Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Gary has to decide between attending a two-day art workshop and a four-day art workshop. If 1)
he evaluates only the change in net benefit when he switches between the two options, he is
using the technique of:
A) comparative statics. B) ordinal analysis.
C) optimization in levels. D) optimization in differences.

2) If an individual's opportunity cost of commute is $300 per month and his monthly commuting 2)
time is 60 hours, his opportunity cost of time is:
A) $5 per hour. B) $30 per hour. C) $10 per hour. D) $60 per hour.

3) John has to choose between a camping holiday and a holiday in Las Vegas. If he evaluates the 3)
total net benefit of both alternatives before coming to a decision, he is using the technique of:
A) ordinal analysis. B) optimization in levels.
C) marginal analysis. D) optimization in differences.

Ryan wants to rent an apartment. The following table shows the monthly rent of five apartments and the monthly
commuting time to work from each apartment. Ryan's opportunity cost of time is $15 per hour.

Commuting Time
Apartment (hours/month) Rent ($/month)
1 40 1,500
2 20 1,750
3 10 2,000
4 4 2,210
5 1 2,250

4) Refer to the table above. What is the total cost incurred per month if Ryan rents Apartment 3? 4)
A) $2,050 B) $2,150 C) $2,270 D) $2,000

5) Refer to the table above. If the opportunity cost of time increases to $60 per hour, renting which 5)
apartment will minimize Ryan's total cost every month?
A) 2 B) 3 C) 4 D) 5

6) Refer to the table above. The total cost per month is the highest if Apartment ________ is rented. 6)
A) 2 B) 3 C) 4 D) 5

7) To carry out an optimization analysis: 7)

A) only indirect costs incurred in a project are to be estimated.
B) all costs are required to be converted to a same unit of measurement.
C) different types of costs are measured in different units.
D) only direct costs incurred in a project are to be estimated.

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 8) When optimizing in levels, if the ________ exceeds the ________, Project A is chosen over Project 8)
B.
A) marginal benefits of Project B; marginal benefits of Project A
B) net benefits of Project A; net benefits of Project B
C) total benefits of Project A; total benefits of Project B
D) marginal cost of Project A; marginal costs of Project B

9) Among a set of alternatives with the same total costs, an individual is said to optimize if she 9)
chooses an alternative that has the:
A) lowest opportunity costs. B) highest risk.
C) highest net costs. D) highest total benefit.

10) The techniques of optimization in levels and optimization in differences: 10)

A) cannot be used to compare the same set of alternatives.
B) provide identical answers when comparing the same set of alternatives.
C) may provide different answers when comparing the same set of alternatives.
D) compare only the costs and ignore the benefits of the alternatives.

11) Making choices by selecting the best feasible option, given the available information is referred 11)
to as:
A) imposition. B) optimization. C) delegation. D) actualization.

12) Which of the following is likely to shift the market demand curve for school textbooks to the 12)
right?
A) A fall in the total income of all consumers
B) An increase in school tuition fees
C) An increase in the enrollment rates in high schools
D) A fall in the price of school textbooks

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The following figure shows the demand and supply curves for gas. D 1 is the initial demand curve and S is the supply
curve.

13) Refer to the figure above. When the demand curve for gas is D2 and the supply curve for gas is 13)
S, the surplus in the market when price is $8 is:
A) 50 gallons. B) 20 gallons. C) 55 gallons. D) 25 gallons.

14) If the demand and supply curves for a commodity shift to the right and the shift in demand is 14)
greater than the shift in supply, then in comparison to the initial equilibrium, the new
equilibrium will be characterized by:
A) a lower price and quantity. B) the same price and quantity.
C) a higher price and quantity. D) a higher price and a lower quantity.

15) Which of the following pairs of goods is likely to be considered substitutes? 15)
A) A Nokia cell phone and a Nokia cell phone charger
B) A Ford car and public transportation
C) Printers and printing ink
D) Coffee and sugar

16) Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to 16)
the left, both by the same degree. Then, in comparison to the initial equilibrium, the new
equilibrium will be characterized by:
A) a higher price and quantity. B) a lower price and the same quantity.
C) a higher price and the same quantity. D) a lower price and quantity.

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The following figure shows the demand and supply curves for USB flash drives. D is the demand curve and S 1 is the
initial supply curve.

17) Refer to the figure above. When the demand curve for flash drives is D and the supply curve of 17)
flash drives is S1, the equilibrium quantity is:
A) 60 units. B) 10 units. C) 40 units. D) 20 units.

18) The ________ plots the relationship between prices and the quantity producers are willing to 18)
sell.
A) isoquant B) indifference curve
C) supply curve D) demand curve

19) Suppose the market for cement is such that the government does not interfere in price 19)
determination but plays an important role in the provision of property rights. While there are a
large number of buyers and sellers, everyone conducts transactions at a common market price.
Which of the following statements is true about the structure of the cement market?
A) The cement market is government regulated.
B) All participants in the cement market are price makers.
C) The cement market is free and competitive.
D) All transactions in the cement market are likely to be involuntary.

20) The gross domestic product of Richland during a particular year was $672,500. If the 20)
expenditure on consumption during that year was $220,000, the expenditure on investment was
$250,000, the expenditure incurred by the government was $100,000, and exports was $182,000,
calculate the value of imports.
A) $79,500 B) $40,000 C) $100,750 D) $21,500

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 21) ________ will lead to an increase in the gross domestic product of a country, all other variables 21)
remaining unchanged.
A) A fall in the expenditure on consumption
B) A fall in the expenditure on investment goods
C) An increase in expenditure incurred by the government
D) An increase in imports

The table below shows the values of various economic variables of a country during a particular year.

22) Refer to the table above. The trade balance of the country during that particular year was 22)
________.
A) $50,000 B) -$6,000 C) $4,000 D) -$104,000

23) A machinery used in a factory is a(n) ________ good. 23)

A) club B) inferior C) capital D) public

24) Which of the following is an example of labor income? 24)

A) Rent paid to a landlord B) Profit earned by an entrepreneur
C) Dividend received by shareholder D) Bonus paid to a worker

25) The expenditure -based method of national accounting ________. 25)

A) tracks the purchase of all goods by households, firms and the government
B) only tracks the purchase of goods and services by the government
C) does not track the purchase of investment goods by firms and households
D) only tracks the purchase of goods and services by firms

26) Which of the following is a reason behind the rise in US trade over the last 80 years? 26)
A) Improved transportation technology B) Falling consumption expenditure
C) Improved bureaucracy D) Rising government expenditure

27) The market value of domestic production is equal to the total expenditure on domestic agents: 27)
A) plus domestic expenditure on imports minus the expenditure of foreign agents on
exports.
B) plus the expenditure of foreign agents on exports minus domestic expenditure on
imports.
C) plus the expenditure of foreign agents on exports minus gross investment by the foreign
firms.
D) plus domestic expenditure on imports.

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28) If the number of workers in a country is 12,000 and its income per worker is $380, its gross 28)
domestic product is ________.
A) $1,240,000 B) $524,000 C) $618,000 D) $4,560,000

29) If the income per capita of United Kingdom is 23,800 and dollar/pound exchange rate (US$/) 29)
is 1.68 in 2014, the income per capita of UK in US dollars in the same year is ________.
A) $12,812 B) $30,400 C) $22,829 D) $39,984

30) Which of the following causes the aggregate production function to shift up? 30)
A) An increase in the total efficiency units of labor
B) An increase in capital stock
C) An improvement in technology
D) A decrease in the productivity of workers

31) The aggregate production function of Ritland is Y = A K0.3 H0.7. The total output produced 31)
in Ritland in a certain year was worth $135,000. The technology used in the country improved
over the next 10 years while the capital stock and the efficiency units of labor remained
approximately the same. Which of the following is likely to be true in this case?
A) The inflation rate in the country is likely to reduce.
B) The gross domestic product of the country is likely to decrease.
C) The gross domestic product of the country is likely to increase.
D) The Human Development Index of the country is likely to improve.

32) ________ is likely to result in an increase in the total efficiency units of labor in an economy. 32)
A) A decrease in the labor force participation rate in the economy
B) A decrease in the capital-labor ratio in the economy
C) An increase in the productivity of each worker in the country
D) An increase in the unemployment rate in the economy

33) Income per capita is ________. 33)

A) gross domestic product divided by total labor force
B) gross domestic product divided by total unit of all goods produced
C) gross domestic product divided by total population
D) gross domestic product divided by total amount of capital used

34) Which of the following is likely to reduce the total efficiency units of labor in an economy? 34)
A) A decrease in the price of capital
B) An earthquake that kills several people
C) An increase in the price level
D) A recession that lowers aggregate demand

35) The income per capita in Genovia is 38,333 Genovian dollars. If 1 Genovian dollar is equal to 35)
0.78 U.S. dollars, the income per capita in Genovia in U.S. dollars, is ________
A) $49,144.87 B) $3,563 C) $30,000 D) $29,899.74

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The following figure shows the total output that an economy can produce using varying amounts of capital.

36) Refer to the scenario above. Suppose a country is currently at point C. Which of the following 36)
will happen if it experiences an improvement in technology?
A) The curve will shift downward.
B) It will move from point C towards point D.
C) The curve will shift upward.
D) It will move from point C toward point A.

37) Which of the following is most likely to be an example of causation? 37)

A) A student wins money by scratching a ticket with a particular coin. He decides to scratch
all tickets with the same coin in the future.
B) The crime rate is high in a country. The literacy rate is high as well.
C) A soccer player scores 4 goals when he wears red socks. He concludes that the red socks
helped him score the goals.
D) A firm producing CFLs installs new machinery. The per-day production of CFLs
increases.

38) Which of the following relationships is likely to exhibit negative correlation? 38)
A) The relationship between inflation in the U.S. and traffic congestion in China
B) The relationship between the amount of precipitation in a year and the number of
umbrellas sold
C) The relationship between level of professional training and unemployment
D) The relationship between amount saved with a bank and the interest earned

39) Which of the following statements correctly differentiates between positive and normative 39)
economics?
A) Positive economics describes what people ought to do, whereas normative economics
describes what people actually do.
B) Positive economics is based on judgments, whereas normative economics is not.
C) Positive economics can only be applied to microeconomics, whereas normative economics
can be applied to both microeconomics and macroeconomics.
D) Positive economics is descriptive, whereas normative economics is advisory.

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 40) The net benefit of a particular alternative equals: 40)
A) the benefits received from the alternative divided by the costs incurred in choosing the
alternative.
B) the benefits received from the alternative minus the costs incurred in choosing the
alternative.
C) the costs incurred in choosing the alternative divided by the benefits received from the
alternative.
D) the benefits received from the alternative plus the costs incurred in choosing the
alternative.

41) A student has two options: she can either surf the web, or work part-time. Working part-time 41)
pays her $20 per hour. What is the student's opportunity cost of surfing the web for 5 hours?
A) $50 B) $4 C) $100 D) $20

42) When the market for a commodity is in equilibrium: 42)

A) all sellers of the commodity will want to change their behavior.
B) there will still be some unsold stock of the commodity.
C) all buyers of the commodity will want to change their behavior.
D) no economic agent will want to change his or her behavior.

Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will
take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost
of time is $15 per hour.

43) Refer to the scenario above. Maria should choose to: 43)
A) travel by train, as it will save her $30 in travel time.
B) drive, as it will give her a real saving of $150.
C) drive, as it will save her $120.
D) travel by train, because it is quicker.

44) Refer to the scenario above. If the opportunity cost of time increases to $80 per hour, which of 44)
the following statements is true?
A) Maria should choose to drive, as it saves her $10.
B) Maria should choose to travel by train, as it saves her $10.
C) Maria should choose to drive, as it saves her $150.
D) Maria should choose to travel by train, as it saves her $150.

45) A consumer has $20 that he wants to spend on two goods: pens priced at $2 each, and pencils 45)
priced at $1 each. Which of the following correctly represents his budget constraint?
A) $20 = ($2 Quantity of pens) + ($1 Quantity of pencils)
B) $20 = ($2/Quantity of pens) + ($1/Quantity of pencils)
C) $20 = ($3/Quantity of pens + Quantity of pencils)
D) $20 = $3 (Quantity of pens - Quantity of pencils)

46) The Law of Supply states that: 46)

A) the quantity supplied of a good rises when the price rises.
B) the quantity supplied of a good will always equal the quantity of the good demanded.
C) at the equilibrium price, there is always some excess supply in the market.
D) supply creates its own demand.

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47) The population of Potentia doubled within 20 years while its income per capita remained 47)
unchanged during the same period of time. This implies that ________.
A) its price level doubled
B) its gross domestic product remained constant
C) its gross domestic product also doubled
D) its price level halved

48) Which of the following is likely to cause the supply curve for steel window frames to shift to the 48)
right?
A) A fall in the number of steel window frame producers due to factory lockouts
B) An increase in the wages of labor working in steel firms due to demands by trade unions
C) A decrease in the cost of production of steel due to a new subsidy
D) A rise in the market price of steel window frames due to an increase in demand

49) Country A's income per capita is higher than that of Country B. Country A is likely to have 49)
________.
A) a lower life expectancy at birth B) a higher life expectancy at birth
C) a higher unemployment rate D) a higher exchange rate

50) Japan's currency is called Yen. The value of Japan's income per capita in dollars is high if 50)
________.
A) the dollar/yen exchange rate is high
B) the value of Japan's income per capita in yen is low
C) the dollar/yen exchange rate is low
D) the income per capita of the U.S. is high

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Answer Key
Testname: FALL 2016 MACRO 1

1) D
2) A
3) B
4) B
5) D
6) C
7) B
8) B
9) D
10) B
11) B
12) C
13) A
14) C
15) B
16) B
17) C
18) C
19) C
20) A
21) C
22) C
23) C
24) D
25) A
26) A
27) B
28) D
29) D
30) C
31) C
32) C
33) C
34) B
35) D
36) C
37) D
38) C
39) D
40) B
41) C
42) D
43) C
44) B
45) A
46) A
47) C
48) C
49) B

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Answer Key
Testname: FALL 2016 MACRO 1

50) A

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