CLASS / COURSE: Microeconomics
Micro Summer 11 Test 1 Ch 1-5
1. In the above diagram variables x and y are: A. both dependent variables. B. directly related. C. inversely related. D. unrelated.
2. The scarcity problem: A. persists only because countries have failed to achieve continuous full employment. B. persists because economic wants exceed available productive resources. C. has been solved in all industrialized nations. D. has been eliminated in affluent societies such as the United States and Canada.
3. Which of the following is real capital? A. a pair of stockings B. a construction crane C. a savings account D. a share of IBM stock
4. Normative statements are concerned with: A. facts and theories. B. what ought to be. C. what is. D. rational choice involving costs and benefits.
5. A positive statement is one which is: A. derived by induction. B. derived by deduction. C. subjective and is based on a value judgment. D. objective and is based on facts.
Answer the next question(s) on the basis of the following five data sets wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis.
6. Refer to the above data sets. The vertical intercept is negative for: A. none of the data sets. B. data sets 1 and 3 only. C. data sets 2 and 4 only. D. data sets 1 and 5 only.
7. Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit. True False
8. (Consider This) In 1996 McDonald's introduced its Arch Deluxe hamburger, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of: A. consumer sovereignty. B. technological change. C. downsloping demand. D. specialization.
Answer the next question(s) on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3 respectively.
9. Refer to the above information. Which technique is economically most efficient in producing A? A. I B. II C. III D. IV
10. If competitive industry Z is making substantial economic profit, output will: A. fall in industry Z, and firms will likely leave the market. B. fall in all industries except industry Z. C. expand in industry Z, as more resources will move to that industry. D. expand in industry Z, but no new firms will enter the market.
11. The guiding function of prices tends to keep resources flowing toward their most highly valued uses. True False
12. Which of the following is not an economic cost? A. wages. B. rents. C. economic profits. D. normal profits.
13. If we say that a price is too high to clear the market, we mean that: A. quantity demanded exceeds quantity supplied. B. the equilibrium price is above the current price. C. quantity supplied exceeds quantity demanded. D. the price of the good is likely to rise.
14. Refer to the above diagram. If this is a competitive market, price and quantity will move toward: A. $60 and 100 respectively. B. $60 and 200 respectively. C. $40 and 150 respectively. D. $20 and 150 respectively.
15. Refer to the above diagram. A government-set price ceiling is best illustrated by: A. price A. B. quantity E. C. price C. D. price B.
16. An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: A. there are many goods that are substitutes for bicycles. B. there are many goods that are complementary to bicycles. C. there are few goods that are substitutes for bicycles. D. bicycles are normal goods.
17. Black markets are associated with: A. price floors and the resulting product surpluses. B. price floors and the resulting product shortages. C. ceiling prices and the resulting product shortages. D. ceiling prices and the resulting product surpluses.
18. The equilibrium price and quantity in a market usually produces allocative efficiency because: A. all consumers who want the good are satisfied. B. marginal benefit and marginal cost are equal at that point. C. equilibrium insures an equitable distribution of output. D. the excess of goods produced at equilibrium guarantees that all will have enough.
19. Other things equal, an excise tax on a product will: A. increase its supply. B. increase its price. C. increase the quantity sold. D. increase its demand.
20. The law of demand states that: A. price and quantity demanded are inversely related. B. the larger the number of buyers in a market, the lower will be product price. C. price and quantity demanded are directly related. D. consumers will buy more of a product at high prices than at low prices.
21. A price floor means that: A. inflation is severe in this particular market. B. sellers are artificially restricting supply to raise price. C. government is imposing a maximum legal price that is typically below the equilibrium price. D. government is imposing a minimum legal price that is typically above the equilibrium price.
22. Allocative efficiency refers to: A. the use of the least-cost method of production. B. the production of the product-mix most wanted by society. C. the full employment of all available resources. D. production at some point inside of the production possibilities curve.
23. As a proportion of domestic outputs, taxes in the United States: A. are lower than in most other industrially advanced countries. B. are higher than in most other industrially advanced countries. C. are approximately the same as in most other industrially advanced countries. D. doubled in the 1990s.
24. In performing its stabilization function it may be appropriate for government to: A. increase both government spending and taxes when the economy is experiencing rapid inflation. B. reduce government spending and increase taxes when the economy experiences substantial unemployment. C. increase government spending and reduce taxes when the economy experiences rapid inflation. D. increase government spending and reduce taxes when the economy experiences substantial unemployment.
25. The most crucial determinant of the legal form of an enterprise will usually be the: A. ability of the firm to sell bonds to the public. B. amount of financial capital required by the line of production. C. amount of unemployment in the particular industry. D. state in which it is located.
26. In the above diagrams for a hypothetical economy, Figure 1 shows the: A. personal distribution of income. B. functional distribution of income. C. microeconomic distribution of income. D. international distribution of income.
27. A productive activity that creates substantial external benefits should be: A. encouraged by subsidization. B. discouraged by special taxes or legislation. C. exempt from governmental intervention. D. prohibited.
28. NAFTA refers to the: A. National Association of Free Trade Agencies. B. National Alliance for Foreign Trade and Assistance. C. North American Free Trade Agreement. D. Northern Alliance For Tariff Adjustment.
29. The terms of trade: A. show the ratio at which nations will exchange two goods. B. show how the gains from trade can be equally shared. C. show the value of one nation's currency in terms of another nation's currency. D. compare the volume of a nation's exports and imports.
Answer the next question(s) on the basis of the following production possibilities tables for countries Alpha and Beta:
30. Refer to the above tables. According to the concept of comparative advantage: A. Alpha should specialize in X; Beta in Y. B. Beta should produce some X and some Y. C. Alpha should produce some X and some Y. D. Beta should specialize in X; Alpha in Y.
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SUBJECTS / CATEGORIES:
1. Business Economics
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