ECO2071 - Economics is the study of how society manages

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ECO2071 - Economics is the study of how society manages

Question # 00768788 Posted By: dr.tony Updated on: 07/03/2020 09:53 AM Due on: 07/03/2020

Subject Education Topic General Education Tutorials:

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South University

Virginia Beach Campus

ECO2071

Select the CORRECT answer to each question. Each question is worth 2 points.

1. Economics is the study of how society manages its

	a.	limited wants and unlimited resources.
	b.	unlimited wants and unlimited resources.
	c.	limited wants and limited resources.
	d.	unlimited wants and limited resources.

2. The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

	a.	equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
	b.	equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
	c.	equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
	d.	equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

3. Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

	a.	only if it allows us to obtain things that we couldn't make for ourselves.
	b.	because it allows specialization, which increases total output.
	c.	to us if we can gain and the others involved in the trade lose.
	d.	in only a limited number of circumstances because others are typically self-interested.

4. A direct or positive relationship exists between a country's

	a.	productivity and its standard of living.
	b.	amount of government spending and its productivity.
	c.	total population and its average citizen’s income.
	d.	rate of population growth and the extent of its trade with other countries.

5. Economists, like mathematicians, physicists, and biologists,

	a.	make use of the scientific method.
	b.	try to address their subject with a scientist’s objectivity.
	c.	devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
	d.	All of the above are correct.

6. Which of the following is an example of a positive, as opposed to normative, statement?

	a.	Inflation is more harmful to the economy than unemployment is.
	b.	If welfare payments increase, the world will be a better place.
	c.	Prices rise when the government prints too much money.
	d.	When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.

7. Which of the following is an example of a normative, as opposed to positive, statement?

	a.	Universal health care would be good for U.S. citizens.
	b.	An increase in the cigarette tax would cause a decrease in the number of smokers.
	c.	A decrease in the minimum wage would decrease unemployment.
	d.	A law requiring the federal government to balance its budget would increase economic growth.

8. The opportunity cost of an item is

	a.	the number of hours that one must work in order to buy one unit of the item.
	b.	what you give up to get that item.
	c.	always less than the dollar value of the item.
	d.	always greater than the cost of producing the item.

9. The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

	a.	has a low opportunity cost of producing that good, relative to the opportunity costs of other producers.
	b.	has a comparative advantage in the production of that good.
	c.	has an absolute advantage in the production of that good.
	d.	should be the only producer of that good.

10. If Shawn can produce donuts at a lower opportunity cost than Sue, then

	a.	Shawn has a comparative advantage in the production of donuts.
	b.	Sue has a comparative advantage in the production of donuts.
	c.	Shawn should not produce donuts.
	d.	Shawn is capable of producing more donuts than Sue in a given amount of time.

11. An increase in the price of a good will

	a.	increase demand.
	b.	decrease demand.
	c.	increase quantity demanded.
	d.	decrease quantity demanded.

12. The law of demand states that, other things equal, an increase in

	a.	price causes quantity demanded to increase.
	b.	price causes quantity demanded to decrease.
	c.	quantity demanded causes price to increase.
	d.	quantity demanded causes price to decrease.

13. Which of the following changes would not shift the demand curve for a good or service?

	a.	a change in income
	b.	a change in the price of the good or service
	c.	a change in expectations about the future price of the good or service
	d.	a change in the price of a related good or service

14. The law of supply states that, other things equal, when the price of a good

	a.	falls, the supply of the good rises.
	b.	rises, the quantity supplied of the good rises.
	c.	rises, the supply of the good falls.
	d.	falls, the quantity supplied of the good rises.

15. Which of the following changes would not shift the supply curve for a good or service?

	a.	a change in production technology
	b.	a change in the price of the good or service
	c.	a change in expectations about the future price of the good or service
	d.	a change in input prices

16. Refer to the figure below:

At a price of

	a.	$2, there is a surplus of 6 units.
	b.	$5, there is a surplus of 25 units.
	c.	$5, there is a shortage of $25.
	d.	$7, there is a surplus of 4 units.

17. Refer to the figure below:

Equilibrium price and quantity are, respectively,

	a.	$15 and 200 units.
	b.	$25 and 600 units.
	c.	$25 and 400 units.
	d.	$35 and 200 units.

17. The price elasticity of demand measures how much

	a.	quantity demanded responds to a change in price.
	b.	quantity demanded responds to a change in income.
	c.	price responds to a change in demand.
	d.	demand responds to a change in supply.

18. Demand is said to be inelastic if

	a.	buyers respond substantially to changes in the price of the good.
	b.	demand shifts only slightly when the price of the good changes.
	c.	the quantity demanded changes only slightly when the price of the good changes.
	d.	the price of the good responds only slightly to changes in demand.

19. For a good that is a luxury, demand

	a.	tends to be inelastic.
	b.	tends to be elastic.
	c.	has unit elasticity.
	d.	cannot be represented by a demand curve in the usual way.

20. If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

	a.	0.50.
	b.	1.
	c.	1.5.
	d.	2.

21. A price ceiling is

	a.	often imposed on markets in which “cutthroat competition” would prevail without a price ceiling.
	b.	a legal maximum on the price at which a good can be sold.
	c.	often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling.
	d.	All of the above are correct.

22. Refer to the figures below:

Panel (a)	Panel (b)

A binding price ceiling is shown in

	a.	panel (a) only.
	b.	panel (b) only.
	c.	both panel (a) and panel (b).
	d.	neither panel (a) nor panel (b).

24. When a binding price floor is imposed on a market,

	a.	price no longer serves as a rationing device.
	b.	the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor.
	c.	only some sellers benefit.
	d.	All of the above are correct.

25. Refer to the figure below:

A price ceiling set at

	a.	$4 will be binding and will result in a shortage of 8 units.
	b.	$4 will be binding and will result in a shortage of 16 units.
	c.	$7 will be binding and will result in a surplus of 4 units.
	d.	$7 will be binding and will result in a surplus of 8 units.

26. Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be

	a.	$15.
	b.	$30.
	c.	$45.
	d.	$90.

26. George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

	a.	$6.
	b.	$10.
	c.	$16.
	d.	$26.

27. Refer to the figure below:

Which area represents total surplus in the market when the price is P1?

	a.	A+B
	b.	B+C
	c.	C+D
	d.	A+B+C+D

29. When a tax is levied on a good, the buyers and sellers of the good share the burden,

	a.	provided the tax is levied on the sellers.
	b.	provided the tax is levied on the buyers.
	c.	provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers.
	d.	regardless of how the tax is levied.

30. Taxes cause deadweight losses because taxes

	a.	reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.
	b.	prevent buyers and sellers from realizing some of the gains from trade.
	c.	cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall.
	d.	All of the above are correct.

31. Patterns of trade among nations are primarily determined by

	a.	cultural considerations.
	b.	political considerations.
	c.	comparative advantage.
	d.	differences in the income elasticity of demand among nations.

32. If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

	a.	the country will be an exporter of the good.
	b.	the country will be an importer of the good.
	c.	the country will be neither an exporter nor an importer of the good.
	d.	Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

33. Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that

	a.	Ireland has a comparative advantage relative to the United States in producing pineapples, and China has a comparative advantage relative to Ireland in producing beer.
	b.	Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantage relative to Ireland in producing pineapples.
	c.	Ireland has an absolute advantage relative to the United States in producing pineapples, and China has an absolute advantage relative to Ireland in producing beer.
	d.	Ireland has an absolute advantage relative to China in producing beer, and the United States has an absolute advantage relative to Ireland in producing pineapples.

34. Externalities tend to cause markets to be

	a.	inefficient.
	b.	unequal.
	c.	unnecessary.
	d.	overwhelmed.

35. When a good is excludable,

	a.	one person's use of the good diminishes another person's ability to use it.
	b.	people can be prevented from using the good.
	c.	no more than one person can use the good at the same time.
	d.	everyone will be excluded from using the good.

36. Goods that are not excludable include both

	a.	private goods and public goods.
	b.	club goods and common resources.
	c.	common resources and public goods.
	d.	private goods and club goods.

37. In designing a tax system, policymakers have two objectives that are often conflicting. They are

	a.	maximizing revenue and minimizing costs to taxpayers.
	b.	efficiency and minimizing costs to taxpayers.
	c.	efficiency and equity.
	d.	maximizing revenue and reducing the national debt.

38. Deadweight losses are associated with

	a.	taxes that distort the incentives that people face.
	b.	taxes that target expenditures on survivor's benefits for Social Security.
	c.	taxes that have no efficiency losses.
	d.	lump-sum taxes.

39. The principle that people should pay taxes based on the benefits they receive from government services is called the

	a.	pay principle.
	b.	tax-benefit principle.
	c.	government services principle.
	d.	benefits principle.

40. The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

	a.	the ability-to-pay principle.
	b.	the equity principle.
	c.	the benefits principle.
	d.	regressive.

41. Explicit costs

	a.	require an outlay of money by the firm.
	b.	include all of the firm's opportunity costs.
	c.	include the value of the business owner’s time.
	d.	Both b and c are correct.

42. The marginal product of labor is equal to the

	a.	incremental cost associated with a one unit increase in labor.
	b.	incremental profit associated with a one unit increase in labor.
	c.	increase in labor necessary to generate a one unit increase in output.
	d.	increase in output obtained from a one unit increase in labor.

43. Refer to the Table below:

Number of Workers	Total Output	Marginal Product
0	0	--
1		30
2		45
3		60
4		50
5		40

What is total output when 2 workers are hired?

	a.	15
	b.	45
	c.	75
	d.	120

44. Refer to the Table below:

Number of Workers	Total Output	Marginal Product
0	0	--
1	300
2	500
3	600
4	650

What is the marginal product of the third worker?

	a.	300 units
	b.	200 units
	c.	100 units
	d.	50 units

45. When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

	a.	increasing marginal product.
	b.	diminishing marginal product.
	c.	diminishing total product.
	d.	Both b and c are correct.

46. Economies of scale occur when a firm’s

	a.	marginal costs are constant as output increases.
	b.	long-run average total costs are decreasing as output increases.
	c.	long-run average total costs are increasing as output increases.
	d.	marginal costs are equal to average total costs for all levels of output.

47. At the profit-maximizing level of output,

	a.	marginal revenue equals average total cost.
	b.	marginal revenue equals average variable cost.
	c.	marginal revenue equals marginal cost.
	d.	average revenue equals average total cost.

48. A firm in a competitive market has the following cost structure:

Output	Total Costs
0	$10
1	$12
2	$15
3	$19
4	$24
5	$30
6	$37
7	$46
8	$55
9	$65

If the market price is $8, how many units of output should the firm produce to maximize profit?

	a.	5 units
	b.	6 units
	c.	7 units
	d.	8 units

49. Suppose a firm operating in a competitive market has the following cost curves:

If the market price is Pa, in the short run the firm will earn

	a.	positive economic profits.
	b.	negative economic profits but will try to remain open.
	c.	negative economic profits and will shut down.
	d.	zero economic profits.

50. A monopoly firm is a price

	a.	taker and has no supply curve.
	b.	maker and has no supply curve
	c.	taker and has an upward-sloping supply curve.
	d.	maker and has an upward-sloping supply curve.

51. Refer to the figure below:

What price will the monopolist charge?

	a.	A
	b.	C
	c.	K
	d.	L

52. Refer to the figure below:

How much output will the monopolist produce?

	a.	O
	b.	T
	c.	W
	d.	Z

53. A monopolistically competitive industry is characterized by

	a.	many firms selling products that are similar but not identical.
	b.	many firms selling identical products.
	c.	a few firms selling products that are similar but not identical.
	d.	a few firms selling highly different products.

54. An agreement among firms in a market about quantities to produce or prices to charge is called

	a.	collusion.
	b.	Nash equilibrium
	c.	dominant strategy.
	d.	behavioral economics.

55. Which of the following statements is correct?

	a.	When duopoly firms reach a Nash equilibrium, their combined level of output is the monopoly level of output.
	b.	When oligopoly firms collude, they are behaving as a cartel.
	c.	In an oligopoly, self-interest drives the market to the competitive outcome.
	d.	An oligopoly is an example of monopolistic competition.

56. Factor markets are different from product markets in an important way because

	a.	equilibrium is the exception, and not the rule, in factor markets.
	b.	the demand for a factor of production is a derived demand.
	c.	the demand for a factor of production is likely to be upward sloping, in violation of the law of demand.
	d.	All of the above are correct.

57. The marginal product of labor is defined as the change in

	a.	output per additional unit of revenue.
	b.	output per additional unit of labor.
	c.	revenue per additional unit of labor.
	d.	revenue per additional unit of output.

58. The characteristics of jobs and workers affect

	a.	labor supply.
	b.	labor demand.
	c.	equilibrium wages.
	d.	All of the above are correct.

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