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ECON 211 Practice Exam 1, Form: A

1. Refer to the graph below. Jorge’s opportunity cost of producing 1 pound of corn is of green beans.

(a)

4

(b)

2

(c)

1

(d)

1/4

pound(s)

2. Macroeconomics approaches the study of economics from the viewpoint of (a)

the entire economy.

(b)

governmental units.

(c)

the operation of specific product and resource markets.

(d)

individual firms.

3. Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if the (a)

marginal cost of the book is affordable for her.

(b)

marginal benefit of the book is a positive value.

(c)

marginal cost of the book is greater than its marginal benefit.

(d)

marginal benefit of the book is greater than its marginal cost.

1

4. Which statement best illustrates the concept of diminishing marginal utility? (a)

As one consumes more hamburgers per week, one would be willing to pay a higher price for additional hamburgers.

(b)

Some consumers will receive less satisfaction from consuming hamburgers than from consuming fried chicken.

(c)

A typical consumer will receive less satisfaction from consuming the fourth hamburger in a week than from the third hamburger.

(d)

A decrease in the price of hamburgers will cause consumers to buy more hamburgers because they can afford to buy more.

5. The table below shows the weekly demand for hamburger in a market where there are just three buyers. At a price of $6, the weekly market quantity demanded for hamburger is

(a)

17

(b)

23

(c)

18

(d)

24

Price

Buyer 1 Qd1

Buyer 2 Qd2

Buyer 3 Q3d

$6 $5 $4 $3

7 9 15 21

4 7 10 15

6 8 12 16

6. For most products, purchases tend to fall with decreases in buyers’ incomes. Such products are known as (a)

inferior goods.

(b)

direct goods.

(c)

average goods.

(d)

normal goods.

7. In understanding and analyzing ”market demand,” we focus on how much all buyers are (a)

willing and wanting to buy.

(b)

actually buying now and in the recent past.

(c)

able to buy with their given income.

(d)

willing and able to buy.

8. Which of the following is a land resource? (a)

a farmer

(b)

an oil drilling rig

(c)

a machine for detecting earthquakes

(d)

natural gas

2

9. Refer to the table below. Jake should specialize in the production of which good? Jake’s Production Possibility Schedule

Jane’s Production Possibility Schedule

Pounds Green Beans

Pounds Corn

Pounds Green Beans

0 10 20 30 40

160 120 80 40 0

0 20 40 60 80

(a)

corn

(b)

green beans

(c)

both

(d)

neither

Pounds Corn 80 60 40 20 0

10. Which of the following would most likely increase the demand for gasoline? (a)

the expectation by consumers that gasoline prices will be higher in the future

(b)

the expectation by consumers that gasoline prices will be lower in the future

(c)

a decrease in the price of gasoline

(d)

an increase in the price of gasoline

11. Refer to the table below. The terms of trade for one pound of corn must lie between pounds of green beans. Giovanni’s Production Possibility Schedule

Jorge’s Production Possibility Schedule

Pounds Green Beans

Pounds Corn

Pounds Green Beans

0 40 80 120 160

160 120 80 40 0

(a)

1,4

(b)

1,2

(c)

1/4, 1

(d)

1/8, 1

0 20 40 60 80

3

Pounds Corn 320 240 160 80 0

and

12. Refer to the graph below. An “increase in quantity demanded” would be illustrated by a change from

(a)

point 4 to point 6.

(b)

point 5 to point 1.

(c)

point 4 to point 1.

(d)

point 2 to point 5.

13. The basic truth that underlies the study of economics is the fact that we all face (a)

death.

(b)

taxes.

(c)

risk.

(d)

scarcity.

4

14. Refer to the graph below. A “decrease in demand” would be illustrated by a change from

(a)

point 1 to point 4.

(b)

point 1 to point 3.

(c)

line C to B.

(d)

line A to C.

15. Refer to the graph below. Point A in the figure is

(a)

local.

(b)

not attainable.

(c)

efficient

(d)

inefficient

5

16. The table below represents a production possibilities frontier. The opportunity cost of producing 1 pound of corn is pound(s) of green beans. Green Beans Corn (a)

4

(b)

2

(c)

1

(d)

1/2

0 160

20 120

40 80

60 40

80 0

17. A higher price reduces the quantity demanded for a product because (a)

the purchasing power of individuals increases.

(b)

the financial assets of individuals increase.

(c)

individuals will buy more of the product and less of its substitutes.

(d)

individuals can afford less of the product and will switch to substitutes.

18. Mutually beneficial trade is possible when the terms of trade are (a)

above the seller’s opportunity cost and above the buyer’s opportunity cost.

(b)

between the seller’s and buyer’s opportunity cost.

(c)

between the seller’s and buyer’s general behavior

(d)

below the seller’s opportunity cost and above the buyer’s opportunity cost.

19. Other things being equal, the law of demand suggests that as (a)

the demand for iPads increases, this will cause the price to increase.

(b)

income increases, the quantity of iPads demanded will increase.

(c)

the price of iPads decreases, the quantity demanded will increase.

(d)

the price of iPads decreases, the quantity demanded will decrease.

20. Because of increasing opportunity costs, the production possibility curve (a)

is bowed out from (or concave to) the origin.

(b)

can be either downward- or upward-sloping.

(c)

at first rises, then falls eventually.

(d)

is a straight downward-sloping line.

21. The four factors of production (or types of resources) are (a)

land, labor, capital, and money.

(b)

land, labor, capital, and entrepreneurial ability.

(c)

labor, capital, technology, and entrepreneurial ability.

(d)

labor, capital, entrepreneurial ability, and money.

6

22. Refer to the graph below. Which of the following would cause a shift in noodle demand from D1 to D2 ?

(a)

a decrease in the number of buyers

(b)

an increase in the number of buyers

(c)

People hear that eating noodles can have negative health effects.

(d)

a decrease in the price of noodles

23. As a consequence of the problem of scarcity (a)

there is never enough of anything.

(b)

individuals have to make choices from among alternatives.

(c)

only some people can “have it all.”

(d)

things that are plentiful have relatively high prices.

24. When economists describe a “market,” they mean a (a)

place where stocks and bonds are traded.

(b)

communication network that allows individuals to keep in touch with each other.

(c)

hypothetical place where the production of goods and services takes place.

(d)

system that allows buyers and sellers to interact with one another.

25. Which situation is consistent with the law of diminishing marginal benefit? (a)

The more pizza Joe eats, the more he enjoys an additional slice.

(b)

The more pizza Joe eats, the less he enjoys an additional slice.

(c)

Joe’s marginal benefit from eating pizza becomes positive after eating 3 slices.

(d)

Joe’s marginal benefit from eating pizza reaches a maximum when total benefit is zero.

7

26. Use the graph of the market for milk below to answer the question. In this market, the equilibrium (optimal) price is and the equilibrium quantity is .

(a)

$1.50 per gallon; 28 million gallons

(b)

$1.50 per gallon; 30 million gallons

(c)

$28 per gallon; 150 million gallons

(d)

$1.00 per gallon; 35 million gallons

27. Marginal cost canbe defined as the change in (a)

cost resulting from one more unit of production.

(b)

cost resulting from one less unit of production.

(c)

benefit resulting from one more unit of production.

(d)

benefit resulting from one less unit of production.

28. If an individual has a comparative advantage in the production of a good, then this individual has the (a)

highest opportunity cost in the production of the good.

(b)

same opportunity cost in the production of the good.

(c)

lowest opportunity cost in the production of the good.

(d)

greatest desire for the good.

29. An increase in the price of digital cameras will result in a (a)

shift of the demand curve for digital cameras to the left.

(b)

decrease in the demand for digital cameras.

(c)

shift of the demand curve for digital cameras to the right.

(d)

movement up and to the left along the demand curve for digital cameras.

8

30. Who determines the price and quantity traded in a market? (a)

buyers

(b)

sellers

(c)

buyers and sellers

(d)

the government

31. Refer to the graph below. Which of the following would cause a shift in hot dog demand from D1 to D2 ?

(a)

an increase in the price of hamburgers

(b)

an increase in the price hot dogs

(c)

a decrease in the price of hamburgers

(d)

a decrease in the price of hot dogs

32. Which of the following is a capital resource? (a)

a computer programmer

(b)

a corporate bond issued by a computer manufacturer

(c)

silicon (sand) used to make computer chips

(d)

a piece of software used by a firm

9

33. Refer to the table below. Who has the comparative advantage in the production of green beans? Giovanni’s Production Possibility Schedule

Jorge’s Production Possibility Schedule

Pounds Green Beans

Pounds Corn

Pounds Green Beans

0 40 80 120 160

160 120 80 40 0

(a)

Giovanni

(b)

Jorge

(c)

Both

(d)

Neither

Pounds Corn

0 20 40 60 80

320 240 160 80 0

34. The horizontal axis of a graph that shows a market demand curve indicates the (a)

different prices at which various levels of output can be sold.

(b)

number of consumers who are in the market for this product.

(c)

various quantities of output at which the market will be cleared.

(d)

quantities that consumers will be willing and able to buy at various prices.

35. After graduating from high school, Adam is thinking about going to college. The college tuition is 15, 000ayear.Insteadof goingtocollege, Adamcouldtakeaf ull − timejobthatpays25,000. What is Adams opportunity cost of attending college for one year? (a)

$10,000

(b)

$15,000

(c)

$25,000

(d)

$40,000

36. The table below represents a production possibilities frontier for a nation. In moving from combination E to F, the opportunity cost of an additional unit of steel is

(a)

5 units of steel.

(b)

0 units of wheat.

(c)

1 unit of steel.

(d)

20 units of what.

Product

A

B

C

D

E

F

Steel Wheat

0 100

1 90

2 75

3 55

4 30

5 0

10

37. After eating four slices of pizza, you are offered a fifth slice for free. You turn down the fifth slice. Your refusal indicates that the (a)

marginal benefit for four pizza slices is negative.

(b)

total benefit for five pizza slices is negative.

(c)

marginal benefit is positive for the fourth slice and negative for the fifth slice.

(d)

marginal benefit for the fourth slice is the largest among all slices.

38. Which of the following factors will decrease the current demand for a product? (a)

an expected increase in the future price of the product

(b)

an increase in the current price of a substitute product

(c)

an increase in the current price of a complementary product

(d)

a decrease in the current price of a complementary product

39. Refer to the graph below. Which of the following would cause a shift in coffee demand from D1 to D3 if pasta is an inferior good?

(a)

an increase in the price of pasta

(b)

an increase in consumer incomes

(c)

a decrease in consumer incomes

(d)

a decrease in the price of pasta

40. Which would be a likely cause of an increase in the demand for pizza? (a)

a reduced desire for take-out and fast-food dining

(b)

a decrease in the price of pizza

(c)

an increase in the price of pizza

(d)

a health report showing eating pizza reduces stress

11

41. If the price of Pepsi decreases, other factors constant, then wed expect to see a consequent shift of the demand curve for (a)

Coke to the left.

(b)

Coke to the right.

(c)

Pepsi to the left.

(d)

Pepsi to the right.

42. Joe sold gold coins for 1, 000thatheboughtayearagof or1,000. He says, ”At least I didn’t lose any money on my financial investment.” His economist friend points out that in effect he did lose money because he could have received a 3 (a)

opportunity costs.

(b)

marginal benefits that exceed marginal costs.

(c)

imperfect information.

(d)

normative economics.

43. Refer to the graph below. If box A represents businesses or firms, B the resource market, and C households, and if flow (7) represents goods and services, then flow (6) would represent

(a)

goods and services

(b)

consumption expenditures

(c)

resources

(d)

money income

44. When economists say that the demand for a product has decreased, they mean that (a)

the demand curve has shifted to the right.

(b)

the product has become particularly scarce for some reason.

(c)

the product has become more expensive and thus consumers are buying less of it.

(d)

consumers are now willing and able to buy less of this product at each possible price.

12

45. Refer to the table below. The marginal cost of producing 3 units of output is

(a)

$38.

(b)

$28.

(c)

$10.

(d)

$0.

Output

Total Cost

0 1 2 3 4 5 6

$10 $20 $28 $38 $53 $73 $98

13

Answer Key for Exam A 1. Refer to the graph below. Jorge’s opportunity cost of producing 1 pound of corn is of green beans.

(a)

4

(b)

2

(c) (d)

1 1/4

pound(s)

2. Macroeconomics approaches the study of economics from the viewpoint of (a) the entire economy. (b)

governmental units.

(c)

the operation of specific product and resource markets.

(d)

individual firms.

3. Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if the (a)

marginal cost of the book is affordable for her.

(b)

marginal benefit of the book is a positive value.

(c) (d)

marginal cost of the book is greater than its marginal benefit. marginal benefit of the book is greater than its marginal cost.

1

4. Which statement best illustrates the concept of diminishing marginal utility? (a)

As one consumes more hamburgers per week, one would be willing to pay a higher price for additional hamburgers.

(b)

Some consumers will receive less satisfaction from consuming hamburgers than from consuming fried chicken. A typical consumer will receive less satisfaction from consuming the fourth hamburger in a week than from the third hamburger.

(c) (d)

A decrease in the price of hamburgers will cause consumers to buy more hamburgers because they can afford to buy more.

5. The table below shows the weekly demand for hamburger in a market where there are just three buyers. At a price of $6, the weekly market quantity demanded for hamburger is

(a)

17

(b)

23

(c)

18

(d)

24

Price