ECO 212 FINAL EXAM (SET-02) - 31323

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1) Consider a good whose consumption takes place publicly. On what factors would your decision to buy that good depend? 

A. only on how many other people buy the good, and not on the good itself.

B. both on the characteristics of the product and on how many other people are buying it. 

C. only on the price of the good, and not on other factors, such as other people’s actions. 

D. only on the characteristics of the good itself and not on other people/s actions. 

 

2) Economics does not study correct or incorrect behaviors, but rather it assumes that economic agents make the best decisions given their knowledge of the costs and benefits. What term best describes this behavior? 

A. emotionally

B. rationally

C. equitably

D. selfishly

 

3) According to economics, what causes us to have to make choices? 

A. greed.

B. scarcity.

C. unemployment. 

D. unlimited resources.

 

4) Which of the following statements describes the actions of producers in the circular flow model? 

A. hire resources sold by households in the factor market. 

B. and households spend earnings from resource sales on goods and services in the factor market.

C. sell goods and services in the input market.

D. spend earnings from resource sales on goods and services in the product market.

 

5) Which of the following countries is not close to the free market benchmark? 

A. Germany.

B. North Korea.

C. Canada.

D. Singapore.

 

6) Which of the following is an example of spending on goods and services in the circular flow model? 

A. Celeste buys fresh herbs at the farmers' market to use in her restaurant.

B. Javier buys 800 square feet of wood flooring for his vacation home.

C. Belinda purchases a new computer for her tax-preparation business.

D. Timmy purchases a new examination table for use in his veterinary clinic.

 

7) Economists in general 

A. Do not believe that people's tastes determine demand and therefore they ignore the subject of tastes.

B. Believe that they must be able to explain people's tastes in order to explain what happens when tastes change.

C. Do not try to explain people's tastes, but they do try to explain what happens when tastes change.

D. Incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.

 

8) A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand. 

A. vertical; downward sloping

B. upward sloping; horizontal

C. horizontal; downward sloping

D. downward sloping; vertical

 

9) If demand is inelastic, the absolute value of the price elasticity of demand is 

A. greater than one.

B. greater than the absolute value of the slope of the demand curve.

C. less than one.

D. one.

 

10) At a product's equilibrium price 

A. the quantity of the product demanded is less than the quantity of the product supplied.

B. the product's demand curve crosses the product's supply curve.

C. the quantity of the product demanded is greater than the quantity of the product supplied.

D. the product's demand curve is the same as the product's supply curve.

 

11) A decrease in the price of GPS systems will result in 

A. a decrease in the demand for GPS systems.

B. an increase in the supply of GPS systems.

C. a larger quantity of GPS systems supplied.

D. a smaller quantity of GPS systems supplied.

12) Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this? 

A. There is a decrease in the quantity of pool maintenance services supplied.

B. There is a decrease in the supply of pool maintenance services.

C. There is a decrease in the demand for pool maintenance services.

D. There is an increase in the supply of pool maintenance services.

 

13) Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is 

A. P × MP > W.

B. P × W > MP.

C. P × MP < W.

D. P × MP = W.

 

14) Firms use information on labor's marginal revenue product to determine 

A. how much marginal product to produce at each wage rate.

B. how much labor services to supply at each wage rate.

C. how many workers to hire at each wage rate.

D. how much to produce at each output price.

 

15) Which of the following best explains why unemployment rates are higher in the European economies than in the United States? 

A. Workers in Europe are less productive than workers in the United States.

B. European industries pay a lower wage rate than industries in the United States.

C. Unemployment benefits are more generous in Europe than in the United States.

D. More Europeans go to school fulltime and are therefore not able to participate in the labor market.

 

16) The labor supply for an industry would decrease if 

A. the government welcomes foreign workers into the country.

B. a greater percentage of women want to work outside the home.

C. the percentage of the population from age 16 to 65 decreases.

D. the wage rate falls.

 

17) Which of the following will not cause the labor demand curve to shift to the right? 

A. an increase in human capital in the labor force 

B. an increase in the market wage rate

C. a technological improvement that increases labor productivity 

D. an increase in the price of the firm's product

 

18) A decrease in the wage rate causes 

A. a leftward shift of the firm's labor demand curve. 

B. a decrease in labor's productivity.

C. a rightward shift of the firm's labor demand curve. 

D. an increase in the quantity of labor demanded.

 

19) Which of the following is an example of a common resource? 

A. the stock of knowledge in the public domain

B. taxicab services

C. rabbit fur

D. the Sumatran tiger population in the world

 

20) Which of the following is an example of a quasi-public good? 

A. stock of knowledge in the public domain

B. crime prevention

C. organic apples

D. cable television

 

21) Which of the following displays these two characteristics: rivalry and nonexcludability? 

A. a quasi-public good

B. a common resource

C. a private good

D. a public good

 

22) The key characteristics of a monopolistically competitive market structure include 

A. barriers to entry are strong.

B. many small (relative to the total market) sellers acting independently.

C. all sellers sell a homogeneous product.

D. sellers have no incentive to advertise their products. 

 

23) A monopoly is a seller of a product 

A. with a perfectly inelastic demand.

B. with many substitutes.

C. without a close substitute.

D. without a well-defined demand curve.

 

24) One reason why the coffeehouse market is competitive is that 

A. barriers to entry are low.

B. demand for specialty coffee is very high.

C. it is trendy and therefore is likely to have a customer following.

D. consumption takes place in public. 

 

25) Gross domestic product is calculated by summing up 

A. the total market value of goods and services in the economy.

B. the total quantity of goods and services in the economy.

C. the total quantity of goods and services produced in the economy during a period of time.

D. the total market value of final goods and services produced in the economy during a period of time.

 

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) The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion. You should conclude 

A. a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines.

B. a typical person in Vietnam is 10 times as well off as the typical person in the Philippines.

C. a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines.

D. it is not possible to make a good comparison of the economic well being of a typical individual in the 2 countries without additional information.

 

28) Before the Great Depression of the 1930s, the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________. 

A. federal level; state and local levels

B. state and local levels; federal level

C. local level; federal level

D. federal level; state level

 

29) Which of the following would be classified as fiscal policy? 

A. A state government cuts taxes to help the economy of the state.

B. The federal government passes tax cuts to encourage firms to reduce air pollution.

C. The Federal Reserve cuts interest rates to stimulate the economy.

D. The federal government cuts taxes to stimulate the economy.

 

30) Fiscal policy refers to changes in 

A. federal taxes and purchases that are intended to fund the war on terrorism.

B. federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

C. state and local taxes and purchases that are intended to achieve macroeconomic policy objectives.

D. the money supply and interest rates that are intended to achieve macroeconomic policy objectives.

 

31) Which of the following assets is most liquid? 

A. savings account

B. bond

C. money

D. stock

 

32) In economics, money is defined as 

A. the total amount of salary, interest, and rental income earned during a year.

B. the total value of one's assets minus the total value of one's debts, in current prices.

C. the total value of one's assets in current prices. 

D. any asset people generally accept in exchange for goods and services.

 

33) Dollar bills in the modern economy serve as money because 

A. they have value as a commodity independent of their use as money.

B. they can be redeemed for gold by the central bank.

C. they are backed by the gold stored in Fort Knox.

D. people have confidence that others will accept them as money.

34) In an economy with ________, there are more prices than in an economy with ________. 

A. fiat money; commodity money

B. money; barter

C. barter; money

D. fiat money; barter

 

35) The M2 measure of the money supply equals 

A. M1 plus savings account balances plus small-denomination time deposits.

B. savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.

C. savings account balances plus small-denomination time deposits plus traveler's checks.

D. M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.

 

36) The M1 measure of the money supply equals 

A. currency plus checking account balances plus traveler's checks.

B. currency plus checking account balances.

C. paper money plus coins in circulation.

D. currency plus checking account balances plus traveler's checks plus savings account balances.

 

37) To increase the money supply, the Federal Reserve could 

A. raise the required reserve ratio.

B. conduct an open market purchase of Treasury securities.

C. decrease income taxes.

D. raise the discount rate.

E. lower transfer payments.

 

38) If the central bank can act as a lender of last resort during a banking panic, banks can 

A. borrow more and more money from the central bank, and this will lower its reserves and decrease the public's faith in the banking system.

B. satisfy customer withdrawal needs and eventually restore the public's faith in the banking system.

C. encourage the public to borrow directly from the central bank, and this will worsen the banking panic.

D. call in their loans to their customers and eventually restore the public's faith in the banking system.

 

39) Which of the following determines the amount of money the banking system as a whole can create? 

A. the quantity of bank reserves

B. the quantity of vault cash held by banks

C. the gold reserves held by the Federal Reserve

D. the limit on profits by banks imposed by the U.S. Congress

 

40) Toll Brothers, a residential home builder, did well during the recession in 2001 but did not do so well in 2007 after the housing bubble burst. The reason for this is 

A. the Fed raised interest rates in 2001 but did not believe that cutting the interest rate in 2007 would be enough to revive the housing market.

B. the Fed lowered interest rates in 2001 but did not believe that cutting the interest rate in 2007 would be enough to revive the housing market.

C. the Fed raised interest rates in 2001 but lowered interest rates in 2007 to revive the housing market.

D. the Fed lowered interest rates in 2001 but raised interest rates in 2007 to help fight inflation.

 

41) The Federal Reserve's two main ________ are the money supply and the interest rate. 

A. fiscal policy targets

B. policy tools

C. fiscal tools

D. monetary policy targets

 

42) If the probability of losing your job remains ________, a recession would be a good time to purchase a home because the Fed usually ________ interest rates during this time. 

A. high; lowers

B. high; raises

C. low; raises

D. low; lowers

E. low; does not change

 

43) Table 2-3 

SerenaHaley

Bracelets89

Necklaces1612

 

Refer to Table 2-3. What is Haley's opportunity cost of making a bracelet? 

A. 1 1/3 necklaces

B. 3 bracelets

C. 2 necklaces

D. 3/4 of a bracelet

 

44) Table 2-3 

SerenaHaley

Bracelets89

Necklaces1612

 

Refer to Table 2-3. Which of the following statements is true? 

A. Haley has an absolute advantage in making bracelets and Serena in making necklaces.

B. Serena has an absolute advantage in making both products.

C. Haley has an absolute advantage in making necklaces and Serena in making bracelets.

D. Haley has an absolute advantage in making both products.

 

45) Table 2-3 

SerenaHaley

Bracelets89

Necklaces1612

 

Refer to Table 2-3. Which of the following statements is true? 

A. Haley has a comparative advantage in making bracelets and Serena in making necklaces.

B. Haley has a comparative advantage in making necklaces and Serena in making bracelets.

C. Serena has a comparative advantage in making both products.

D. Haley has a comparative advantage in making both products.

 

46) Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market? 

A. Demand for dollars will decrease, and supply of dollars will increase.

B. Demand for dollars will decrease, and supply of dollars will decrease.

C. Demand for dollars will increase, and supply of dollars will increase.

D. Demand for dollars will increase, and supply of dollars will decrease.

 

47) If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market? 

A. There will be a decrease in the demand for dollars.

B. There will be a decrease in the supply of dollars.

C. The dollar will depreciate.

D. The dollar will appreciate.

 

48) When the market value of the dollar rises relative to other currencies around the world, we say that 

A. the demand for dollars has increased.

B. the supply of dollars has increased.

C. the dollar has depreciated.

D. the dollar has appreciated.

 

49) The gold standard is an example of 

A. a fixed exchange rate system.

B. a flexible exchange rate system.

C. a managed float exchange rate system.

D. a floating exchange rate system.

 

50) Pegging a country's exchange rate to the dollar can be advantageous if 

A. a country wishes to conduct independent monetary policy.

B. imports are not a significant fraction of the goods the country's consumers buy.

C. investors believe the dollar to be more stable than the domestic country's currency.

D. the country does not trade much with the United States.

 

51) If relative purchasing power between the United States and Argentina is 3.22 pesos per dollar, under which circumstances would we say that the dollar is "overvalued"? 

A. if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos per dollar

B. if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos per dollar

C. if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos per dollar

D. if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos per dollar

 

52) China has been accused of deliberately undervaluing its currency, the yuan, in order to 

A. prevent deflation.

B. increase its exports.

C. increase its imports.

D. maintain purchasing power parity.

 

53) If interest rates in the United States rise, 

A. the value of the dollar will fall as foreign investors increase their holdings of U.S. investments.

B. the value of the dollar will fall as foreign investors sell their U.S. investments.

C. the value of the dollar will rise as the foreign investors increase their holdings of U.S. investments.

D. the value of the dollar will rise as foreign investors sell their U.S. investments.

 

54) Shares of stock and long-term debt, including corporate and government bonds and bank loans, are bought and sold on 

A. foreign exchange markets.

B. the stock market.

C. capital markets.

D. commodity markets.

 

 

 

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Shares of stock and long-term debt, including corpora

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