Exam I
1)Which of the following statements can be classified as a positive statement
a)Attendance in our class should always be close to 100 percent
b)Attendance on the exam day should be at 100 percent level
c)Attendance on most days is less than 100 percent
d)None of the above represent an example of a positive statement
2)Modern economics is best classified as?
a)a social science
b)a natural science
c)a discipline within humanities
d)an art
3)Which of the following statements is correct?
a)economics is mainly concerned with efficiency and efficient allocation of resources
b)economics is mainly concerned with revenue maximization of the firms and financial stability of the firms
c)economics mainly focuses on financial investments and their analysis
d)none of the above statements are correct
4)Which of the following best defines capitalism?
a)An economic system where productive capital stock belongs to the state
b)A system where political rule is determined through democratic means
c)An economic system where productive capital stock belongs to private parties (individuals)
d)None of the above
5)Which of the following statements is incorrect?
a)In a capitalist economy productive efficiency is achieved through competition between firms
b)Competition is an essential tool in the evolution of the production process
c)In a socialist economy production efficiency may suffer due to government monopoly and lack of competition
d)None of the above statements are correct
6)Which of the following statements is incorrect?
a)Implicit costs arise only when owner-provided inputs are present
b)Implicit costs require an evaluation of the next best foregone alternative
c)Economic costs include both explicit and implicit costs
d)None of the above statements are correct
7)When the price of a product increases, all else held constant
a)the quantity demand increases
b)the quantity demanded declines
c)the demand increases
d)the demand declines
8)Which of the following demand curves is consistent with the law of demand?
a)upward slopped
b)downward slopped
c)vertical
d)horizontal
9)The economic cost of taking this class is
a)The cost of tuition, books, notepaper, gasoline, parking, student fees, car depreciation.
b)The value of the time spent in the classroom
c)All of the above
d)None of the above
10) If the demand curve is vertical then?
a)A price increase will lead to a reduction in quantity demanded
b)A price decrease will lead to a reduction in quantity demanded
c)A price change will leave quantity demanded unchanged
d)None of the above
11)The principle of comparative advantage is based on the idea that a country specializes in the production of the product in which it has the lowest ….
a)absolute cost of production relative to all the other producers
b)opportunity cost of production relative to all the other producers
c)none of the above
12)Which of the following statements is incorrect?
a)the development of the internet helps expand the geographical boundaries of the market for those businesses that chose to advertise and sell their products online
b)when two firms from different geographical markets advertise online, they each expand into each other’s maker and thus the competition between these firms increases
c)product differentiation may allow the producer to increase the price
d)none of the above
13)Consider the following scenario: the economy experiences a recession, and car manufacturers offer significant price reductions. As a result, the level of car sales increases. Note that new cars are indeed a normal good. Which of the following statements in terms of economic terminology best describes what is going on?
a)recession causes a decline in the demand, as cars are a normal good, but the reduction in the prices causes quantity demanded to increase. In this case, the increase in quantity demanded due to the price change surpasses the reduction in the demand cause by income declines. Thus, the demand has shifted inwards, but then the equilibrium moved along the demand (down in terms of the direction of the price)
b)recession causes a decline in the demand, as cars are a normal good, but the reduction in the prices causes an increase in demand. In this case, the increase in demand due to the price decline surpassed the reduction in demand due to the recessionary pressure
c)recession caused an increase in the demand, as cars are a normal good, but the reduction in the prices caused an a reduction in the quantity demand. In this case, the effect of the recession on demand dominated the effect of the price reduction on quantity demand, and hence the overall quantity sold increased
d)none of the above make sense
14)Which of the following statements is correct?
a)the demand for gasoline, the product itself, is more elastic than the demand for gasoline from a particular gas station, say a QT outlet
b)the demand for gasoline, the product itself, is more inelastic than the demand for gasoline from a particular gas station, say a QT outlet
c)the demand for gasoline and the demand for gasoline from a particular supplier are identical in terms of elasticities
d)none of the above
15)Assume that a given market experienced both, changes in the demand and supply. As a result of these shifts, the price of the product fell while the equilibrium level of output remained roughly unchanged. Assuming that the demand is consistent with the law of demand, and the supply is consistent with the law of supply, which scenario is likely to be responsible for the change?
a)demand increased while supply decreased
b)demand decreased while supply increased
c)demand increased while supply increased
d)demand decreased while supply decreased
16)Under which condition an increase in the minimum wage will lead to higher job losses for low skilled labor?
a)if the demand for low skilled labor is very elastic
b)if the demand for low skilled labor is very inelastic
c)if the demand for low skilled labor is nearly vertical
17)The demand for gasoline may be very inelastic, in which case it is safe to say that the excise tax on gasoline is largely paid by:
a)the consumers of gasoline
b)the producers of gasoline
18)The demand for AirTran services may be very elastic, in which case if the government imposes a penalty on the AirTran company
a)AirTran will be able to pass most of the penalty onto their consumers in the form of a price increase
b)AirTran will be unable to pass the penalty onto their consumers in the form of a higher price
19)At the market equilibrium
a)the benefit to the marginal consumer is equal to the market price
b)the cost to the marginal producer is equal to the market price
c)both, a and b are correct
d)none of the above, as the market price has nothing to do with either the marginal benefit or the marginal cost
20)Which of the three fundamental questions is concerned with productive (production) aspect of efficiency?
a)What to produce?
b)How to produce?
c)For whom to produce?
21)Imagine that at the start of this semester you purchased 100 shares in the XYZ Corporation at 10 dollars per share. By the time you take this exam the value of the shares has risen to 12 dollars per share. The opportunity cost of CONTINUING THE OWNERSHIP of the stock today is
a)zero
b)10 dollars per share
c)12 dollars per share
d)15 dollars per share
e)none of the above
22)Consider the following scenario: a gas station reduces the price of regular gasoline from $3.00/gallon to $2.97 per gallon and as a result the sales of gasoline increase by 5% for the day. All else held constant, would you argue:
a)t the gas station is operating in the inelastic range of the demand curve
b)that the gas station is operating in the elastic range of the demand curve
c)that the gas station is operating at the unit elastic point
d)none of the above
True [A] / False [B]
23)Minimum wage is an example of a price ceiling
24)In a recession, all stocks are expected to be affected negatively, as profits for all companies are expected to decline because consumers’ incomes are declining. Hence, it is a bad idea to be invested in the stock market during a recession.
25)If consumers of a product expect that in the near future the price of this product will increase then the demand for this product will increase now, putting pressure on the price to increase
26)If the price of an apple is $0.25 and the price of an orange is $0.5, then one orange has the opportunity cost of two apples.
27)Microeconomics studies the behavior of individual economic agents, such as consumers, firms.
28)If a price floor is set below the market clearing price then a shortage will emerge
29)GSU is an example of a socialistic entity as it is owned by the state
30)Assume the following scenario: you purchase two goods online: books, and Russian souvenirs. The books you purchase online can also be purchased at a number of local stores, but the Russian souvenirs have no substitutes in the local market and only one retailer online. All else held constant, would you agree that the online bookstore will be more successful in passing the shipping costs onto the consumer than the seller of the Russian souvenirs?
Thank you for taking the exam at such a late hour!