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Exam 1

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Question 1 (4 points)
What is the main reason why monopolies are considered bad for market economies?
  1. Because more variety of firms is preferred by consumers.
  2. Because when they appear, resources may not be used in their most highly valued manner and consumers might not be able to buy the goods they desire.
  3. Because monopolies concentrate all the wealth of a nation in the hands of very few people.
  4. Because monopolies tend to pay lower wages to their employees.
  5. Because, given the political power that they have, monopolies are harder to tax.
Question 2 (4 points)
A change in the quantity demanded of skis is a movement along the demand curve for skis. In contrast, a change in demand for skis
  1. is not related to the price of a lift ticket.
  2. reflects a change in the price of skis.
  3. can be caused by an increase in the popularity of the sport.
  4. is a movement along the demand curve for skis.
  5. is a movement along the demand curve for ski boots.
Question 3 (4 points)
If an increase in the price of good X causes the demand for good Y to decrease, it can be concluded that
  1. X and Y are complements.
  2. X and Y are inferior goods.
  3. there is collusion in the marketplace.
  4. X and Y are substitutes.
  5. X and Y are superior goods.
Question 4 (4 points)
When homeowners allow their properties to become rundown,
  1. they impose a negative externality on neighboring properties.
  2. they pay for the loss in value of neighboring properties.
  3. they pay for the increase in value of neighboring properties.
  4. they increase the value of neighboring properties.
  5. they are not acting in their own self-interest.
Question 5 (4 points)
Production Possibilities Schedule
Refer to the production possibilities schedule in the table above. A combination of 12 units of corn and 6 television sets
  1. is possible only with full and efficient use of all resources.
  2. would not satisfy the consumers' demands.
  3. could not be produced with the current supply of resources.
  4. illustrates unemployment of resources.
  5. has never been and never will be produced.
Question 6 (4 points)
If because of decreased prices of fuel oil and natural gas, electric rates were reduced by 15 percent and the quantity demanded did not change, one could conclude that in the short run the demand for electricity is
  1. relatively inelastic.
  2. perfectly elastic.
  3. relatively elastic.
  4. perfectly inelastic.
  5. unitary elastic.
Question 7 (4 points)
If total utility increases by smaller and smaller amounts as more units of a product are consumed, then marginal utility is
  1. zero.
  2. increasing and is a negative amount.
  3. decreasing and is a positive amount.
  4. increasing and is a positive amount.
  5. decreasing and is a negative amount.
Question 8 (4 points)
Since consumers are not identical, then
  1. total utility schedules will differ among consumers.
  2. different consumers will maximize their utility with different quantities of goods and services.
  3. consumers have different tastes and preferences.
  4. marginal utility will decline at different rates for different individuals.
  5. All of these.
Question 9 (4 points)
What is the difference between the microeconomic functions of government and the macroeconomic functions?
  1. There are no microeconomic functions because microeconomics deals with individual economic entities.
  2. Microeconomic functions deal with individual economic entities while macroeconomic functions deal with broad economic sectors.
  3. There are no macroeconomic functions of government because macroeconomics deals with broad economic sectors.
  4. Macroeconomic functions deal with individual economic entities while microeconomic functions deal with broad economic sectors.
  5. There is no difference.
Question 10 (4 points)
Consumer surplus is
  1. the area above the supply curve.
  2. the area below the price line.
  3. the area above the demand curve.
  4. the area under the market demand curve and above the price line.
  5. there is no such thing as consumer surplus�any surplus belongs to producers.
Question 11 (4 points)
Competitive firms produce in the manner that _________ costs and __________ profits.
  1. minimizes, minimizes
  2. maximizes, maximizes
  3. eliminates, maximizes
  4. maximizes, minimizes
  5. minimizes, maximizes
Question 12 (4 points)
If a basketball is priced at $12.00 and a sleeve of 3 golf balls is priced at $6.00, the relative price of one golf ball in terms of a basketball is
  1. 1/6 of a basketball.
  2. 1/4 of a basketball.
  3. 2 basketballs.
  4. 1/2 of a basketball.
  5. 1/3 of a basketball.
Question 13 (4 points)
Total Utility
According to the table above, the total utility of consuming all 5 units is
  1. 13.
  2. 55.
  3. 64.
  4. 188.
  5. 303.
Question 14 (4 points)
All of the following are used to justify the intervention of the government in the private economy except
  1. incentives to free-ride on others.
  2. public goods.
  3. market imperfections.
  4. positive externalities.
  5. the existence of private property rights.
Question 15 (4 points)
Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units. From this we can conclude that the price elasticity of demand over this price range is equal to
  1. 1.2.
  2. 0.80.
  3. 0.20.
  4. 1.25.
  5. Cannot be determined from the information given.
Question 16 (4 points)
The circular flow model
  1. illustrates how business firms interact with one another.
  2. shows the flow of output and income within one sector of the economy.
  3. illustrates how different sectors of the economy are linked together.
  4. shows how businesses sell their resource services to households.
  5. shows that income is rarely equal to output.
Question 17 (4 points)
Which of the following statements is true regarding the term investment as it is used in economics?
  1. Investment includes the purchase of bonds.
  2. Investment includes the purchase of stocks.
  3. Investment can both rise and fall at different times.
  4. Investment spending is always greater than consumption.
  5. Investment is largely unimportant in determining the economic health of the nation.
Question 18 (4 points)
Demand Curves
Referring to the figure above, the demand curve B compared to the demand curve C is
  1. less than 1.
  2. varies from being more elastic to being less elastic.
  3. equal to zero.
  4. more elastic.
  5. less elastic.
Question 19 (4 points)
If demand is unit-elastic, a 25 percent increase in price will result in
  1. a 25 percent change in total revenue.
  2. a 100 percent change in quantity demanded.
  3. no change in quantity demanded.
  4. a 1 percent decrease in quantity demanded.
  5. a 25 percent decrease in quantity demanded.
Question 20 (4 points)
The quantity supplied of bicycle parts is a function of
  1. what percent of the population college students are at a given time.
  2. the price of bicycle parts.
  3. the quantity supplied of bicycle riders.
  4. how expensive bicycles are.
  5. the quantity supplied of bicycles.
Question 21 (4 points)
Suppose 200 videotapes are rented when the price is $4. If the price drops by $0.80, the number of videotapes rented increases to 220. Which of the following statements about the non-arc price elasticity of demand is true?
  1. Demand is inelastic.
  2. Demand is elastic.
  3. The elasticity of demand is equal to 5.
  4. The elasticity of demand is equal to 2.
  5. Demand is unit-elastic.
Question 22 (4 points)
The opportunity cost of studying for economics tonight at the library may not include
  1. the good time you could be having by going out with your friends.
  2. the higher grade you might earn on the next economics test.
  3. time you could be spending listening to music or watching television.
  4. lost sleep.
  5. time that you could be spending studying for your history class.
Question 23 (4 points)
Quantities of CDs
According to the table above, the market quantity of compact disks demanded at a price of $8 is
  1. 50.
  2. 176.
  3. 90.
  4. 92.
  5. 36.
Question 24 (4 points)
The following equation, MU (a) | P(a) = MU (b) | P(b) = MU (c) | P(c)� = MU (x) | P(x), is a mathematical representation of what economic concept?
  1. Consumer disequilibrium
  2. Wealth optimization
  3. Income maximization
  4. Consumer equilibrium
  5. Income redistribution
Question 25 (4 points)
The demand curve graphically expresses
  1. the principle that as price increases, demand decreases.
  2. the principle that as price increases, quantity demanded decreases.
  3. the principle that as price decreases, marginal utility increases.
  4. the law of increasing costs.
  5. the principle that as price increases, quantity demanded increases.
Question 26 (4 points)
If the price elasticity of demand for U.S. automobiles is higher in Europe than it is in the United States, we might expect
  1. a price in Europe that is less than the cost of producing the car in Europe.
  2. a higher price for autos in the United States than in Europe.
  3. a less profitable price for autos in the United States than in Europe.
  4. the same price for autos in the United States and Europe.
  5. a lower price for autos in the United States than in Europe.
Question 27 (4 points)
Production Possibilities Curve
Consider the economy described by the production possibilities curves in the figure above. Between 1980 and 1990, the economy most likely experienced
  1. an increase in resources associated with producing goods.
  2. a decrease in resources associated with producing goods.
  3. an increase in resources associated with producing both goods and services.
  4. an increase in resources associated with producing services.
  5. a decrease in resources associated with producing services.
Question 28 (4 points)
When the value of net exports is positive,
  1. imports exceed exports.
  2. there is a trade deficit.
  3. imports are less than exports.
  4. exports equal imports.
  5. None of these
Question 29 (4 points)
If the demand for product R increases as the price of product S increases, then
  1. R is an inferior good.
  2. R and S are substitutes.
  3. R and S are not related goods.
  4. consumer preferences for S have increased.
  5. R and S are complements.
Question 30 (4 points)
Economists have devised measures of how much consumers alter their purchases in response to price changes. These measures are called
  1. price controls.
  2. irrational behaviors.
  3. price elasticities.
  4. price ceilings.
  5. price floors.
Question 31 (4 points)
The law of demand illustrates that
  1. as price decreases, demand increases.
  2. as price decreases, quantity demanded increases.
  3. as price increases, quantity demanded increases.
  4. price changes are always in the same direction as demand changes.
  5. as price decreases, quantity supplied increases.
Question 32 (4 points)
A U.S. export occurs when
  1. France imports leather shoes from Italy.
  2. Kuwait sells oil to a U.S. oil company.
  3. Germany buys Pontiacs from General Motors.
  4. Pepsi-Cola sells soft drinks to a local retailer.
  5. IBM purchases computer chips from Motorola.
Question 33 (4 points)
Production Possibility for Corn and TV sets
Refer to the table above. The opportunity cost of producing the first television set is
  1. 42 units of corn.
  2. 40 units of corn.
  3. 36 units of corn.
  4. 12 units of corn.
  5. 2 units of corn.
Question 34 (4 points)
When specialized resources are shifted to the production of another good in which they are relatively less productive, the resulting production possibilities curve of the two goods tends to
  1. disappear.
  2. bow out.
  3. bow in.
  4. be a straight line.
  5. be a bent line.
Question 35 (4 points)
Utility is most closely defined as
  1. extra.
  2. marginal.
  3. opportunity cost.
  4. satisfaction.
  5. usefulness.
Question 36 (4 points)
If demand is elastic, then an increase in price ________ total revenue and a decrease in price ________ total revenue.
  1. decreases; increases
  2. increases; decreases
  3. decreases; decreases
  4. increases; increases
  5. does not change; decreases
Question 37 (4 points)
Which of the following will not cause the demand for ice cream to change?
  1. A change in population size
  2. A change in consumer preferences
  3. A change in consumer incomes
  4. A change in seasons
  5. A change in the price of ice cream
Question 38 (4 points)
Suppose that the marginal utility of a ham sandwich is twice that of a turkey sandwich, and that a ham sandwich costs three times as much as a turkey sandwich. In this situation,
  1. the consumer should purchase a turkey sandwich.
  2. the consumer should purchase a ham sandwich.
  3. the consumer is indifferent between ham sandwiches and turkey sandwiches.
  4. the consumer should purchase both sandwiches.
  5. the consumer should purchase neither because she is a vegetarian.
Question 39 (4 points)
If a consumer purchases more of a product, then most likely the marginal utility
  1. of other products increases.
  2. of that product remains the same.
  3. of that product decreases.
  4. of that product increases.
  5. of other products decreases.
Question 40 (4 points)
Government spending and taxation is the focus of
  1. fiscal policy.
  2. monetary policy.
  3. public policy.
  4. political policy.
  5. foreign policy.
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Exam 1. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/introduction-to-microeconomics-1/exam1.htm. This work is licensed under a Creative Commons License Creative Commons License