Question BAM 223 Principles of Economics Text: Essentials of Economics

BAM 223

Principles of Economics

Text: Essentials of Economics

Final Examination

Multiple Choice Questions (Enter your answers on the enclosed answer sheet)

1. An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

a. variable

b. market

c. model

d. trade-off

Scenario 1-2

Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of

$5,000 per week. The plant owner observes, “Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we’re on the right track. We are producing the optimal number of hats.”

2. Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and if so by how much?

a. Its profit will be $1,100 higher.

b. Its profit will be $1,000 lower.

c. Its profit will be $100 lower.

d. Its profit will be $100 higher.

3. The term market in economics refers to:

a. a place where money changes hands.

b. a legal institution where exchange can take place.

c. a group of buyers and sellers of a product and the arrangement by which they come together to trade.

d. an organization which sells goods and services.

Scenario 1-3

Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, “Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we’re on the right track. We are producing the optimal number of t-shirts.”

4. Refer to Scenario 1-3. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 400 t-shirts?

a. marginal cost

b. explicit cost

c. operating cost

d. Any of the above terms are correct.

5

BAM 223 Principles of Economics

Final Examination

5. Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that:

a. people respond to economic incentives

b. people are rational

c. optimal decisions are made at the margin

d. equity is more important than efficiency

6. Dr. Goldfinger decides to invest in companies which he believes can “improve the productivity and efficiency” of health care services. How can Dr. Goldfinger strive to achieve this productive efficiency?

a. by investing in companies that produce goods and services at the lowest possible cost

b. by investing in companies that produce up to the point where the marginal benefit of the last unit produced is equal to the marginal cost of producing it.

c. by investing in companies that fairly distribute their products and services

d. by investing in companies that produce goods and services based on consumer preferences

7. How are the fundamental economic decisions determined in Canada?

a. The United Nations decides because Canada is a developing economy.

b. The government decides because Canada is a centrally planned economy.

c. Individuals, firms, and the government interact in a market to make these economic decisions.

d. These decisions are made by the country’s elders who have had much experience in answering these questions.

8. Which of the following is a macroeconomics question?

a. How is the production quantity of snowboards determined?

b. What factors determine the price of electronic cigarettes?

c. What determines the growth rate of gross domestic product?

d. What determines the salaries of Wall Street executives?

9. Scarcity:

a. stems from the incompatibility between limited resources and unlimited wants

b. can be overcome by discovering new resources

c. can be eliminated by rationing products

d. is a bigger problem in market economies than in socialist economies

6

BAM 223 Principles of Economics

Final Examination

10. The principle of opportunity cost is that:

a. in a market economy, taking advantage of profitable opportunities involves some money cost

b. the economic cost of using a factor of production is the alternative use of that factor that is given up

c. taking advantage of investment opportunities involves costs

d. the cost of production varies depending on the opportunity for technological application

11. A production possibilities frontier with a bowed outward shape indicates:

a. the possibility of inefficient production

b. constant opportunity costs as more and more of one good is produced

c. increasing opportunity costs as more and more of one good is produced

d. decreasing opportunity costs as more and more of one good is produced

Figure 2-4

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.

12. Refer to Figure 2-4. Consider the following events:

(a) an increase in the unemployment rate

(b) general technological advancement

(c) decrease in consumer wealth

Which of the events listed above could cause a movement from X to V?

a. a only

b. a and b only

c. b and c only

d. a, b, and c

7

BAM 223 Principles of Economics

Final Examination

13. You have an absolute advantage whenever you:

a. are better educated than someone else

b. can produce something at a lower opportunity cost than others

c. prefer to do one particular activity

d. can produce more of something than others with the same resources

Table 2-5

Production choices for Nadia’s Neckware

Choice Quantity of Ascots Quantity of Bowties

Produced Produced

A 32 0

B 24 6

C 16 12

D 8 18

E 0 24

14. Refer to Table 2-5. Assume Nadia’s Neckware only produces ascots and bowties. A combination of 16 ascots and 6 bowties would appear:

a. along Nadia’s production possibilities frontier

b. inside Nadia’s production possibilities frontier

c. outside Nadia’s production possibilities frontier

d. at the horizontal intercept of Nadia’s production possibilities frontier

15. If the best surgeon in town is also the best at cleaning swimming pools, then according to economic reasoning, this person should:

a. specialize in being a surgeon because its opportunity cost is lower

b. specialize in cleaning swimming pools because it is more labor-intensive

c. split his time evenly between being a surgeon and cleaning swimming pools

d. should pursue the activity he enjoys more

8

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.