NORTHEASTERN ILLINOIS UNIVERSITY Name:________________________Date:__/__/__ Classtime:___VER: P

Economics 215 - Exam One

Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. 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 maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. b. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. 2. When the government attempts to improve equality in an economy the result is often a. a reduction in equality. b. a reduction in efficiency. c. additional government revenue since overall income will increase. d. an increase in overall output in the economy. 3. Evidence indicates that seat belt laws have led to a. fewer pedestrian deaths. b. fewer automobile accidents. c. fewer deaths per automobile accident. d. All of the above are correct. 4. Trade a. reduces specialization, which increases costs. b. allows specialization, which increases costs. c. allows specialization, which reduces costs. d. reduces specialization, which reduces costs. 5. President Gerald Ford referred to inflation as a. a necessary evil to combat high unemployment. b. a fly in the ointment. c. public enemy number one. d. a blight on our nation's economy.

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ID: P ____ 6. Most economists believe that an increase in the quantity of money results in a. an increase in the demand for goods and services. b. higher inflation in the long run. c. lower unemployment in the short run. d. All of the above are correct. 7. Who said, "The whole of science is nothing more than the refinement of everyday thinking"? a. Albert Einstein b. Isaac Newton c. Benjamin Franklin d. Adam Smith 8. In a. b. c. d. economics, capital refers to the finances necessary for firms to produce their products. buildings and machines used in the production process. stocks and bonds. the money households use to purchase firms' output.

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Figure 2-2

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9. Refer to Figure 2-2. If the owners of land, labor, and capital are represented by Box B of this circular-flow diagram, then a. firms are sellers in Box B. b. households are represented by Box A. c. firms are represented by Box C. d. firms are represented by Box A.

ID: P ____ 10. Where can an economy not produce? a. outside its production possibilities frontier b. inside its production possibilities frontier c. on its production possibilities frontier d. at the endpoints of its production possibilities frontier ____ 11. Which of the following concepts cannot be illustrated by the production possibilities frontier? a. efficiency b. equality c. opportunity cost d. trade-offs

Figure 2-12

____ 12. Refer to Figure 2-12. Which of the following combinations of points are both efficient and attainable for this economy? a. A, D, H b. F, G c. B, C d. A, B, C, D, H ____ 13. The field of economics is traditionally divided into two broad subfields, a. national economics and international economics. b. microeconomics and macroeconomics. c. private sector economics and public sector economics. d. consumer economics and producer economics.

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Figure 2-14

____ 14. Refer to Figure 2-14. The curves shown are a. demand curves. b. preference curves. c. supply curves. d. income-consumption curves.

Table 3-11

Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. Quantity Produced in 1 Hour Bushels of Yards of Cloth Wheat 8 12 6 15

Falda Varick

____ 15. Refer to Table 3-11. Faldas opportunity cost of one yard of cloth is a. 3/2 bushels of wheat and Varicks opportunity cost of one yard of cloth is 2/5 bushel of wheat. b. 2/3 bushel of wheat and Varicks opportunity cost of one yard of cloth is 2/5 bushel of wheat. c. 3/2 bushels of wheat and Varicks opportunity cost of one yard of cloth is 5/2 bushels of wheat. d. 2/3 bushel of wheat and Varicks opportunity cost of one yard of cloth is 5/2 bushels of wheat.

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Figure 3-2
Perus Production Possibilities Frontier

____ 16. Refer to Figure 3-2. The fact that the line slopes downward reflects the fact that a. for Peru, it is more costly to produce emeralds than it is to produce rubies. b. Peru faces a tradeoff between producing emeralds and producing rubies. c. Peru will produce more emeralds and fewer rubies as time goes by. d. Peru should specialize in producing rubies. ____ 17. If Iowas opportunity cost of corn is lower than Oklahomas opportunity cost of corn, then a. Iowa has a comparative advantage in the production of corn. b. Iowa has an absolute advantage in the production of corn. c. Oklahoma should produce just enough corn to satisfy its own residents demands. d. Iowa should import corn from Oklahoma. ____ 18. Which of the following statements about comparative advantage is not true? a. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. b. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. c. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good. d. The principle of comparative advantage applies to countries as well as to individuals.

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Table 3-5
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Labor Hours Needed to Make 1 Unit of Cheese 1 4 Bread 4 8 Number of Units Produced in 40 Hours Cheese Bread 40 10 10 5

England Spain

____ 19. Refer to Table 3-5. The opportunity cost of 1 unit of bread for England is a. 4 hours of labor. b. 4 units of cheese. c. 1/4 unit of cheese. d. 1/4 hour of labor. ____ 20. Refer to Table 3-5. At which of the following prices would both England and Spain gain from trade with each other? a. 16 units of bread for 24 units of cheese b. 16 units of bread for 48 units of cheese c. 16 units of bread for 16 units of cheese d. England and Spain could not both gain from trade with each other at any price. ____ 21. Refer to Table 3-5. If England and Spain each spends all its time producing the good in which it has a comparative advantage and the countries agree to trade 2 units of bread for 6 units of cheese, then England will consume a. 34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of bread. b. 34 units of cheese and 2 units of bread and Spain will consume 16 units of cheese and 3 units of bread. c. 34 units of cheese and 12 units of bread and Spain will consume 16 units of cheese and 3 units of bread. d. 34 units of cheese and 12 units of bread and Spain will consume 6 units of cheese and 3 units of bread.

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Figure 3-4
Perrys Production Possibilities Frontier Jordans Production Possibilities Frontier

____ 22. Refer to Figure 3-4. Perry has a comparative advantage in the production of a. novels and Jordan has a comparative advantage in the production of poems. b. poems and Jordan has a comparative advantage in the production of novels. c. novels and Jordan has a comparative advantage in the production of neither good. d. neither good and Jordan has a comparative advantage in the production of novels.

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Figure 3-7
Bintus Production Possibilities Frontier Jubas Production Possibilities Frontier

____ 23. Refer to Figure 3-7. The opportunity cost of 1 cup for Juba is a. 6 bowls. b. 2/3 bowl. c. 1/6 bowl. d. 3/2 bowls.

Table 3-12

Labor Hours Needed to Make 1 Pound of: Meat Potatoes 5 hours/pound 10 hours/pound 8 hours/pound 4 hours/pound

Amount Produced in 40 hours Meat 5 pounds 10 pounds Potatoes 8 pounds 4 pounds

Farmer Rancher

____ 24. Refer to Table 3-1. For the farmer, the opportunity cost of 1 pound of potatoes is a. 1.0 pounds of meat. b. 1.6 pounds of meat. c. 0.625 pound of meat. d. 3.2 pounds of meat.

ID: P ____ 25. Which of the a. a change b. a change c. a change d. a change following changes would not shift the demand curve for a good or service? in the price of the good or service in income in the price of a related good or service in expectations about the future price of the good or service

____ 26. Holding the nonprice determinants of demand constant, a change in price would a. have no effect on the quantity demanded. b. result in a movement along a stationary demand curve. c. result in either a decrease in demand or an increase in demand. d. result in a shift of supply. ____ 27. Which of the following is not an expression for the sum of all the individual demand curves for a product? a. aggregate demand b. total demand c. market demand d. equilibrium demand ____ 28. The supply curve for portable charcoal grills shifts a. when a determinant of the supply of portable charcoal grills other than the price of portable charcoal grills changes. b. only when the number of sellers of portable charcoal grills changes. c. only when production technology changes. d. when any determinant of the supply of portable charcoal grills changes.

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Table 4-8

A country club usually only allows members to purchase tickets for its celebrity golf tournament, but the club is considering allowing non-members to purchase tickets this year. The demand and supply schedules are as follows: Price Quantity Demanded Quantity Demanded Quantity Supplied by Members by Non-members $10 1000 500 600 $15 800 400 600 $20 600 300 600 $25 400 200 600 $30 200 100 600 ____ 29. Refer to Table 4-8. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price? a. $20 b. $15 c. $25 d. $10 ____ 30. Expenditures on a nations domestic production a. are greater than its domestic production. b. are less than its domestic production. c. are equal to its domestic production. d. could be less than, equal to, or greater than its domestic production.

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