ECO 212 Final Exam 1

1) According to economics, what causes us to have to make choices?
A. unlimited resources.
B. unemployment.
C. scarcity.
D. greed.

2) Why do consumers have to make tradeoffs in deciding what to consume?
A. there are not enough of all goods produced.
B. the prices of goods vary.
C. not all goods give them the same amount of satisfaction.
D. they are limited by a budget constraint. 
3) What is the term in economics by which a group of buyers and sellers of a product come together to trade?
A. trade-off
B. cooperative
C. collective
D. market 
4) Which of the following is not a critical function of the government in facilitating the operation of a market economy?
A. enforcing contracts.
B. enforcing property rights.
C. protecting private property. D. ensuring an equal distribution of income to all citizens. 
5) Which of the following statements describes the actions of producers in the circular flow model?
A. spend earnings from resource sales on goods and services in the product market.
B. hire resources sold by households in the factor market. C. sell goods and services in the input market. D. and households spend earnings from resource sales on goods and services in the factor market.

6) Which of the following is an example of spending on goods and services in the circular flow model?
A. Timmy purchases a new examination table for use in his veterinary clinic.
B. Celeste buys fresh herbs at the farmers' market to use in her restaurant. C. Belinda purchases a new computer for her tax-preparation business. D. Javier buys 800 square feet of wood flooring for his vacation home.    

7) If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is
A. relatively elastic.
B. relatively inelastic.
C. unit-elastic.
D. perfectly elastic.

8) If demand is inelastic, the absolute value of the price elasticity of demand is
A. greater than the absolute value of the slope of the demand curve.
B. greater than one.
C. one.
D. less than one.

9) Economists in general
A. Incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.
B. Do not try to explain people's tastes, but they do try to explain what happens when tastes change.
C. Believe that they must be able to explain people's tastes in order to explain what happens when tastes change.
D. Do not believe that people's tastes determine demand and therefore they ignore the subject of tastes.

10) Which of the following is evidence of a surplus of bananas?
A. The quantity demanded of bananas is greater than the quantity supplied.
B. Firms raise the price of bananas.
C. The price of bananas is lowered in order to increase sales. D. The equilibrium price of bananas rises due to an increase in demand.

11) At a product's equilibrium price
A. the product's demand curve crosses the product's supply curve.
B. the product's demand curve is the same as the product's supply curve.
C. the quantity of the product demanded is greater than the quantity of the product supplied.
D. the quantity of the product demanded is less than the quantity of the product supplied.

12) If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
A. quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
B. the quantity demanded exceeds the quantity supplied. The market will then be in equilibrium.
C. quantity demanded equals quantity supplied. The equilibrium price will then be lower than the market price.
D. all consumers will be able to afford the product. 
13) Marginal revenue product for a perfectly competitive seller is equal to
A. the marginal cost of production.
B. the output price multiplied by the total product of labor.
C. the output price multiplied by the number workers hired.
D. the change in total revenue that results from hiring another worker. 
14) At low wages, the labor supply curve for most people slopes upward because
A. the demand for labor is perfectly elastic at low wages.
B. as wages increase the opportunity cost of leisure increases. C. the supply of labor is perfectly inelastic at low wages. D. as wages increase income also increases unless hours worked decrease.

15) Firms use information on labor's marginal revenue product to determine
A. how much labor services to supply at each wage rate.
B. how many workers to hire at each wage rate.
C. how much to produce at each output price.
D. how much marginal product to produce at each wage rate. 
16) How will an increase in population affect the labor market?
A. It will increase the opportunity cost of leisure.
B. It will cause a decrease in the quantity of labor demanded.
C. It will shift the market supply curve.
D. It will increase the supply of jobs.

17) A firm's demand for labor curve is also called its
A. marginal benefit of labor curve.
B. marginal factor cost of labor curve.
C. marginal revenue product of labor curve.
D. marginal valuation curve.

18) An individual's labor supply curve shows
A. the relationship between the quantity of hours worked and total income earned by that individual.
B. the relationship between wages and the quantity of labor that she is willing to supply.
C. the maximum wage rates offered to that individual by various potential employers.
D. the relationship between wages and the quantity of labor that a firm is willing to employ.

19) Which of the following is an example of a quasi-public good?
A. crime prevention
B. stock of knowledge in the public domain
C. organic apples
D. cable television

20) Private costs
A. are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.
B. are borne by producers of a good while social costs are borne by society at large.
C. are borne by consumers of a good while social costs are borne by government.
D. are borne by producers of a good while social costs are borne by government.

21) Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?
A. common resources
B. quasi-public goods
C. private goods
D. public goods

22) A monopoly is a seller of a product
A. without a well-defined demand curve.
B. with a perfectly inelastic demand.
C. without a close substitute.
D. with many substitutes. 
23) One reason why the coffeehouse market is competitive is that
A. consumption takes place in public.
B. barriers to entry are low.
C. it is trendy and therefore is likely to have a customer following.
D. demand for specialty coffee is very high. 
24) A characteristic found only in oligopolies is
A. break even level of profits. B. interdependence of firms. C. products that are slightly different.  D. independence of firms. 
25) Gross domestic product understates the total production of final goods and services because of the omission of
A. the underground economy.
B. intermediate goods.
C. exports.
D. inflation.

26) Which of the following would be directly counted in GDP in 2010?
A. kitchen cabinets purchased from Home Depot in 2010 to be installed in a house built in 1997
B. kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a brand new country-style home
C. kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a farm house built in 1950
D. none of the these 
27) Gross domestic product is calculated by summing up
A. the total quantity of goods and services in the economy. B. the total quantity of goods and services produced in the economy during a period of time.
C. the total market value of final goods and services produced in the economy during a period of time.
D. the total market value of goods and services in the economy. 
28) Which of the following would be classified as fiscal policy?
A. The federal government passes tax cuts to encourage firms to reduce air pollution.
B. The Federal Reserve cuts interest rates to stimulate the economy.
C. The federal government cuts taxes to stimulate the economy.
D. A state government cuts taxes to help the economy of the state.

29) Which of the following does not reflect the state of the tax system in the United States today?
A. The tax laws have become increasingly simplified as private citizens have demanded these changes.
B. The tax laws are used to achieve social policy goals such as energy conservation.
C. Many taxpayers use software or professional tax preparation companies to file their income taxes.
D. The tax laws are used to achieve macroeconomic goals of high employment and economic growth.

30) Which of the following is an objective of fiscal policy?
A. energy independence from Middle East oil
B. discovering a cure for AIDs
C. high rates of economic growth
D. health care coverage for all Americans 
31) In economics, money is defined as
A. the total value of one's assets in cur