Quiz 1 (Chapters 1 and 2) Answers

Transcription

1 Econ*1050 Introductory Microeconomics Instructor: Vitali Alexeev Quiz 1 (Chapters 1 and 2) Answers 1) Both households and societies face many decisions because a. resources are scarce. b. populations may increase or decrease over time. c. wages for households and therefore society fluctuate with business cycles. d. people, by nature, tend to disagree. e. All of the above are correct. 2) Economists study all of the following EXCEPT a. how people make decisions. b. how people interact with one another. c. the forces and trends that affect the economy as a whole. d. how societies change over time. 3) Henry decides to spend two hours playing golf rather than working at his job which pays $8 per hour. Henry's tradeoff is a. the $16 he could have earned working for two hours. b. nothing, because he enjoys playing golf more than working. c. the increase in skill he obtains from playing golf for those two hours. d. nothing, because he spent $16 for green fees to play golf. 4) When the government implements programs such as progressive income tax rates, which of the following is likely to occur? a. Equity is increased and efficiency is increased. b. Equity is increased and efficiency is decreased. c. Equity is decreased and efficiency is increased. d. Equity is decreased and efficiency is decreased. 5) Making decisions "at the margin" means that people 1

2 a. make those decisions that do not impose a marginal cost. b. evaluate how easily a decision can be reversed if problems arise. c. compare the marginal costs and marginal benefits of each decision. d. always calculate the marginal dollar costs for each decision. 6) The average cost per seat on a airline trip from Calgary to Edmonton is $105. If no refreshments are served and 7 seats are empty, the airline company could increase its profit only if it a. charged no less than $105 for the 3 remaining seats. b. charged more than $105 for the 3 remaining seats. c. charged any ticket price above $0 for the remaining seats. d. left the seats empty. 7) Karol has spent $2,000 purchasing and repairing an old car, which she expects to sell for $2,400 once the repairs are complete. She discovers that he needs an additional repair, which will cost $400, in order to complete the repairs. She can sell the boat as it is now for $2,000. What should she do? a. She should cut her losses and take the $2,400. b. She should never sell something for less than it cost. c. She should complete the repairs and sell the boat. d. It doesn't matter which action she takes; the outcome is the same either way. 8) Your professor loves her work, teaching economics. She has been offered other positions in the corporate world making 25 percent more, but has decided to stay in teaching. Her decision would not change unless the marginal a. cost of teaching increased. b. benefit of teaching increased. c. cost of teaching decreased. d. cost of a corporate job increased. 9) Trade can benefit a family a. by allowing the family to buy a greater variety of goods and services at a lower cost. b. by allowing each person to specialize in the activities he or she does best. c. only if the family is not in economic competition with other families. d. All of the above are correct. e. Both a and b are correct. 10) Which would NOT be true in a market economy? a. Firms decide whom to hire and what to produce. b. Government policies do not affect the decisions of firms and households. c. Households decide which firms to work for and what to buy with their incomes. d. Profit and self-interest guide the decisions of firms and households. 11) Taxes adversely affect the allocation of resources in society because 2

3 a. they do not always fall more heavily on the rich. b. the taxes collected are not enough to finance government spending. c. not everyone pays taxes. d. they distort prices and thus the decisions of households and firms. 12) The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces buyer demand. c. a situation in which competition among firms becomes ruthless. d. a firm which is forced out of business because of losses. 13) Productivity is defined as the a. amount of goods and services produced from each hour of a worker's time. b. number of workers required to produce a given amount of goods and services. c. amount of labor which can be saved by replacing workers with machines. d. actual amount of effort workers put into an hour of working time. e. estimated amount of effort workers put into an hour of working time. 14) Inflation is defined as a. a period of rising productivity in the economy. b. a period of rising income in the economy. c. an increase in the overall level of output in the economy. d. an increase in the overall level of prices in the economy. 15) Which of the following is the most correct statement about the relationship between inflation and unemployment? a. In the short run, reducing inflation is associated with falling unemployment. b. In the short run, reducing inflation is associated with rising unemployment. c. In the long run, reducing inflation is associated with falling unemployment. d. In the long run, reducing inflation is associated with rising unemployment. Figure 2-1 3

4 16) Refer to Figure 2-1. The slope of the curve between points A and B is a. 5/2 b. 2/5 c. -2/5 d. -5/2 Figure ) Refer to Figure 2-2. The opportunity cost to the economy of getting 30 additional toothbrushes by moving from point A to point D is a. 10 toasters. b. 15 toasters. c. 20 toasters. d. 25 toasters. 4

5 18) Draw a production possibilities frontier showing increasing opportunity cost for hammers and horseshoes. a. On a graph, identify the area of feasible outcomes and the area of infeasible outcomes. b. On the graph, label a point that's efficient as point "E" and a point that inefficient as point "I". c. On a graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy. d. On a graph for hammers and horseshoes, illustrate the effect a new computerized assembly line in the production of hammers would have. 5