quantity.
	B.
 	An increase in equilibrium price and an increase in equilibrium quantity.
	C.
 	A decrease in equilibrium price and a decrease in equilibrium quantity.
	D.
 	An increase in equilibrium price and no change in equilibrium quantity.


11) Another term for equilibrium price is 
	A.
 	Dynamic price.
	B.
 	Satisfactory price.
	C.
 	Market-clearing price.
	D.
 	Quantity-defining price.


12) The unique point at which the supply and demand curves intersect is called 
	A.
 	Market harmony.
	B.
 	Equilibrium.
	C.
 	Coincidence.
	D.
 	Cohesion.

13) The marginal product of labor is equal to the 
	A.
 	incremental cost associated with a one unit increase in labor.
	B.
 	increase in output obtained from a one unit increase in labor.
	C.
 	incremental profit associated with a one unit increase in labor.
	D.
 	increase in labor necessary to generate a one unit increase in output.


14) When a firm's only variable input is labor, then the slope of the production function measures the 
	A.
 	total cost.
	B.
 	quantity of labor.
	C.
 	quantity of output.
	D.
 	marginal product of labor.


15) On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product? 
	A.
 	The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.
	B.
 	The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers.
	C.
 	The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers.
	D.
 	All of these are correct.


16) A Luddite would be expected to fear 
	A.
 	supply-shifting technologies.
	B.
 	labor-saving technologies.
	C.
 	labor-augmenting technologies.
	D.
 	the Chairman of the Federal Reserve.


17) The term Luddite is used to describe 
	A.
 	a person who opposes technological advances.
	B.
 	a person who readily adopts the latest technological advances.
	C.
 	a person who fears computers.
	D.
 	any mythical historical figure.


18) Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. Such an invention would be an example of 
	A.
 	Luddite technology.
	B.
 	labor-saving technology.
	C.
 	labor-augmenting technology.
	D.
 	supply-shifting technology.


19) When an industry has many firms, the industry is 
	A.
 	monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
	B.
 	an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.
	C.
 	an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
	D.
 	perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.


20) The typical firm in the U. S. economy 
	A.
 	is perfectly competitive.
	B.
 	has some degree of market power.
	C.
 	sells its product for a price that is equal to the marginal cost of producing the last unit.
	D.
 	is a monopoly.


21) In which of the following markets is economic profit driven to zero in the long run? 
	A.
 	Perfect competition
	B.
 	Oligopoly
	C.
 	Monopoly
	D.
 	Cartels


22) A firm in a monopolistically competitive market is similar to a monopolist in the sense that it 
	A.
 	has no barriers to entry or exit.
	B.
 	must overcome significant barriers to entry.
	C.
 	faces a downward-sloping demand curve.
	D.
 	it is the only seller of the good.


23) The U.S. market for locomotives is divided between two producers: General Electric has 70 percent of the market and General Motors has 30 percent. This market is an example of 
	A.
 	a duopoly.
	B.
 	monopolistic competition.
	C.
 	a collusive monopoly.
	D.
 	a cartel.


24) The commercial jetliner industry, consisting of Boeing and Airbus, would best be described as a (an) 
	A.
 	oligopoly.
	B.
 	perfectly competitive market.
	C.
 	monopolistically competitive market.
	D.
 	monopoly.

25) Which of the following newspaper headlines would be more closely related to what microeconomists study than to what macroeconomists study? 
	A.
 	Retail sales at stores show large gains.
	B.
 	Unemployment rate rises from 5 percent to 5.5 percent.
	C.
 	Real GDP grows by 3.1 percent in the third quarter.
	D.
 	The price of oranges rises after an early frost.


26) Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist? 
	A.
 	how consumers maximize utility, and how prices are established in markets for agricultural products
	B.
 	the effect of taxes on the prices of airline tickets, the profitability of automobile-manufacturing firms, and employment trends in the food-service industry
	C.
 	the price of beef, wage differences between genders, and antitrust laws
	D.
 	the percentage of the labor force that is out of work, and differences in average income from country to country


27) For an economy as a whole, 
	A.
 	GDP measures income more precisely than it measures expenditure.
	B.
 	income is equal to expenditure.
	C.
 	income is greater than expenditure.
	D.
 	expenditure is greater than income.


28) Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, then we would expect that in the short-run, 
	A.
 	the price level will fall, and real GDP might rise, fall, or stay the same.
	B.
 	the price level will rise, and real GDP might rise, fall, or stay the same.
	C.
 	real GDP will rise and the price level might rise, fall, or stay the same.
	D.
 	real GDP will fall and the price level might rise, fall, or stay the same.


29) When production costs rise, 
	A.
 	the aggregate demand curve shifts to the left.
	B.
 	the aggregate demand curve shifts to the right.
	C.
 	the short-run aggregate supply curve shifts to the right.
	D.
 	the short-run aggregate supply curve shifts to the left.


30) Which of the following would cause stagflation? 
	A.
 	aggregate supply shifts left
	B.
 	aggregate supply shifts right
	C.
 	aggregate demand shifts right
	D.
 	aggregate demand shifts left


31) If policymakers decrease aggregate demand, the price level 
	A.
 	rises, but unemployment falls.
	B.
 	and unemployment rise.
	C.
 	falls, but unemployment rises.
	D.
 	and unemployment fall.


32) In the long run, the inflation rate depends primarily on 
	A.
 	the monopoly power of firms.
	B.
 	the money supply growth rate.
	C.
 	the ability of unions to raise wages.
	D.
 	government spending.


33) If policymakers increase aggregate demand, the price level 
	A.
 	rises, but unemployment falls.
	B.
 	and unemployment rise.
	C.
 	falls, but unemployment rises.
	D.
 	and unemployment fall.

34) Which of the following statements about U.S. inflation is NOT correct? 
	A.
 	The U.S. inflation rate has varied over time, but international data shows even more variation.
	B.
 	The U.S. public has viewed inflation of even 7 percent as a major economic problem.
	C.
 	Low inflation was viewed as a triumph of President Carter's economic policy.
	D.
 	There were long periods in the nineteenth century during which prices fell.


35) Economists all agree that 
	A.
 	moderate inflation is as costly as high inflation.
	B.
 	high inflation is costly, but disagree about the costs of moderate inflation.
	C.
 	neither high inflation nor moderate inflation is very costly.
	D.
 	both high and moderate inflation are quite costly.


36) Which of the following concerning the history of U.S. inflation is NOT correct? 
	A.
 	During it- history the United States has experienced periods of deflation.
	B.
 	Inflation in the 1970s was below the average over the last 70 years.
	C.
 	Prices rose at an average annual rate of about 4 percent over the last 70 years.
	D.
 	There was about a 16-fold increase in the price level over the last 70 years.


37) Nominal GDP measures 
	A.
 	None of these are correct.
	B.
 	the total income received from producing final goods and services measured in constant dollars.
	C.
 	the total quantity of final goods and services produced.
	D.
 	the dollar value of the economy's output of final goods and services.


38) Economic variables whose values are measured in goods are called 
	A.
 	nominal variables.
	B.
 	dichotomous variables.
	C.
 	real variables.
	D.
 	classical variables.


39) According to the classical dichotomy, which of the following is influenced by monetary factors? 
	A.
 	unemployment
	B.
 	real GDP
	C.
 	All of these are correct.
	D.
 	nominal interest rates


40) According to the classical dichotomy, which of the following is NOT influenced by monetary factors? 
	A.
 	nominal GDP and nominal interest rates
	B.
 	real wages and real GDP
	C.
 	the price level and nominal GDP
	D.
 	None of these are correct.


41) According to the classical dichotomy, when the money supply doubles, which of the following also double? 
	A.
 	the price level, but not the nominal wage
	B.
 	the price level and nominal wages
	C.
 	neither the nominal wage nor the price level
	D.
 	the nominal wage, but not the price level


42) Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to 
	A.
 	the classical dichotomy, but not the quantity theory of money.
	B.
 	both the classical dichotomy and the quantity theory of money.
	C.
 	neither the classical dichotomy nor the quantity theory of money.
	D.
 	the quantity theory of money, but not the classical dichotomy.

43) The rice of a good that prevails in a world market is called the 
	A.
 	relative price.
	B.
 	absolute price.
	C.
 	world price.
	D.
 	comparative price.


44) Assume, for Canada, that the domestic price of steel without international trade is higher than the world price of steel. This suggests that, in the production of steel, 
	A.
 	Canada has a comparative advantage over other countries and Canada will export steel.
	B.
 	Canada has a comparative advantage over other countries and Canada will import steel.
	C.
 	other countries have a comparative advantage over Canada and Canada will export steel.
	D.
 	other countries have a comparative advantage over Canada and Canada will import steel.


45) If the world price of textiles is higher than Vietnam- domestic price of textiles without trade, then Vietnam 
	A.
 	has a comparative advantage in textiles.
	B.
 	should import textiles.
	C.
 	should refrain altogether from producing textiles.
	D.
 	should produce just enough textiles to meet its domestic demand.



46) The open-economy macroeconomic model includes 
	A.
 	only the market for foreign-currency exchange.
	B.
 	only the market for loanable funds.
	C.
 	neither the market for loanable funds or the market for foreign-currency exchange.
	D.
 	both the market for loanable funds and the market for foreign-currency exchange.


47) The value of net exports equals the value of 
	A.
 	public saving.
	B.
 	national saving.
	C.
 	national saving - domestic investment.
	D.
 	national saving - net exports.


48) In the open-economy macroeconomic model, other things the same, a decrease in the interest rate shifts 
	A.
 	the demand for dollars in the market for foreign-currency exchange to the left.
	B.
 	the demand for dollars in the market for foreign-currency exchange to the right.
	C.
 	the supply of dollars in the market for foreign-currency exchange to the left.
	D.
 	the supply of dollars in the market for foreign-currency exchange to the right.


49) A tariff on a product 
	A.
 	increases the domestic quantity supplied.
	B.
 	enhances the economic well-being of the domestic economy.
	C.
 	results in an increase in producer surplus that is greater than the resulting decrease in consumer surplus.
	D.
 	increases the domestic quantity demanded.


50) A tariff on a product makes 
	A.
 	domestic sellers worse off and domestic buyers better off.
	B.
 	domestic sellers worse off and domestic buyers worse off.
	C.
 	domestic sellers better off and domestic buyers better off.
	D.
 	domestic sellers better off and domestic buyers worse off.


51) The before-trade price of fish in Greece is $3.00 per pound. The world price of fish is $5.00 per pound. Greece is a price-taker in the fish market. If Greece begins to allow trade in fish, its consumers of fish will become 
	A.
 	better off, its producers of fish will become worse off, and on balance the citizens of Greece will become worse off.
	B.
 	worse off, its producers of fish will become better off, and on balance the citizens of Greece will become better off.
	C.
 	worse off, its producers of fish will become better off, and on balance the citizens of Greece will become worse off.
	D.
 	better off, its producers of fish will become better off, and on balance the citizens of Greece will become better off.


52) Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that producer surplus in Aquilonia is now 
	A.
 	lower in the incense and steel markets, and the same in the rug market.
	B.
 	higher in the incense and steel markets, and unchanged in the rug market.
	C.
 	lower in the incense and rug markets, and higher in the steel market.
	D.
 	higher in the steel market, lower in the incense market, and unchanged in the rug market.


53) Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia- new free-trade policy has 
	A.
 	decreased consumer surplus in the steel market and increased total surplus in the incense market.
	B.
 	increased consumer surplus in the steel market and left producer surplus in the rug market unchanged.
	C.
 	decreased consumer surplus in both the steel and rug markets.
	D.
 	increased consumer surplus and producer surplus in the incense market.


54) Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which groups in Aquilonia are better off as a result of the new free-trade policy? 
	A.
 	producers of steel and consumers of incense
	B.
 	consumers of all three goods
	C.
 	consumers of incense and producers of rugs
	D.
 	producers of incense and consumers of steel


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