Midterm Exam In Tutorial Library

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TITLE: Midterm Exam

UNIVERSITY / INSTITUTE: Saint Leo University

CLASS / COURSE: ECO201

QUESTION DESCRIPTION:

Midterm Exam:

 
 1. Question : Governments establish the laws that regulate the interaction between businesses and households and also serve as actors in the economy themselves.
 
  Student Answer:
 True 
 
  False 
 
 
 
 2. Question : Monopoly power is the ability of individuals or firms currently in business to prevent other individuals or firms from entering the same kind of business.
 
  Student Answer:
 True 
 
  False 
 
 
 
 
 3. Question : Consider the table below, where each production choice represents a point on a production possibility curve. The table shows that the opportunity cost of producing an additional 10 units of rye is: 
 
 
 
 
  Student Answer:
 2 eggs. 
 
 
 4 eggs. 
 
  10 eggs. 
 
  decreasing. 
 
 
 4. Question : Market economies are based upon:
 
  Student Answer: individual planning and individual good will towards others. 
  government planning and individual good will towards others. 
  government planning and private property. 
 
 
 individual self-interest and private property. 
 
 
 5. Question : The principle of increasing marginal opportunity costs states that initial opportunity costs are __________ and they __________ the more you concentrate on the activity
 
  Student Answer: high; decrease 
 
 
 low; increase 
 
  high; increase 
 
  low; decrease 
 
 
 6. Question : A resource is said to have a comparative advantage if:
 
  Student Answer:
 it is more effective in the production of one good than another. 
  it is equally effective to the production of all goods. 
 
  its effectiveness in the production of a good increases as more of that good is produced. 
  its effectiveness in the production of a good does not change as more of that good is produced. 
 
 7. Question : According to the law of demand, a decrease in the price of baseball trading cards causes:
 
  Student Answer:
 an increase in the quantity of trading cards demanded. 
 
  a decrease in the quantity of trading cards demanded. 
 
  an increase in the scarcity of baseball trading cards. 
 
  a greater abundance of baseball trading cards. 
 
 
 8. Question : The marginal benefit of owning another hardback book this month to Shelby is $20. If the $22 price of hardback books reflects their marginal cost to Shelby and she is rational, then:
 
  Student Answer: Shelby will sell the hardback books she has to others who are willing to pay less. 
  Shelby can gain by buying more . 
 
  Shelby will buy more hardback books this month. 
 
 
 Shelby will not buy any more hardback books this month. 
 
 
 9. Question : Marginal analysis suggests that you will choose to do something if:
 
  Student Answer: the total benefit is less than the total cost. 
 
  the marginal cost exceeds the marginal benefit. 
 
  the total benefit exceeds the total cost. 
 
 
 the marginal benefit exceeds the marginal cost. 
 
 
 10. Question : If an economy produces on its production possibility curve, it is:
 
  Student Answer:
 using its resources efficiently. 
 
  using its resources unsustainably. 
 
  using its resources equitably. 
 
  using its resources inefficiently. 
 
 
11. Question : An improvement in technology will:
 
  Student Answer: imply that the law of increasing costs no longer applies. 
 
  shift the production possibilities curve inward. 
 
 
 shift the production possibilities curve outward. 
 
  have no effect on the production possibilities curve. 
 
 
 12. Question : Refer to the graph below. Given the resources and technology available to this economy, it can produce at points: 
  
 
 
  Student Answer: A, B, and C. 
 
 
 A, B, and D. 
 
 
 A, C, and D. 
 
  B, C, and D. 
 
13. Question : The law of demand states that:
 
  Student Answer: sellers supply less of a good when its price increases. 
 
  consumers buy less of a good when its price increases only if their income increases at the same time. 
  consumers buy less of a good when its price increases even if other demand determinants change at the same time. 
 
 consumers buy less of a good when its price increases, provided all shift factors of demand are fixed. 
 14. Question : Economic reasoning is based on the premise that:
 
  Student Answer: all decisions or actions are costless. 
 
  only non-economic decisions or actions have a cost associated with them. 
  only economic decisions or actions have a cost associated with them. 
 
 all decisions and actions have a cost associated with them. 
 
 
 15. Question : The invisible hand refers to:
 
  Student Answer: the role of government in a market economy. 
 
 
 the price mechanism that guides economic actions. 
 
  political forces. 
 
  social forces. 
 
 16. Question : An entrepreneur might choose to form a partnership rather than a sole proprietorship because a partnership:
 
  Student Answer: provides greater accountability. 
 
  provides limited liability. 
 
  is easier to establish. 
 
 
 allows the owners to share the risks of business. 
 
 
 17. Question : A tax that is levied on a specific good is called:
 
  Student Answer: a progressive tax. 
 
 
 an excise tax. 
 
  an income tax. 
 
  an employment tax. 
 
 
 18. Question : The Social Security system is:
 
  Student Answer: sound and faces no significant problems in the next fifty years. 
  threatened by the large budget surpluses projected for the next decade. 
 
 threatened by the impending collapse of the Social Security Trust Fund, which is predicted to fail within the next decade. 
 
 threatened by the retirement of the baby boomers over the next thirty to fifty years. 
 
19. Question : The law of supply states that
 
  Student Answer:
 quantity supplied increases as price increases, other things constant. 
  quantity supplied decreases as price increases, other things constant. 
  more of a good will be supplied the higher its price, other things changing proportionately. 
  less of a good will be supplied the higher its price, other things changing proportionately. 
 
 20. Question : When the wage rate paid to labor is below equilibrium:
 
  Student Answer: the supply of labor increases. 
 
  the demand for labor decreases. 
 
 
 the number of workers seeking jobs exceeds the number of jobs available. 
 
 the number of jobs available exceeds the number of workers seeking jobs. 
 
 21. Question : What form of business is the most common in the United States?
 
  Student Answer: Non-profit businesses. 
 
  Corporations. 
 
 
 Sole proprietorships. 
 
  Partnerships. 
 
 
 22. Question : The use of the phrase "other things equal" in supply and demand analysis indicates that:
 
  Student Answer: an equilibrium price has been reached. 
 
  an equilibrium quantity has been reached. 
 
 
 factors other than the one under consideration are kept constant. 
  we are considering all the changes which might take place in actual markets. 
23. Question : In a partnership:
 
  Student Answer:
 there are two or more owners, with each owner liable for the actions of the other owners. 
  there is only one owner but two or more employees. 
 
  the business is legally treated as a person and owned by stockholders who are not liable for the actions of the corporate "person." 
  each owner is liable only to the extent of his or her own investment. 
 
 24. Question : The existence of a market surplus implies that price is:
 
  Student Answer:
 above equilibrium and must fall to restore equilibrium. 
 
  above equilibrium and must rise to restore equilibrium. 
 
  below equilibrium and must fall to restore equilibrium. 
 
  below equilibrium and must rise to restore equilibrium. 
 
25. Question : If price changes and everything else is held constant, then:
 
  Student Answer: both supply and demand will shift. 
 
  the demand curve will shift. 
 
 
 there will be a movement along a given supply curve, not a shift. 
  the supply curve will shift. 
 
 
 26. Question : One reason government debt is different from individual debt is::
 
  Student Answer:
 the government can print money to alleviate its debt, but individuals can't. 
  the government owes much of its debt to others, while individuals carry credit and that is debt to them 
  the government can refinance its debt, but individuals can only do it when interest rates fall 
  Individual debt is very similar to government debt, because the government is one entity just larger 
 
 27. Question : Socialism is in theory characterized by:
 
  Student Answer: private property. 
 
  self-interest. 
 
 
 distribution according to need. 
 
  free markets. 
 
 
28. Question : When tax revenues exceed government expenditures, the government budget is:
 
  Student Answer: in deficit. 
 
  balanced. 
 
 
 in surplus. 
 
  not in equilibrium. 
 
29. Question : Entrepreneurship is an ability that is most closely related to:
 
  Student Answer: household spending. 
 
 
 business formation. 
 
  consumer sovereignty. 
 
  e-commerce. 
 
 
30. Question : A budget deficit that would not exist if the economy were at potential income is called:
 
  Student Answer:
 a passive deficit. 
 
  a real deficit. 
 
 
 a structural deficit. 
 
  a nominal deficit. 
 
31. Question : The Independent reported in 2004 that "Online music stores such as Apple's iTunes were seen as a revolution in music sales, with customers turning their backs on CDs to shop online" Based on this report, you can conclude that the introduction of online music stores has shifted: 
 
  Student Answer: the supply curve of CDs to the right. 
 
  the supply curve of CDs to the left. 
 
  the demand curve of CDs to the right. 
 
 
 the demand curve of CDs to the left. 
 
 
 32. Question : In late 2003, news reports hit the airways stating that scientists had found evidence of BSE, or "Mad Cow Disease", in U.S. cattle. At the same time, many cattle ranchers had to leave the market because their contaminated cattle had to be put to death. What happens to the demand and supply for red meat?
 
  Student Answer: Demand decreases and supply increases 
 
  Demand increases and supply increases 
 
 
 Demand decreases and supply decreases 
 
  Demand increases and supply decreases 
 
 
33. Question : As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are
 
  Student Answer: substitutes. 
 
  normal goods. 
 
 
 complements. 
 
  inferior goods. 
 
 
 34. Question : Relative to other countries, the U.S. debt to GDP ratio is:
 
  Student Answer: one of the largest. 
 
  one of the smallest 
 
 
 somewhere in the middle given ratios go as high as 170% and fall as low as 27% (as of 2000). 
  Exactly the same as other developed countries, such as Japan and Italy. 
 
 35. Question : A rightward shift in the demand curve for tennis balls could be caused by
 
  Student Answer: a fall in the price of tennis balls. 
 
 
 a fall in the price of tennis rackets. 
 
  a rise in the price of tennis lessons. 
 
  a fall in income, assuming tennis balls are a normal good. 
 
 
 36. Question : If demand falls by a greater amount than supply falls, then equilibrium price __________ and equilibrium quantity __________.
 
  Student Answer: rises; rises 
 
  rises; falls 
 
  falls; rises 
 
 
 falls; falls 
 
 
 37. Question : Two countries that specialize their production along the lines of comparative advantage and then trade with one another will be able to:
 
  Student Answer:
 both produce and consume more. 
 
  produce more and consume less. 
 
  produce less and consume more. 
 
  both produce and consume less. 
 
 
 38. Question : Assume the graph below reflects demand in the automobile market. Which arrow best captures the impact of increased consumer income on the automobile market? 
 
 
 
  Student Answer:
 
 
 
 
 C 
 
 
 D 
 
 
 39. Question : Refer to the graph below. Assume the graph reflects demand in the egg market. Which arrow best captures the impact of increased consumer concern about cholesterol on the egg market? 
 
 
 
  Student Answer:
 
 
 B 
 
 
 C 
 
 
 
 
 40. Question : If production is efficient, then:
 
  Student Answer:
 it is not possible to produce a given quantity of output at a lower cost. 
  quantity demanded equals quantity supplied. 
 
  firms are earning profits. 
 
  income is fairly distributed. 
 
 
 
  Points Received: (not graded) 
  Comments:
 
 
 
 
 41. Question : Refer to the graphs below. A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs? 
 
 
 
  Student Answer:
 I 
 
  II 
 
  III 
 
 
 IV 
 
 
 42. Question : Consider a point on a market demand curve. The point represents
 
  Student Answer: a single price and the quantity demanded by an individual buyer. 
 
 a single price and the sum of the quantities demanded by all buyers. 
  various prices and various quantities demanded. 
 
  various prices and various quantities demanded and supplied added together. 
 
 43. Question : At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value.
 
  Student Answer: surplus; downward 
 
  surplus; upward 
 
  shortage; downward 
 
 
 shortage; upward 
 
 
 44. Question : If Max's demand for hot dogs falls as his income rises, then hot dogs are
 
  Student Answer: a bad good. 
 
 
 an inferior good. 
 
  a preferential good. 
 
  a normal good. 
 
 
 45. Question : Refer to the graph below. Floods in the U.S. Midwest in the early 1990s reduced the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market? 
 
 
 
  Student Answer:
 
  II 
 
 
 III 
 
 
 IV 
 
 
 46. Question : Pencils and erasers are complements. An increase in the price of one (pencils) will result in:
 
  Student Answer:
 A decrease in the demand for the other (erasers) 
 
  An increase in the demand for the other (erasers) 
 
 
 A decrease in the quantity demanded of the other (erasers) 
  An increase in the quantity demanded of the other (erasers) 
 
 
 47. Question : In late 2003, news reports hit the airways stating that scientists had found evidence of BSE, or "Mad Cow Disease", in U.S. cattle. At the same time, many cattle ranchers had to leave the market because their contaminated cattle had to be put to death. What happens to in the market for red meat?
 
  Student Answer:
 Equilibrium price is indeterminate but equilibrium quantity decreases 
  Equilibrium price is indeterminate but equilibrium quantity increases 
  Equilibrium price decreases but equilibrium quantity is indeterminate 
  Equilibrium price increases but equilibrium quantity is indeterminate 
 
48. Question : If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction novels
 
  Student Answer:
 shifts rightward. 
 
  shifts leftward. 
 
  stays constant. 
 
  can shift either rightward or leftward. 
 
 
 
 
 49. Question : An increase in the quantity of resources
 
  Student Answer: shifts the PPC inward. 
 
 
 shifts the PPC outward. 
 
  moves the economy to a point higher up on a given PPC. 
 
  moves the economy to a point further down a given PPC. 
 
 
 50. Question : Price floors
 
  Student Answer: cause surpluses when they are effective. 
 
  are effective when they are above the equilibrium price. 
 
  cause fewer exchanges to be made. 
 
 
 All of the above 

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SUBJECTS / CATEGORIES:
1. Business Economics
2. Economics
3. Macroeconomics

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