midterm exam.docx

Multiple Choice.

1) Economics is best defined as:

A) the study of how people make choices to satisfy their wants.B) the study of individual self—interests.C) the study of how government can most efficiently raise funds by taxation.D) the process by which goods are sold in free markets.

2) Microeconomics is defined as that part of economic analysis which

A) studies the behavior of the economy as a whole.B) includes the problems of inflation and unemployment.C) studies the individual decision making by households and firms.D) concerns international finance and exchange rates.

3) In his book “An Inquiry into the Nature and Causes of the Wealth of Nations,” economist Adam Smith argued that individuals

A) tend to act in an altruistic manner.B) always consider the impact of their actions on the welfare of others.C) are motivated by self—interest.D) are generally not concerned with economic questions.

4) When studying individuals’ economic behavior, economists assume that

A) individuals understand the rationale for all their actions.B) individuals act as if they were rational.C) only educated people act as if they were rational.D) self—interest is of limited relevance in predicting an individual’s actions.

5) Holding all variables but one constant and assessing the impact of the one variable which has changed is an example of using

A) the ceteris paribus assumption. B) Keynesian economic analysis.C) a flawed economic model. D) An untestable proposition.

6) A micro economist would study all of the following issues except

A) the impact of a change in consumer income on the sales of corn.B) the impact of a snowstorm on the sales of snow shovels.C) the most efficient means for General Motors to produce an automobile.D) the effect of a change in income taxes on the nation’s rate of unemployment.

7) An appropriate test of the effectiveness of an economic model is

A) the number of variables contained within the model.B) the model’s ability to predict future activity.C) the number of economists who have worked on the model.D) the number of assumptions which the economist has made.

8) “if A occurs then B will follow” is a

A) positive statement. B) normative statement.C) non—testable statement. D) statement lacking in logic.

9) Normative economic statements

A) violate the law of ceteris paribus. B) contain value judgments.C) are usually irrational. D) are easily testable.

10) “No individual should have less than $10,000 income in the United States in 1990” is an example of

A) a normative statement. B) a positive statement.C) an illogical and refutable statement. D) a truism.

11) Which of the following is a normative statement?

A) An increase in consumer income will lead to increased sales of beef.B) A decrease in the rate of unemployment will lead to upward pressure on consumer prices.C) An increase in the income tax will cause a greater reduction in savings than an increase in the sales tax.D) An economy with high unemployment is worse than an economy with high inflation.

12)Which of the following is a positive economic statement?

A) No individual should live in poverty.B) The rate of unemployment of young African-Americans exceeds that of white Americans.C) Unemployment is a more serious problem than inflation.D) Economic considerations are less relevant than other more ethical issues in deciding national policy.

13)One reason why economists often use models in their analysis is that

A) a model helps us to understand, explain, and predict economic phenomena in the real world.B) a model accurately pictures every detail of the real world economy.C) a model relates to individual thought processes rather than behavior.D) it is relatively easy to perfectly specify a model.

14)The macroeconomist would most likely study

A) the effects of changing apple prices on the market for oranges.B) the effects of an increase in wage rates on a woman’s decision to enter the labor force.C) the effects of a reduction in income tax rates on the nation’s output.D) the effect of increased union wages on the cost of producing automobiles.

15) Macroeconomics is the study of economics from the standpoint ofA) a specific individual. B) a typical firm.C) a typical household. D) the economy as a whole.

16) Microeconomics is the study of

A) the behavior of the economy as a whole.B) how rising prices affect the level of employment in the economy.C) how individuals and firms make decisions.D) the effect that money has in the economic system.

17) Macroeconomics is best defined by which of the following statements?

A) Macroeconomics is the study of how firms strive to maximize their profits.B) Macroeconomics is the study of the behavior of the economy as a whole.C) Macroeconomics is the study of individual economic units.D) Macroeconomics is the study of how the prices of individual goods are determined.

18) When a U.S. Senator tells a campaign crowd that “High inflation rates are a much more serious economic problem than high unemployment rates,” it is an example of

A) a normative statement. B) an empirically proven fact.C) a positive statement. D) a microeconomic argument.

19) Select the positive economic statement from the following list.

A) The number of families living in poverty in the United States is too high.B) One in every five children in the United States is living in poverty.C) Government programs to help the poor are just making the problems worse.D) Increases in poverty rates signify a deterioration of the U.S. economy.

20) Which of the following statements is a statement of normative as opposed to positive economics?A) Consumer spending generates more jobs.B) If the price of gasoline goes up, people buy less.C) Labor unions should be allowed to organize in every industry.D) Government intervention in markets is common in many countries.

21) Which statement most accurately defines economics?A) Economics is the study of how people make money.B) Economics is the study of how people make choices to satisfy their wants.C) Economics is the study of values a society should choose.D) Economics is the study of how to eliminate scarcity.

22) In economics, the concept that individuals are motivated by self interest and respond predictably to opportunities for gain is known as

A) rational self—interest. B) altruism.C) sufficiency. D) empiricism23) The term “ceteris paribus” means

A) the greatest good for all.B) the study of scarcity and choice.C) all other things remaining constant or equal.D) value free and testable.

24) Which of the following is an example of an application of the “ceteris paribus” assumption?

A) An analysis of how price changes affect how much people will purchase when all other factors are held constant.B) An analysis of how people purchase more goods when prices decline and income increases.C) After reading an article on the dangers of high fat diets, an individual buys less red meat when prices increase.D) An analysis of how worker productivity increases when a firm invests in new machines and training programs.

25) Which of the following statements is FALSE?A) Economists empirically test their models.B) The usefulness of an economic model does not depend on how well the model predicts.C) An economic model should capture only the essential relationships that are sufficient to analyze the particular problem being studied.D) Economic models relate to behavior rather than to individual thought processes.

26) Which of the following statements about economic models is true?A) Economic models are not empirically testable.B) The predictive power of models is not important.C) Economic models are designed so that every detail of the real world can be analyzed.D) Every economic model is based on a set of assumptions.

27) Whenever statements embodying values are made, we enter the realm ofA) positive economics. B) normative economics.C) microeconomics. D) macroeconomics.

28) In economic analysis, peoples resources are A) limited, and their wants are unlimited.B) unlimited, and their wants are also unlimited.C) limited, and their wants are also limited.D) unlimited, and their wants are limited.

29) In economics, all the things that people would consume if they had unlimited income are known asA) wants. B) aggregates. C) outputs. D) needs.

30) One topic of study for a micro economist would be

A) the causes of inflation.B) the causes of aggregate unemployment.

C) the effects of an increase in the price of gasoline.D) the effects of an increase in government spending.31) Macroeconomics is concerned with

A) individual consumers.B) government decision-making concerning farm price supports.C) aggregates.D) the effects on a corporation of a strike by the United Auto Workers.

32)Macroeconomics often relies on microeconomic analysis because

A) microeconomics is older than macroeconomics.B) microeconomic theory can be tested and macroeconomic theory cannot be tested.C) all aggregates are made up of individuals and firms.D) the effects of macroeconomic subjects such as inflation and unemployment are independent of

individual consumers and firms.

33) Economists assume that people are motivated byA) benevolence. B) altruism. C) greed. D) self—interest.

34)Economists assume people behave rationally, which means that people

A) never make a mistake.B)do not intentionally make decisions that make themselves worse off.C) have the necessary information to always make correct decisions.D) always understand the consequences of their decisions.

35)Another term for economic models” is

A)economic designs. B) economic theories. C)economic science. D) economic maps.

36) A simplified representation of the real world that is used to explain economic phenomena is a(n)A) map. B) model. C) assumption. D) implication.

37) A good economic model

A) utilizes only the two most factors to analyze the problem under consideration.B) generates statements that are incapable of refutation.C) represents every detail of the real world.D) yields usable predictions and implications for the real world.

38) A map is an example of a model because a map

A) realistically describes an area.B) is always as complex as space will permit.C) is two-dimensional.D) is a simplified representation about reality.

39) ‘Ceteris paribus” meansA)making all the necessary changes. B) other things constant.C)for certain parameters. D) let the buyer beware.

40) The assumption that “other things are constant is also known as the

A) ceteris paribus assumption.B) rational self—interest assumption.C) distinguishing characteristic of economics as a science.D) relationships assumption.

41) A price at which quantity demanded exceeds quantity supplied:

A) is over the equilibrium price.B) will cause a shift in the demand schedule to the rightC) is below the equilibrium priceD) Could not possibly exist

42) Choose the correct statement.

A) if supply goes up and demand falls, equilibrium price goes upB) if supply goes up and demand goes up, equilibrium quantity goes downC) if demand remains the same and supply goes down, equilibrium price goes downD) if supply remains constant and demand increases equilibrium goes up

43) If demand moves to the right as supply moves to the right, then :

A) equilibrium price and quantity must go upB) equilibrium quantity must increase, but price may or may not changeC) equilibrium price must increase, but quantity is indeterminateD) equilibrium price must fall with quantity increasing

44) With competition, the equilibrium price is determined primarily by:

A) demand for commoditiesB) no quantity demandedC) production costD) interaction of supply and demand

45) The law of supply states that:

A) price and quantity demanded are inversely relatedB)price and quantity supplied are directly relatedC) the higher prices go, the lesser the quantity offered for saleD) the more sellers there are, the higher the price

46)Components and CD’s are:A) substitute goods B) inferior goods C) complementary goods D) unrelated goods47) An increase in the number of residents in Barrio Bonifacio.

A) a change in demand B) a change in quantity demandedC) a change in supplyD) a change in quantity supplied

48)The price of a substitute products goes down


49) An expected lowering of prices of goods in the future by the consumers


50) A decrease in the price of raw materials


51) When demand for a good decreases at a rate greater than the increase in its price, the good is:

A)elastic C)negatively elasticB)inelastic D)positively elastic

52) NFA rice is example of a good that is:

A)elastic B)inelasticC)perfectly elastic D)perfectly inelastic

53) Demand for gasoline and diesoline in the Philippines is:

A)elastic B)inelasticC)perfectly elastic D)perfectly inelastic 54)When the computed value of elasticity of a good is infinite, the good is :

A)elastic B)inelastic

C)perfectly elastic D)perfectly inelastic

55)When computed value of a good is zero, the good is:


56)The supply of signature brand goods is:


57) The supply of customized limousines is:


58)The sign (positive or negative) of the computed elasticity is relevant in the computation of:

A)demand elasticity B)supply elasticityC)cross- elasticity D)income inelasticity

59)Solar-powered T V and sunlight are:

A)complementary products B)substitute productsC)unrelated products D)none of the above

60)Differentiated products that are produced but are close substitutes A)perfect competition B)pure monopolyC)monopolistic competition D)oligopoly

61)One seller in the marketA)perfect competition B)pure monopolyC)monopolistic competition D)oligopoly62)The existence of a perfectly elastic demand curve

A)perfect competition B)pure monopolyC)monopolistic competition D)oligopoly

63)There is no close substitute of the product produced

A)perfect competition B)pure monopolyC)monopolistic competition D)oligopoly

64)Collusion is a possibility in this situation

A)perfect competition B)pure monopoly

C)monopolistic competition D)oligopoly

65)STATEMENT 1: Under pure competition, sellers sell identical products/services. STATEMENT 2: Cartel operates under monopolistic competition.

A) Statement 1 is TRUE and Statement 2 is FALSE C) Both statement is TRUEB)Statement 1 is FALSE and Statement 2 is TRUE D)Both statement is FALSE

66)STATEMENT 1: A new invention when initially commercialized will be a monopoly. STATEMENT 2: The most important way of differentiating products is through price.


67)STATEMENT 1: A monopolistic competitive market is by itself an industry. STATEMENT 2: Under a monopoly, advertising and promotion are still practiced.


68)STATEMENT 1: Under oligopoly, demand is inelastic when a firm increase its price. STATEMENT 2: There is a kinked demand in oligopoly.


69) STATEMENT 1: The price behavior under monopolistic competition approximates that of pure competition in the long-run STATEMENT 2: In the short-run, labor and capital can be adjusted.


70)STATEMENT 1: Under pure competition, MR>AC. STATEMENT2: Under oligopoly, demand is elastic when a firm reduces its price.


NOLAN,JONALYN BBSBA-LM

CHAPTERS 1-7

ANSWERS:

1.A 11.D 21.B 31.C 41.B 51.A 61.B2.C 12.B 22.A 32.C 42.D 52.B 62.A3.C 13.A 23.C 33.D 43.A 53.D 63.B4.B 14.C 24.A 34.B 44.D 54.C 64.D5.A 15.D 25.B 35.B 45.B 55.D 65.A6.D 16.C 26.D 36.B 46.C 56.A 66.A7.B 17.B 27.B 37.D 47.A 57.A 67.C8.A 18.A 28.A 38.D 48.B 58.C 68.B9.B 19.B 29.A 39.B 49.A 59.A 69.A10.A 20.C 30.C 40.A 50.C 60.C 70.D

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