Economics Exam 2 practice test

The fact that when temperature rises snow cone sales rise suggests the two are A. directly correlated. B. inversely correlated. C. neither directly correlated nor inversely correlated. D. both directly correlated and inversely correlated.

A. directly correlated.

If there is an expectation that the price of a good will increase in the next month this would immediately A. move its demand curve to the right. B. move its demand curve to the left. C. cause a movement along the demand curve to a (higher price, lower quantity) point. D. cause a movement along the demand curve to a (lower price, higher quantity) point.

A. move its demand curve to the right.

The main effect on the economy of the financial sector crisis in late 2008 was A. reduced aggregate demand. B. increased aggregate demand. C. reduced aggregate supply. D. increased aggregate supply.

A. reduced aggregate demand.

Using Figure 1.6 you can tell that A. there is increasing opportunity cost. B. there is unemployment. C. there is constant opportunity cost. D. the technology does not exist to produce 90 units of soda and 2 units of pizza.

A. there is increasing opportunity cost.

Which of the following environmental problems is among the most easily solved? A. waste water treatment B. a nation's air pollution issues C. a nation's coastal water pollution issues D. the world's global warming issues

A. waste water treatment

Which of the following is the best example of the concept of "substitute"? A. SUV's B. Coke and Pepsi C. Ramen noodles D. Hot dogs and hot dog buns

B. Coke and Pepsi

ERISA stands for A. Equal Retirement, Investments, and Solvency Act. B. Employee Retirement Income Security Act. C. Employer and Retiree Income Security Act. D. Employer Return on Income Security Act.

B. Employee Retirement Income Security Act.

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of a decrease in the price of a substitute for a good? A. Figure 1 B. Figure 2 C. Figure 3 D. Figure 4

B. Figure 2

On the Heritage Foundation's scale of "Economic Freedom," which of the following countries is most "Free"? A. Venezuela B. Ireland C. North Korea D. Russia

B. Ireland

If you overheard a worker say that her pension would only give her what she put in and the interest she garnered on those savings regardless of how long she had worked for the company you would know she had A. a defined benefit pension program. B. a defined contribution program. C. a Ponzi scheme. D. been exempted from Social Security.

B. a defined contribution program.

The quantity supplied is the amount firms wish to sell A. at all possible prices during a specified period of time. B. at a particular price during a specified period of time. C. at a particular price (the timeframe is irrelevant). D. at all possible prices (the timeframe is irrelevant).

B. at a particular price during a specified period of time.

For a market to be characterized by monopoly, there must be A. a large number of firms with no one able to influence price. B. barriers to entry and exit. C. indistinguishable products being sold. D. good information about sales and costs.

B. barriers to entry and exit.

Given the production function and total cost function shown in Chapter 4, as production increases, average variable costs A. decrease constantly. B. decrease for a while and then increase. C. increase constantly. D. increase for a while and then decrease.

B. decrease for a while and then increase.

Suppose you can fly from L.A to New York and 15 separate airlines provide the service. This market would be described by A. limited competition. B. monopolistic competition. C. oligopoly. D. monopoly.

B. monopolistic competition.

The Endangered Species Act has A. succeeded in that there are no endangered species to be concerned about in the U.S. B. succeeded marginally in that 11 of the more than 800 endangered species now have stable populations. C. failed in that no species of plant or animal is better off now than when the law was passed. D. made things worse because it allows more species to become extinct.

B. succeeded marginally in that 11 of the more than 800 endangered species now have stable populations.

Referring to Figure 1.5, the opportunity cost of producing the first unit of pizza is A. one unit of soda. B. three units of soda. C. six units of soda.

B. three units of soda.

Refer to Table 4.1, Box H should be filled with A. 0$ B. 110$ C. 125$ D. 150$

C. 125%

Refer to Table 4.2, Box N should be filled with A. 0$ B. 10$ C. 20$ D. 30$

C. 20$

Given the production function and total cost function shown in Chapter 4, as production increases, average fixed costs A. decrease constantly. B.decrease for a while and then increase. C. increase constantly. D. increase for a while and then decrease.

A. decrease constantly.

The Latin phrase "ceteris paribus" is used by economists to mean A. "all other things being equal" or "all other things held constant." B. all is lost. C. freedom is better than regulation. D. the only constant is change.

A. "all other things being equal" or "all other things held constant."

The average global temperature rose A. 1 degree F in the last 100 years. B. 3-5 degrees F in the last 100 years. C. 15 degrees F in the last 100 years. D. 3-5 degrees in the last 10 years.

A. 1 degree F in the last 100 years.

Referring to Figure 1.9, if a point represents unemployment it is in A. AREA #1 but not on the curve B.AREA #1 or is on the curve. C. AREA #2 but not on the curve. D. AREA #2 or is on the curve.

A. AREA #1 but not on the curve

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of an increase in the population of the group of people likely to buy a good? A. Figure 1 B. Figure 2 C. Figure 3 D. Figure 4

A. Figure 1

There will be long-run pressure on the price to fall whenever A. P > ATC. B. P = ATC. C. P < ATC. D. P < AVC.

A. P > ATC. B. P = ATC. C. P < ATC. D. P < AVC.

Monopolistically competitive firms are A. Price makers. B. Price takers. C. Price excluders. D. Price includes.

A. Price makers.

The source of diminishing returns is A. The efficiency that results from workers specializing in one aspect of production. B. The fact that anytime you increase labor you get more output. C. The inefficiency that results from the fact that capital is fixed. D. The when each worker is equally capable, each worker adds to production exactly the same as the previous one.

C. The inefficiency that results from the fact that capital is fixed.

The stimulus package proposed in 2009 by newly-elected President Obama included A. reduced income tax rates for high-income individuals. B. reduced levels of federal government aid to state and local governments. C. a combination of tax changes and significant increases in federal government spending. D. rapid contraction of the overall size of the federal government as a share of GDP.

C. a combination of tax changes and significant increases in federal government spending.

Economists Novy-Marx and Rauh contend that states are A. accurately stating their pension liabilities. B. understating the value of both their assets and liabilities. C. accurately stating the value of their assets but understating the value of their pension liabilities. D. accurately stating the value of their assets but overstating the value of their pension liabilities.

C. accurately stating the value of their assets but understating the value of their pension liabilities.

Home price escalation in the U.S. during 2005 fueled booms in A. Iraq and Afghanistan. B. stocks of dot com startups in Silicon Valley and U.S. government bonds. C. home building and home equity lines of credit. D. mortgage foreclosures and home demolition.

C. home building and home equity lines of credit.

There are two large chain coffee houses and McDonalds that all produce Frappuccinos in dozens of locations in a large city. The best model to analyze this market is A. perfect competition. B. monopolistic competition. C. oligopoly D. monopoly.

C. oligopoly

In a market served by vendors who sell both orange juice and bottled water from their carts, an increase in the price of bottled water will tend to A. reduce the supply of bottled water. B. increase the supply of bottled water. C. reduce the supply of orange juice. D. increase the supply of orange juice.

C. reduce the supply of orange juice.

From Table 2.3, at the price of $1 there is a A. shortage of 5. B. neither a shortage nor a surplus. C. shortage of 4. D. surplus of 4.

C. shortage of 4.

Global environmental problems are less easily solved than those confined to a single country because A. a single country has no incentive to solve global problems. B. there is no worldwide interest in solving global problems. C. there is no effective enforcement mechanism available for solving global problems. D. all of the options are correct.

C. there is no effective enforcement mechanism available for solving global problems.

The fact that we are operating at a point inside a bowed out production possibilities frontier, indicates there is A. scarcity. B. constant opportunity cost. C. unemployment. D. increasing opportunity cost.

C. unemployment.

Among the key ingredients of what a house is fundamentally worth would be A. the opportunity cost of the land on which the house is located. B. the quality of the school system in which the house is located. C. "location, location, location"! D. Correct all of the options are correct.

D. Correct all of the options are correct.

Of the collection of supply and demand diagrams in Figure 2.2 which one shows the result of an increase in technology in the market for anything? A. Figure 1 B. Figure 2 C. Figure 3 D. Figure 4

D. Figure 4

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of an increase in the price of an input in the market for anything? A. Figure 1 B. Figure 2 C. Figure 3 D. Figure 4

D. Figure 4

For a market to be characterized by monopoly, there must be A. a large number of firms with no one able to influence price. B. freedom of entry and exit. C. indistinguishable products being sold. D. a single seller.

D. a single seller.

If the market price for a good produced by a price taking firm is $5, the firm's total revenue is A. a flat line at P = $5. B. parabolic C. downward sloping. D. an upward sloping line beginning at the origin and having a slope of 5.

D. an upward sloping line beginning at the origin and having a slope of 5.

Buyers and sellers in the market for goods and services might be negotiating an exchange of A. labor or financial capital. B. goods for use by final consumers. C. services provided to final consumers. D. either goods for use by final consumers or services provided to final consumers.

D. either goods for use by final consumers or services provided to final consumers.