ECON 201 Exam 1 - Winter 2020 - Elias PDF

ID: A ECON 201 Exam 1 - Winter 2020 - Elias - 40 Points Total Multiple Choice - 1 point each Identify the choice that best completes the statement or answers the question. ____ 1. More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________...

ID: A ECON 201 Exam 1 - Winter 2020 - Elias - 40 Points Total Multiple Choice - 1 point each Identify the choice that best completes the statement or answers the question. ____ 1. More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________ advantage in growing oranges. a. comparative d. producer b. public e. planning c. revenue ____ 2. Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n) a. decrease in supply from Q1 to Q2. b. increase in supply from Q2 to Q1. c. decrease in quantity supplied from Q1 to Q2. d. increase in quantity supplied from Q2 to Q1. e. shift of the supply curve. ____ 3. What would happen to the equilibrium price and quantity of shirts if the price of cotton, an input into the production of shirts, decreases and all else is held constant? a. The price falls and the quantity rises. b. The price rises and the quantity falls. c. The price falls and the quantity falls. d. The price rises and the quantity rises. e. The price falls and the quantity remains constant. 1  ID: A Consider the following data that identifies real gross domestic product (GDP) in comparison to the long-run trend of real GDP to answer the following two questions: Real GDP Long-Run Trend of Real GDP Quarter (billions of dollars) (billions of dollars) 1 4,000 4,000 2 4,160 4,120 3 4,326 4,244 4 4,413 4,371 5 4,501 4,502 6 4,591 4,637 7 4,499 4,776 8 4,409 4,919 9 4,673 5,067 10 4,954 5,219 11 5,252 5,376 12 5,376 5,537 ____ 4. Between quarter 2 and quarter 3, real gross domestic product (GDP) grew by what percentage? Round your answer to the nearest whole number. a. 4 percent d. 2 percent b. 3 percent e. −2 percent c. 1 percent ____ 5. Between quarter 7 and quarter 8, real gross domestic product (GDP) grew by what percentage? Round your answer to the nearest whole number. a. −2 percent d. 6 percent b. 3 percent e. 2 percent c. 1 percent ____ 6. If Alexander doesn’t like changing the oil in his car and pays his father to do it for him, he has provided his father with a(n) ________ incentive. a. direct d. complementary b. indirect e. unintended c. neutral ____ 7. The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance? a. More people are using credit and debit cards, so people are not accustomed to using change. b. Retailers find it too expensive to deal with coins and would have to raise their prices if consumers used coins more. c. The opportunity cost of carrying around large quantities of coins is too large. d. Prices have increased over time, and the opportunity cost of carrying around a large number of coins would be low. e. People who receive a dollar coin are more likely to collect than spend the money, and the economy won’t grow as quickly because less is being spent. 2  ID: A ____ 8. Which of the following is a positive statement? a. Winters in Arkansas are too cold. b. Everyone should work in a bank to understand the true value of money. c. Harvard University is the top education institution in the country. d. On average, people save 15 percent when they switch to GEICO. e. Everyone ought to have a life insurance policy. The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the following two questions. ____ 9. What is DiNozzo’s opportunity cost of making a wooden boat? a. 20 solved crimes d. 1/20 of a boat b. 30 solved crimes e. 1/10 of a boat c. 10 solved crimes 3  ID: A ____ 10. What is Gibbs’s opportunity cost of making a wooden boat? a. 20 solved crimes d. 1/20 of a boat b. 30 solved crimes e. 1/10 of a boat c. 10 solved crimes Consider the following data, where gross domestic product (GDP) values are measured in millions of dollars, to answer the following two questions: Year Nominal GDP Real GDP GDP Deflator 2009 ________ $500 100 2010 $551.2 ________ 106 2011 $600.6 $546 ________ 2012 ________ $600.6 120 ____ 11. What is the value of the gross domestic product (GDP) deflator in 2011? Round to the nearest decimal. a. 54.6 d. 90.9 b. 154.6 e. 112.0 c. 110.0 ____ 12. What is the value of real gross domestic product (GDP) in 2010? Round to the nearest second decimal. a. $58,427.20 million d. $445.20 million b. $584.27 million e. $657.20 million c. $520.00 million ____ 13. Gross domestic product (GDP) is an important indicator because it is used as a measure of all of the following EXCEPT a. economic growth. d. average income levels. b. average living standards. e. environmental quality. c. business-cycle fluctuations. ____ 14. A new car is typically considered to be a normal good. What would happen to the equilibrium price and quantity of new cars if there is a recession where many people lose their jobs, causing incomes to decrease, ceteris paribus? a. The equilibrium price would rise and the equilibrium price would fall as demand shifts to the left. b. The equilibrium price and quantity would both fall as demand shifts to the left. c. The equilibrium price and quantity would both rise as demand shifts to the right. d. The equilibrium price would fall and the equilibrium quantity would rise as demand shifts to the right. e. There would be no change to the equilibrium price or quantity. ____ 15. People often clean cabinet doors, but do not regularly clean inside the cabinet. The insides of cabinets aren’t visible and require the removal of contents in order to clean. This is an example of ________ thinking. a. conscientious d. incentive b. deferential e. marginal c. dismal 4  ID: A ____ 16. During the winter months, many elderly people leave their homes in northern New York and travel south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York? a. They would both increase. b. They would both decrease. c. One would increase and one would decrease, but we don’t know which would do what. d. The price would increase and the quantity would decrease. e. The price would decrease and the quantity would increase. ____ 17. Which of the following scenarios best describes the change in the equilibrium shown in the accompanying graph? a. firms entering the market d. buyers leaving the market b. firms leaving the market e. an input cost decreasing c. buyers entering the market ____ 18. An economist’s use of experiments and real-world data to test a theory is an example of a. the scientific method in economics. d. normative analysis. b. macroeconomics. e. comparative advantage. c. economic growth. ____ 19. The ________ system encourages innovation by creating a powerful financial reward for creativity. a. direct incentive d. trade-off b. indirect incentive e. tax credit c. patent ____ 20. In economics, choices are necessary because of the presence of a. luxuries. d. scarcity. b. inefficiency. e. incentives. c. needs. 5  ID: A ____ 21. An index of the average prices of all final goods and services in GDP is called a. the inflation rate. b. the GDP deflator. c. the interest rate. d. the consumer price index. e. nominal GDP. ____ 22. If real gross domestic product (GDP) grew by 2 percent and the inflation rate was 2 percent, then nominal GDP grew by a. 2 percent. d. 1 percent. b. 4 percent. e. 3 percent. c. 0 percent. ____ 23. Actions and activities are discouraged with a. positive incentives. d. indirect incentives. b. negative incentives. e. unintended consequences. c. direct incentives. Refer to the figure to answer the following three questions. ____ 24. We can see that the opportunity cost of moving from point D to point E is different from the opportunity cost of moving from point E to point C because a. growing rice requires more water than growing wheat for pasta does. b. the slope of the production possibilities frontier (PPF) is different in each of the two segments. c. they are all efficient points. d. they are all attainable points. e. the opportunity cost is constant along the PPF. 6  ID: A ____ 25. Which of the following represents a point that is unattainable with current resources and technology? a. point B d. point E b. point C e. point F c. point D ____ 26. Which of the following represents an inefficient point? a. point A d. point D b. point B e. point F c. point C ____ 27. The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called a. business cycles. d. economic peaks. b. economic contractions. e. economic troughs. c. economic expansions. ____ 28. Variables that are NOT accounted for in a model are called a. endogenous factors. d. positive statements. b. exogenous factors. e. the scientific method. c. normative statements. ____ 29. Real gross domestic product (GDP) increases over time if a. prices increase over time. d. nominal GDP increases. b. quantities increase over time. e. nominal GDP decreases. c. future prices are constant. ____ 30. If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone, a substitute good for an iPhone, decreased? a. They would both increase. b. They would both decrease. c. One would increase and one would decrease, but we don’t know which would do what. d. The price would increase and the quantity would decrease. e. The price would decrease and the quantity would increase. 7  ID: A Refer to the figure to answer the following question. ____ 31. According to the accompanying supply and demand figure, if the price is $10, there is a ________ of ________ units. a. shortage; 15 d. surplus; 30 b. surplus; 15 e. surplus; 22 c. shortage; 30 ____ 32. When firms in a market expect the price of their products to rise in the future, ceteris paribus, today’s supply curve of their goods ________, causing the equilibrium price to ________. a. decreases; rise b. decreases; fall c. increases; fall d. increases; rise e. increases; rise and the equilibrium quantity to fall ____ 33. On a production possibilities frontier (PPF) that shows the trade-off between consumer goods and capital goods given a fixed amount of labor, unemployment is illustrated by a. movement from a point outside the frontier to a point on the frontier. b. a point outside the frontier. c. a point inside the frontier. d. movement from a point on the frontier to another point on the frontier. e. a point on the frontier. 8  ID: A Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following question. Assume that the base year is 2015. Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity A $2 250 $3 200 B $3 300 $2 400 C $4 400 $5 500 ____ 34. What was the inflation rate between the two years? a. 1 percent d. 3.8 percent b. 3.2 percent e. 8.3 percent c. 2 percent ____ 35. When the price is ________ the equilibrium price, we would expect there to be a ________, causing the market to put ________ pressure on the price until it went back to the equilibrium price. a. above; surplus; upward d. below; shortage; downward b. above; shortage; downward e. above; surplus; downward c. below; surplus; upward ____ 36. Ceteris paribus means a. in sets of two. b. constant opportunity cost. c. other things being equal. d. buyer beware. e. there is no reason to argue about people’s tastes. ____ 37. Isaac has four potential jobs to consider, each with different salary offers. From highest to lowest, the salaries are: $47,500, $46,000, $45,000, and $42,000. Based on the information provided, if Isaac accepts the highest-paying position, what is his opportunity cost of this position? a. $46,000 d. $133,000 b. $42,000 e. $1,500 c. $47,500 ____ 38. Bea bakes pastries well, and Lucian raises great herbs. If Lucian trades parsley with Bea in exchange for cupcakes, and both actions are taken voluntarily, then a. both Bea and Lucian are made better off by trade. b. neither Bea nor Lucian are made better off by trade. c. only Bea is made better off by trade. d. only Lucian is made better off by trade. e. either Bea or Lucian is made better off by trade, but not both. ____ 39. Imperfect markets a. do not exist in democracies. b. always result in supply exceeding demand. c. always result in demand exceeding supply. d. occur when the buyer or seller has an influence on the price. e. can’t occur if there are many buyers. 9  ID: A ____ 40. Decisions by individuals and firms are the domain of a. microeconomics. d. median economics. b. macroeconomics. e. choice economics. c. consumption economics. 10  ID: A ECON 201 Exam 1 - Winter 2020 - Elias - 40 Points Total Answer Section MULTIPLE CHOICE 1. ANS: A PTS: 1 DIF: Moderate REF: Trade OBJ: 1.2 What are five foundations of economics? MSC: Applying 2. ANS: C PTS: 1 DIF: Moderate REF: The Supply Curve OBJ: 3.3 What determines supply? MSC: Analyzing 3. ANS: A PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 4. ANS: A PTS: 1 DIF: Easy REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 5. ANS: A PTS: 1 DIF: Easy REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 6. ANS: A PTS: 1 DIF: Moderate REF: Incentives OBJ: 1.2 What are five foundations of economics? MSC: Applying 7. ANS: C PTS: 1 DIF: Moderate REF: Opportunity Cost OBJ: 1.2 What are five foundations of economics? MSC: Applying 8. ANS: D PTS: 1 DIF: Easy REF: Positive and Normative Analysis OBJ: 2.1 How do economists study the economy? MSC: Applying 9. ANS: A PTS: 1 DIF: Moderate REF: The Production Possibilities Frontier and Opportunity Cost OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 10. ANS: C PTS: 1 DIF: Moderate REF: The Production Possibilities Frontier and Opportunity Cost OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 11. ANS: C PTS: 1 DIF: Moderate REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Analyzing 12. ANS: C PTS: 1 DIF: Moderate REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Analyzing 13. ANS: E PTS: 1 DIF: Easy REF: What Are Some Shortcomings of GDP Data? OBJ: 6.4 What are some shortcomings of GDP data? MSC: Remembering 14. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Applying 15. ANS: E PTS: 1 DIF: Easy REF: Marginal Thinking OBJ: 1.2 What are five foundations of economics? MSC: Understanding 16. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 1  ID: A 17. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 18. ANS: A PTS: 1 DIF: Easy REF: The Scientific Method in Economics OBJ: 2.1 How do economists study the economy? MSC: Understanding 19. ANS: C PTS: 1 DIF: Easy REF: Incentives OBJ: 1.2 What are five foundations of economics? MSC: Remembering 20. ANS: D PTS: 1 DIF: Easy REF: What Is Economics? OBJ: 1.1 What is economics? MSC: Understanding 21. ANS: B PTS: 1 DIF: Easy REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Remembering 22. ANS: B PTS: 1 DIF: Easy REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 23. ANS: B PTS: 1 DIF: Easy REF: Incentives OBJ: 1.2 What are five foundations of economics? MSC: Remembering 24. ANS: B PTS: 1 DIF: Difficult REF: The Production Possibilities Frontier and Opportunity Cost OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 25. ANS: E PTS: 1 DIF: Easy REF: What Is a Production Possibilities Frontier? OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 26. ANS: A PTS: 1 DIF: Easy REF: What Is a Production Possibilities Frontier? OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 27. ANS: A PTS: 1 DIF: Easy REF: Three Uses of GDP Data OBJ: 6.2 What does GDP tell us about the economy? MSC: Understanding 28. ANS: B PTS: 1 DIF: Moderate REF: Economic Models OBJ: 2.1 How do economists study the economy? MSC: Understanding 29. ANS: B PTS: 1 DIF: Moderate REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Analyzing 30. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 31. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 32. ANS: A PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 33. ANS: C PTS: 1 DIF: Moderate REF: What Is a Production Possibilities Frontier? OBJ: 2.2 What is a production possibilities frontier? MSC: Understanding 34. ANS: E PTS: 1 DIF: Difficult REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 2  ID: A 35. ANS: E PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Understanding 36. ANS: C PTS: 1 DIF: Easy REF: Economic Models OBJ: 2.1 How do economists study the economy? MSC: Remembering 37. ANS: A PTS: 1 DIF: Moderate REF: Opportunity Cost OBJ: 1.2 What are five foundations of economics? MSC: Applying 38. ANS: A PTS: 1 DIF: Moderate REF: Trade OBJ: 1.2 What are five foundations of economics? MSC: Understanding 39. ANS: D PTS: 1 DIF: Easy REF: Imperfect Markets OBJ: 3.1 What are the fundamentals of markets? MSC: Remembering 40. ANS: A PTS: 1 DIF: Easy REF: Microeconomics and Macroeconomics OBJ: 1.1 What is economics? MSC: Applying 3  ID: B ECON 201 Exam 1 - Winter 2020 - Elias - 40 Points Total Multiple Choice - 1 point each Identify the choice that best completes the statement or answers the question. ____ 1. More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________ advantage in growing oranges. a. public d. producer b. revenue e. planning c. comparative ____ 2. Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n) a. increase in supply from Q2 to Q1. b. increase in quantity supplied from Q2 to Q1. c. shift of the supply curve. d. decrease in supply from Q1 to Q2. e. decrease in quantity supplied from Q1 to Q2. ____ 3. What would happen to the equilibrium price and quantity of shirts if the price of cotton, an input into the production of shirts, decreases and all else is held constant? a. The price falls and the quantity rises. b. The price rises and the quantity falls. c. The price falls and the quantity remains constant. d. The price rises and the quantity rises. e. The price falls and the quantity falls. 1  ID: B Consider the following data that identifies real gross domestic product (GDP) in comparison to the long-run trend of real GDP to answer the following two questions: Real GDP Long-Run Trend of Real GDP Quarter (billions of dollars) (billions of dollars) 1 4,000 4,000 2 4,160 4,120 3 4,326 4,244 4 4,413 4,371 5 4,501 4,502 6 4,591 4,637 7 4,499 4,776 8 4,409 4,919 9 4,673 5,067 10 4,954 5,219 11 5,252 5,376 12 5,376 5,537 ____ 4. Between quarter 2 and quarter 3, real gross domestic product (GDP) grew by what percentage? Round your answer to the nearest whole number. a. 1 percent d. −2 percent b. 2 percent e. 3 percent c. 4 percent ____ 5. Between quarter 7 and quarter 8, real gross domestic product (GDP) grew by what percentage? Round your answer to the nearest whole number. a. 1 percent d. 6 percent b. 2 percent e. 3 percent c. −2 percent ____ 6. If Alexander doesn’t like changing the oil in his car and pays his father to do it for him, he has provided his father with a(n) ________ incentive. a. unintended d. indirect b. neutral e. complementary c. direct ____ 7. The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance? a. Prices have increased over time, and the opportunity cost of carrying around a large number of coins would be low. b. People who receive a dollar coin are more likely to collect than spend the money, and the economy won’t grow as quickly because less is being spent. c. The opportunity cost of carrying around large quantities of coins is too large. d. More people are using credit and debit cards, so people are not accustomed to using change. e. Retailers find it too expensive to deal with coins and would have to raise their prices if consumers used coins more. 2  ID: B ____ 8. Which of the following is a positive statement? a. Winters in Arkansas are too cold. b. Everyone ought to have a life insurance policy. c. On average, people save 15 percent when they switch to GEICO. d. Everyone should work in a bank to understand the true value of money. e. Harvard University is the top education institution in the country. The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the following two questions. ____ 9. What is DiNozzo’s opportunity cost of making a wooden boat? a. 30 solved crimes d. 10 solved crimes b. 1/20 of a boat e. 20 solved crimes c. 1/10 of a boat 3  ID: B ____ 10. What is Gibbs’s opportunity cost of making a wooden boat? a. 1/20 of a boat d. 1/10 of a boat b. 30 solved crimes e. 20 solved crimes c. 10 solved crimes Consider the following data, where gross domestic product (GDP) values are measured in millions of dollars, to answer the following two questions: Year Nominal GDP Real GDP GDP Deflator 2009 ________ $500 100 2010 $551.2 ________ 106 2011 $600.6 $546 ________ 2012 ________ $600.6 120 ____ 11. What is the value of the gross domestic product (GDP) deflator in 2011? Round to the nearest decimal. a. 110.0 d. 154.6 b. 112.0 e. 54.6 c. 90.9 ____ 12. What is the value of real gross domestic product (GDP) in 2010? Round to the nearest second decimal. a. $584.27 million d. $58,427.20 million b. $520.00 million e. $445.20 million c. $657.20 million ____ 13. Gross domestic product (GDP) is an important indicator because it is used as a measure of all of the following EXCEPT a. business-cycle fluctuations. d. environmental quality. b. average living standards. e. economic growth. c. average income levels. ____ 14. A new car is typically considered to be a normal good. What would happen to the equilibrium price and quantity of new cars if there is a recession where many people lose their jobs, causing incomes to decrease, ceteris paribus? a. The equilibrium price would fall and the equilibrium quantity would rise as demand shifts to the right. b. There would be no change to the equilibrium price or quantity. c. The equilibrium price and quantity would both fall as demand shifts to the left. d. The equilibrium price would rise and the equilibrium price would fall as demand shifts to the left. e. The equilibrium price and quantity would both rise as demand shifts to the right. ____ 15. People often clean cabinet doors, but do not regularly clean inside the cabinet. The insides of cabinets aren’t visible and require the removal of contents in order to clean. This is an example of ________ thinking. a. dismal d. deferential b. conscientious e. marginal c. incentive 4  ID: B ____ 16. During the winter months, many elderly people leave their homes in northern New York and travel south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York? a. They would both decrease. b. One would increase and one would decrease, but we don’t know which would do what. c. The price would increase and the quantity would decrease. d. They would both increase. e. The price would decrease and the quantity would increase. ____ 17. Which of the following scenarios best describes the change in the equilibrium shown in the accompanying graph? a. an input cost decreasing d. buyers entering the market b. firms entering the market e. firms leaving the market c. buyers leaving the market ____ 18. An economist’s use of experiments and real-world data to test a theory is an example of a. comparative advantage. d. macroeconomics. b. normative analysis. e. the scientific method in economics. c. economic growth. ____ 19. The ________ system encourages innovation by creating a powerful financial reward for creativity. a. direct incentive d. indirect incentive b. tax credit e. trade-off c. patent ____ 20. In economics, choices are necessary because of the presence of a. incentives. d. inefficiency. b. needs. e. scarcity. c. luxuries. 5  ID: B ____ 21. An index of the average prices of all final goods and services in GDP is called a. nominal GDP. b. the inflation rate. c. the consumer price index. d. the GDP deflator. e. the interest rate. ____ 22. If real gross domestic product (GDP) grew by 2 percent and the inflation rate was 2 percent, then nominal GDP grew by a. 4 percent. d. 1 percent. b. 3 percent. e. 2 percent. c. 0 percent. ____ 23. Actions and activities are discouraged with a. indirect incentives. d. positive incentives. b. direct incentives. e. unintended consequences. c. negative incentives. Refer to the figure to answer the following three questions. ____ 24. We can see that the opportunity cost of moving from point D to point E is different from the opportunity cost of moving from point E to point C because a. they are all efficient points. b. they are all attainable points. c. growing rice requires more water than growing wheat for pasta does. d. the opportunity cost is constant along the PPF. e. the slope of the production possibilities frontier (PPF) is different in each of the two segments. 6  ID: B ____ 25. Which of the following represents a point that is unattainable with current resources and technology? a. point F d. point C b. point B e. point E c. point D ____ 26. Which of the following represents an inefficient point? a. point A d. point C b. point B e. point F c. point D ____ 27. The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called a. business cycles. d. economic expansions. b. economic troughs. e. economic contractions. c. economic peaks. ____ 28. Variables that are NOT accounted for in a model are called a. the scientific method. d. positive statements. b. endogenous factors. e. exogenous factors. c. normative statements. ____ 29. Real gross domestic product (GDP) increases over time if a. quantities increase over time. d. future prices are constant. b. nominal GDP decreases. e. prices increase over time. c. nominal GDP increases. ____ 30. If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone, a substitute good for an iPhone, decreased? a. The price would decrease and the quantity would increase. b. They would both decrease. c. They would both increase. d. One would increase and one would decrease, but we don’t know which would do what. e. The price would increase and the quantity would decrease. 7  ID: B Refer to the figure to answer the following question. ____ 31. According to the accompanying supply and demand figure, if the price is $10, there is a ________ of ________ units. a. surplus; 15 d. surplus; 30 b. shortage; 30 e. surplus; 22 c. shortage; 15 ____ 32. When firms in a market expect the price of their products to rise in the future, ceteris paribus, today’s supply curve of their goods ________, causing the equilibrium price to ________. a. decreases; fall b. decreases; rise c. increases; rise and the equilibrium quantity to fall d. increases; rise e. increases; fall ____ 33. On a production possibilities frontier (PPF) that shows the trade-off between consumer goods and capital goods given a fixed amount of labor, unemployment is illustrated by a. movement from a point outside the frontier to a point on the frontier. b. movement from a point on the frontier to another point on the frontier. c. a point on the frontier. d. a point inside the frontier. e. a point outside the frontier. 8  ID: B Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following question. Assume that the base year is 2015. Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity A $2 250 $3 200 B $3 300 $2 400 C $4 400 $5 500 ____ 34. What was the inflation rate between the two years? a. 2 percent d. 1 percent b. 3.2 percent e. 3.8 percent c. 8.3 percent ____ 35. When the price is ________ the equilibrium price, we would expect there to be a ________, causing the market to put ________ pressure on the price until it went back to the equilibrium price. a. above; surplus; upward d. above; surplus; downward b. below; surplus; upward e. below; shortage; downward c. above; shortage; downward ____ 36. Ceteris paribus means a. constant opportunity cost. b. buyer beware. c. in sets of two. d. there is no reason to argue about people’s tastes. e. other things being equal. ____ 37. Isaac has four potential jobs to consider, each with different salary offers. From highest to lowest, the salaries are: $47,500, $46,000, $45,000, and $42,000. Based on the information provided, if Isaac accepts the highest-paying position, what is his opportunity cost of this position? a. $47,500 d. $133,000 b. $42,000 e. $1,500 c. $46,000 ____ 38. Bea bakes pastries well, and Lucian raises great herbs. If Lucian trades parsley with Bea in exchange for cupcakes, and both actions are taken voluntarily, then a. neither Bea nor Lucian are made better off by trade. b. only Bea is made better off by trade. c. both Bea and Lucian are made better off by trade. d. only Lucian is made better off by trade. e. either Bea or Lucian is made better off by trade, but not both. ____ 39. Imperfect markets a. always result in supply exceeding demand. b. do not exist in democracies. c. can’t occur if there are many buyers. d. occur when the buyer or seller has an influence on the price. e. always result in demand exceeding supply. 9  ID: B ____ 40. Decisions by individuals and firms are the domain of a. microeconomics. d. consumption economics. b. choice economics. e. median economics. c. macroeconomics. 10  ID: B ECON 201 Exam 1 - Winter 2020 - Elias - 40 Points Total Answer Section MULTIPLE CHOICE 1. ANS: C PTS: 1 DIF: Moderate REF: Trade OBJ: 1.2 What are five foundations of economics? MSC: Applying 2. ANS: E PTS: 1 DIF: Moderate REF: The Supply Curve OBJ: 3.3 What determines supply? MSC: Analyzing 3. ANS: A PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 4. ANS: C PTS: 1 DIF: Easy REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 5. ANS: C PTS: 1 DIF: Easy REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 6. ANS: C PTS: 1 DIF: Moderate REF: Incentives OBJ: 1.2 What are five foundations of economics? MSC: Applying 7. ANS: C PTS: 1 DIF: Moderate REF: Opportunity Cost OBJ: 1.2 What are five foundations of economics? MSC: Applying 8. ANS: C PTS: 1 DIF: Easy REF: Positive and Normative Analysis OBJ: 2.1 How do economists study the economy? MSC: Applying 9. ANS: E PTS: 1 DIF: Moderate REF: The Production Possibilities Frontier and Opportunity Cost OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 10. ANS: C PTS: 1 DIF: Moderate REF: The Production Possibilities Frontier and Opportunity Cost OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 11. ANS: A PTS: 1 DIF: Moderate REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Analyzing 12. ANS: B PTS: 1 DIF: Moderate REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Analyzing 13. ANS: D PTS: 1 DIF: Easy REF: What Are Some Shortcomings of GDP Data? OBJ: 6.4 What are some shortcomings of GDP data? MSC: Remembering 14. ANS: C PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Applying 15. ANS: E PTS: 1 DIF: Easy REF: Marginal Thinking OBJ: 1.2 What are five foundations of economics? MSC: Understanding 16. ANS: A PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 1  ID: B 17. ANS: E PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 18. ANS: E PTS: 1 DIF: Easy REF: The Scientific Method in Economics OBJ: 2.1 How do economists study the economy? MSC: Understanding 19. ANS: C PTS: 1 DIF: Easy REF: Incentives OBJ: 1.2 What are five foundations of economics? MSC: Remembering 20. ANS: E PTS: 1 DIF: Easy REF: What Is Economics? OBJ: 1.1 What is economics? MSC: Understanding 21. ANS: D PTS: 1 DIF: Easy REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Remembering 22. ANS: A PTS: 1 DIF: Easy REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 23. ANS: C PTS: 1 DIF: Easy REF: Incentives OBJ: 1.2 What are five foundations of economics? MSC: Remembering 24. ANS: E PTS: 1 DIF: Difficult REF: The Production Possibilities Frontier and Opportunity Cost OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 25. ANS: A PTS: 1 DIF: Easy REF: What Is a Production Possibilities Frontier? OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 26. ANS: A PTS: 1 DIF: Easy REF: What Is a Production Possibilities Frontier? OBJ: 2.2 What is a production possibilities frontier? MSC: Analyzing 27. ANS: A PTS: 1 DIF: Easy REF: Three Uses of GDP Data OBJ: 6.2 What does GDP tell us about the economy? MSC: Understanding 28. ANS: E PTS: 1 DIF: Moderate REF: Economic Models OBJ: 2.1 How do economists study the economy? MSC: Understanding 29. ANS: A PTS: 1 DIF: Moderate REF: Real GDP: Adjusting GDP for Price Changes OBJ: 6.3 How is GDP computed? MSC: Analyzing 30. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 31. ANS: A PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 32. ANS: B PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Analyzing 33. ANS: D PTS: 1 DIF: Moderate REF: What Is a Production Possibilities Frontier? OBJ: 2.2 What is a production possibilities frontier? MSC: Understanding 34. ANS: C PTS: 1 DIF: Difficult REF: Growth Rates OBJ: 6.3 How is GDP computed? MSC: Analyzing 2  ID: B 35. ANS: D PTS: 1 DIF: Moderate REF: Supply, Demand, and Equilibrium OBJ: 3.4 How do supply and demand interact to create equilibrium MSC: Understanding 36. ANS: E PTS: 1 DIF: Easy REF: Economic Models OBJ: 2.1 How do economists study the economy? MSC: Remembering 37. ANS: C PTS: 1 DIF: Moderate REF: Opportunity Cost OBJ: 1.2 What are five foundations of economics? MSC: Applying 38. ANS: C PTS: 1 DIF: Moderate REF: Trade OBJ: 1.2 What are five foundations of economics? MSC: Understanding 39. ANS: D PTS: 1 DIF: Easy REF: Imperfect Markets OBJ: 3.1 What are the fundamentals of markets? MSC: Remembering 40. ANS: A PTS: 1 DIF: Easy REF: Microeconomics and Macroeconomics OBJ: 1.1 What is economics? MSC: Applying 3