ECO312 FINAL EXAM QUESTIONS (ANSWER 20/20) Question Question 1. (TCO 1) As a consequence of the problem of scarcity (Points : 4) there is never enough of anything. individuals have to make choices from among alternatives. production has to be planned by government. things which are plentiful have relatively high prices. Question 2. 2. (TCO1) Money is not considered to be an economic resource because (Points : 4) as such, it is not productive. money is not a free gift of nature. money is made by man. idle money balances do not earn interest income. Question 3. 3. (TCO1) A point inside the production possibilities curve is (Points : 4) attainable and the economy is efficient. attainable, but the economy is inefficient. unattainable, but the economy is inefficient. unattainable and the economy is efficient. Question 4. 4. (TCO1) In a command system (Points : 4) self-interest guides and commands individuals to pursue actions that lead them toward achieving their goals. the head of each family decides what to do with the familyâ€™s resources. the government makes production and allocation decisions. market traders command what outputs are produced and how they are allocated. Question 5. 5. (TCO 2) Which is consistent with the law of demand? (Points : 4) A decrease in the price of tacos causes no change in the quantity of tacos demanded. An increase in the price of pizza causes an increase in the quantity of pizza demanded. An increase in the price of hamburgers causes a decrease in the quantity of hamburgers demanded. A decrease in the price of turkey sandwiches causes a decrease in the quantity of turkey sandwiches demanded. Question 6. 6. (TCO 2) What combination of changes in supply and demand would most likely increase the equilibrium quantity? (Points : 4) When supply increases and demand increases When supply decreases and demand decreases When supply decreases and demand increases When supply increases and demand decreases Question 7. 7. (TCO 2) Chuck Grim has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer? (Points : 4) It will not change. It will decrease. It will increase. It is impossible to tell. Question 8. 8. (TCO 2) The elasticity of supply for a product will be 2 if: (Points : 4) A 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied A 2 percent decrease in price causes a 1 percent decrease in quantity supplied A 1 percent decrease in price causes a 2 percent decrease in quantity supplied A 2 percent decrease in price causes a 2 percent decrease in quantity supplied Question 9. 9. (TCO 2) Which is true for a purely competitive firm in short-run equilibrium? (Points : 4) The firm is making only normal profits. The firmâ€™s marginal cost is greater than its marginal revenue. The firmâ€™s marginal revenue is equal to its marginal cost. A decrease in output would lead to a rise in profits. Question 10. 10. (TCO 2) Consumers who clip and redeem discount coupons (Points : 4) exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons. exhibit more price elasticity of demand for a given product than consumers who do not clip and redeem coupons. exhibit less price elasticity of demand for a given product than consumers who do not clip and redeem coupons. cause total revenue to decrease for firms that issue coupons for their products. Question 11. 11. (TCO 3) A major reason that firms form a cartel is to (Points : 4) reduce the elasticity of demand for the product. enlarge the market share for each producer. minimize the costs of production. maximize joint profits. Question 12. 12. (TCO 3) In the short run, output (Points : 4) is absolutely fixed. can vary as the result of using a fixed amount of plant and equipment more or less intensively. may be altered by varying the size of plant and equipment which now exist in the industry. can vary as the result of changing the size of existing plants and by new firms entering or leaving the industry. Question 13. 13. (TCO 4) Refer to the diagram. The phases of the business cycle from points A to D are, respectively: Graph Description (Points : 4) Peak, recession, expansion, trough Trough, recovery, expansion, peak Expansion, recession, trough, peak Peak, recession, trough, expansion Question 14. 14. (TCO 4) In calculating the unemployment rate, part-time workers are (Points : 4) counted as unemployed because they are not working full-time. counted as employed because they are receiving payment for work. used to determine the size of the labor force, but not the unemployment rate. treated the same as â€œdiscouragedâ€ workers who are not actively seeking employment. Question 15. 15. (TCO 4) GDP is the market value of (Points : 4) resources (land, labor, capita, and entrepreneurship) in an economy in a given year. all final goods and services produced in an economy in a given year. consumption and investment spending in an economy in a given year. all output produced and accumulated over the years. Question 16. 16. (TCO 4) Nominal GDP differs from real GDP because (Points : 4) nominal GDP is based on constant prices. real GDP is based on current prices. real GDP is adjusted for changes in the price level. nominal GDP is adjusted for changes in the price level. Question 17. 17. (TCO 6) The goal of expansionary fiscal policy is to increase (Points : 4) the price level. aggregate supply. real GDP. unemployment. Question 18. 18. (TCO 6) Refer to the figure. The economy is at equilibrium at Point B. What would expansionary fiscal policy do? Graph Description (Points : 4) Shift aggregate demand from AD2 to AD1 Shift aggregate demand from AD2 to AD3 Move the economy from Point B downward along AD2 Move the economy from Point B upward along AD2 Question 19. 19. (TCO 6) The American Recovery and Reinvestment Act of 2009 is a clear example of (Points : 4) nondiscretionary expansionary fiscal policy. nondiscretionary contractionary fiscal policy. discretionary contractionary fiscal policy. discretionary expansionary fiscal policy. Question 20. 20. (TCO 6) The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n) (Points : 4) budget lag. recognition lag. operational lag. administrative lag.