Unit I and II Quizzes

Question 1

Because economics is “value free,” economists generally believe that people should be allowed to do whatever they please. T/F

Answer 1

False

Question 2

Which good is not scarce for some people in some places in the world, but can become scarce under certain circumstances?
a. air b. water c. marijuana d. sugar

Answer 2

a. air

Question 3

Opportunity cost is defined as “what you give up when you choose a particular course of action.” T/F

Answer 3

True

Question 4

When economists say people are rational, we mean they always carefully calculate the consequences of their actions and almost never make mistakes or errors. T/F

Answer 4

False

Question 5

To be effective, incentives must be compatible with ________________.
a. scarcity b. methodology c. theory d. self-interest

Answer 5

a. scarcity

Question 6

Self interest + rationality means that people can be relied upon to respond to incentives in predictable ways. T/F

Answer 6

True

Question 7

If a product’s money price is $0, there is still an opportunity cost associated with taking the product. T/F

Answer 7

True

Question 8

Prices are “_______________ wrapped in _____________”

Answer 8

information, incentives

Question 9

“Spontaneous order” means that someone has to actively manage a system in a top-down fashion in order for it to function well. T/F

Answer 9

False

Question 10

Innovation refers to:
a. developing new products b. developing new technologies c. developing new production methods d. all of the above

Answer 10

d. all of the above

Question 11

Dr. Watts loves Milk Stout beer and hates olives. This is a demonstration of which economic concept?
a. wants are unlimited b. means are scarce c. preferences are subjective d. more is preferred to less

Answer 11

c. preferences are subjective

Question 12

In economics, “marginal” is best thought of as meaning:
a. extra or additional b. total c. minimal d. partial

Answer 12

a. extra or additional

Question 13

Consumer surplus consists of the area between:
a. price and quantity b. demand and price c. supply and demand d. price and the x axis

Answer 13

b. demand and price

Question 14

What happens to the demand for orange juice when the price of orange juice goes down?

Answer 14

demand does not change

Question 15

In Europe, gas is expensive and people generally own fewer cars than they do in the United States. This is due to the fact that gas and cars are ________________.

Answer 15

complements

Question 16

Many students reduce or cease consumption of Ramen when they graduate and land a high-paying job. For these students, Ramen represents a __________________ good.

Answer 16

inferior

Question 17

What is equal at equilibrium?

Answer 17

quantity supplied and quantity demanded

Question 18

When the price of a good increases, consumers cut back on low-value/low-importance uses of the good first, but will still use the good for high-value/high-importance uses. T/F

Answer 18

True

Question 19

A shortage will not generally occur unless which of the following is true?
a. there are more buyers than sellers b. price is consistently above equilibrium c. price is consistently below equilibrium d. the market is not a live auction market

Answer 19

c. price is consistently below equilibrium

Question 20

Consumers like low prices, and dislike price increases for the products they regularly consume. But what do consumers dislike even more than price increases?
a. shortages of a product b. surpluses of a product c. equilibrium d. rising marginal costs

Answer 20

a. shortages of a product

Question 21

The sum of consumer and producer surplus is maximized when

Answer 21

the market is at equilibrium

Question 22

In Excel, what do you use to “lock” a cell reference, so that the reference cell “stays put” when you fill a formula or function across other cells?

Answer 22

$

Question 23

What the “factors of production” (inputs) listed in the lecture?

Answer 23

Land, labor, capital, technology, and entrepreneurship

Question 24

What happens to the demand for chocolate when the price of chocolate increases?

Answer 24

nothing

Question 25

Market equilibrium is described as "efficient" because only the highest ________________ uses of the good are undertaken, and only the lowest _______________ sources of supply are drawn upon.

Answer 25

value, cost

Question 26

What metric is the best measure of a country's standard of living?

Answer 26

real GDP per capita

Question 27

How is real GDP per capita calculated?

Answer 27

real GDP divided by the population

Question 28

A car engine produced by a supplier to Ford Motor Company is an example of a. an inferior good. b. a final good. c. a common good. d. an intermediate good.

Answer 28

d. an intermediate good.

Question 29

The sale of sugar will contribute to GDP when a. the buyer is Krispy Kreme Doughnuts. b. the buyer is a mother who is baking cookies. c. the buyer is a Mexican food restaurant. d. the buyer is a grocery store chain.

Answer 29

b. the buyer is a mother who is baking cookies.

Question 30

This summer you have a paid internship for Kia Motors (a Korean company) in Canada. For which nation, or nations, are you contributing to GDP? Assume you are a U.S. citizen.

Answer 30

Canada

Question 31

What is the term for the value of a nation's entire stock of assets?

Answer 31

national wealth

Question 32

The difference between nominal and real GDP is that nominal GDP is valued in _______________ year prices and real GDP is valued in ________________ year prices.

Answer 32

current, base

Question 33

The difference between nominal GDP and real GDP is nominal GDP

Answer 33

measures a country's production of final goods and services at current prices, whereas real GDP measures a country's production of all final goods and services at fixed historical prices.

Question 34

A country experiences high GDP growth and low population growth will have a

Answer 34

high per capita GDP growth rate

Question 35

Imported goods consumed in the U.S. are counted as part of the U.S. GDP. T/F

Answer 35

False

Question 36

According to the "naive growth theory," countries with high real GDP per-capita all have abundant domestic supplies and land, labor, and capital. T/F

Answer 36

True

Question 37

The economically relevant factor shared in common by the "Angloshere" countries is their common law legal system. T/F

Answer 37

True

Question 38

The picture of a busy Indian street scene reveals: a. high levels of capital per worker b. low levels of capital per worker c. social customs that discourage use of new technologies d. a country crippled by limited access to natural resources

Answer 38

b. low levels of capital per worker

Question 39

An economic system in which the government owns or controls all factors of production results in the absence of: (select all that apply) a. markets b. prices c. trade in resources and capital goods.

Answer 39

all. Markets, prices, and trade in resources and capital goods.

Question 40

Which economist predicted, in his 1920 book Socialism, that socialist economies would not function well due to the impossibility of 'economic calculation?"

Answer 40

Ludwig von Mises

Question 41

The northern European nation of Sweden was presented in the lectures as an example of a socialist economy in which the government owns most or all of the "means of production." T/F

Answer 41

False

Question 42

High levels of government corruption in a society (e.g. a high prevalence of bribery) act as a tax on entrepreneurship and investment. T/F

Answer 42

True

Question 43

The United States ranks as one of the world's most free and least corrupt economies. T/F

Answer 43

True

Question 44

President George Washington is known for stepping down from office, even though it is widely assumed that he could have remained President for life. This action is exemplary of which institutional factor for the United States economy?

Answer 44

political stability

Question 45

The economic differences between North and South Korea can be explained by non-institutional facts such as demographics, culture, and access to natural resources. T/F

Answer 45

False

Question 46

In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total ouput to a. increase, but by less than one unit. b. double. c. remain the same as with one unit of capital. d. increase exponentially.

Answer 46

a. increase, but by less than one unit.

Question 47

In the Solow model production function, an increase in capital stock with all other variables held constant will __________ the country's real GDP but at a(n) _________________ rate. Fill in with increase/decrease and increasing/decreasing

Answer 47

increase, decreasing

Question 48

Which of the following is NOT a governmental program that would encourage technological advancement? a. requiring banks to offer no-money-down incentives for loans to buy homes. b. creation and enforcement of patent and copyright laws. c. providing loans to people to obtain higher education in the basic sciences. d. providing a tax credit for businesses that conduct research and development.

Answer 48

a. requiring banks to offer no-money-down incentives for loans to buy homes.

Question 49

The production function expresses a relationship between a. capital stock and risk. b. output and growth. c. inflation and growth. d. output and the factors of production.

Answer 49

d. output and the factors of production.

Question 50

Governments can play a role in supporting the production of new ideas by a. taxing industries that become too competitive. b. erecting protective trade barriers for the computer and telecommunication industries. c. directing the exchange of all scientific ideas. d. protecting intellectual property.

Answer 50

d. protecting intellectual property.

Question 51

If investment is ___________ depreciation, the nation's capital stock will grow.

Answer 51

greater than

Question 52

An increase in depreciation will cause the capital stock to a. decrease. b. grow at a slower pace. c. remain unchanged. d. become unprofitable.

Answer 52

a. decrease.

Question 53

The economics of ideas (select all that apply) a. refers to cutting edge growth. b. helps explain why countries like the United States have been growing for the past two centuries. c. explains why the simple Solow growth model incorrectly predicts no long-run economic growth.

Answer 53

All answers are correct. a. refers to cutting edge growth. b. helps explain shy countries like the United States have been growing for the past two centuries. c. explains why the simple Solow growth model incorrectly predicts no long-run economic growth.

Question 54

Institutions that are important to the development of knowledge and new ideas include a well-functioning market system, property rights, and a good legal system. T/F

Answer 54

True

Question 55

An increase in investment results in a higher level of steady-state output. T/F

Answer 55

True

Question 56

In analyzing human behavior, economists are most interested in: a. people's stated intentions b. people's unseen, inner desires c. people's rational responses to changes in the incentive environment d. people's various moral precepts

Answer 56

c. people's rational responses to change in the incentive environment

Question 57

Every exchange-based economy requires basic rules regarding human life and personal property. T/F

Answer 57

True

Question 58

According to Thomas Sowell (the greatest living economist), "Scarce resources have______________"

Answer 58

alternative uses

Question 59

Scarcity applies primarily to: a. poor people b. rich people c. all people

Answer 59

c. all people

Question 60

Fresh air can be, but is not necessarily, a non-scarce good. T/F

Answer 60

True

Question 61

Scarcity implies tradeoffs: more of one thing implies less of something else. The technical term for this is:

Answer 61

opportunity costs

Question 62

At a minimum, the self interest principle is morally neutral. It states that:

Answer 62

people care more about themselves than strangers.

Question 63

Opportunity costs are only associated with products you have to pay for. T/F

Answer 63

False

Question 64

"Spontaneous Order" refers to the idea that:

Answer 64

prices guide people's decisions and coordinate their interactions

Question 65

The price system helps people: (select all that apply) a. compare opportunity costs b. decide what goods or services to produce c. manage their consumption options

Answer 65

all. Compare opportunity costs, decide what goods or services to produce and manage their consumption options

Question 66

Because people face outlays (or receive payments), we say that prices act as: a. incentives b. penalties c. rewards d. data points

Answer 66

a. incentives

Question 67

"Pure economics: is equipped to make value judgements about people's consumption choices. T/F

Answer 67

False

Question 68

"Marginal" choices can be thought of as: (select all that apply) a. "all or nothing" b. "a bit more or less" c. categorical preferences

Answer 68

b. "a bit more or less"

Question 69

What happens to the demand for Tesla cards when the price of Teslas goes down?

Answer 69

demand does not change

Question 70

What happens to the demand for jelly if the price of peanut butter goes down?

Answer 70

demand increases

Question 71

Which acronym properly lists all the "determinants of demand?"

Answer 71

TIPE# Tastes & preferences Incomes Prices of other goods (substitutes/complements) Expectations # of consumers

Question 72

Hot dogs are an "inferior" good. What will happen to the demand for hot dogs in a recession, when consumer incomes decline?

Answer 72

go up

Question 73

"People buy less when the price rises." This is known as the:

Answer 73

law of demand

Question 74

If price is consistently held below equilibrium, the market will most likely face a:

Answer 74

shortage

Question 75

Equilibrium occurs when quantity demanded is equal to quantity supplied. T/F

Answer 75

True

Question 76

The only factor that could NOT potentially shift the demand curve is: a. consumer preferences b. producer costs c. consumers' incomes d. prices of other (related) goods.

Answer 76

b. producer costs

Question 77

The only factor that could NOT potentially shift the demand curve is: a. the product's price b. consumer population c. advertising d. expectations about future need for the product

Answer 77

a. the product's price

Question 78

What are the determinants of supply and the acronym?

Answer 78

TTEP# Technology Taxes Expectations Price of inputs # of producers

Question 79

If a shortage looms, businesses face incentives to increase product prices T/F

Answer 79

True

Question 80

A reduction in gasoline prices would likely lead to a(n) _____________ in demand for SUVs.

Answer 80

increase

Question 81

Government imposes new taxes on big, wealthy insurance companies. What will happen to the price of insurance?

Answer 81

prices rise

Question 82

If resources are scarce, that means they have __________ uses.

Answer 82

one of the following: alternate, alternative, other, opportunity costs

Question 83

Which financial statement allows entrepreneurs to compare revenues and costs and assess a business' success?

Answer 83

the income statement

Question 84

Which aspect of entrepreneurship does Watts emphasize as central to the market process?

Answer 84

"crunching the numbers"

Question 85

Prices reveal the opportunity costs of various combinations of resources. T/F

Answer 85

True

Question 86

What are the "three I's" of prices?

Answer 86

information, incentives, innovation

Question 87

In economics, we assume entrepreneurs are mainly motivated by the public interest. T/F

Answer 87

False

Question 88

Competition among businesses promotes:

Answer 88

lower prices, product improvements and more efficient production methods

Question 89

What value is a measure of output of new goods and services produced in a country, not adjusted for price changes?

Answer 89

nominal GDP

Question 90

2x4 lumber purchased by a home builder will NOT count toward current GDP. T/F

Answer 90

True

Question 91

Trim lumber exported from Canada for purchase by US consumers should count in which country's/countries' GDP?

Answer 91

Canada only

Question 92

GDP measures the ___________ of new production; national wealth measures the _____________ of total productive assets.

Answer 92

flow, stock

Question 93

Currently, US real GDP per capita is about

Answer 93

$65,000

Question 94

According to lecture, over the course of US history America's real GDP per capita doubles roughly every ________ years.

Answer 94

40

Question 95

Which countries disprove "naive growth theory"?

Answer 95

Hong Kong, India

Question 96

The most important common factor among rich, successful economies is their natural resource endowments. T/F

Answer 96

False

Question 97

What are all the institutional factors noted in the lecture video?

Answer 97

property rights, rule of law, political stability, competitive markets

Question 98

Corruption is like a "tax" because it allows dishonest officials to take people's property and entrepreneurs' profits. T/F

Answer 98

True

Question 99

The United State is the largest (by population) country in the top 30 list of real GDP per capita. T/F

Answer 99

True

Question 100

What are institutions?

Answer 100

Rules--or the elements of government that determine people's incentives to work, invest, innovate, etc.

Question 101

The main problem with Indian agriculture is a lack of money for investing in capital (such as tractors). T/F

Answer 101

False

Question 102

Name the two most important inputs in the Solow Model:

Answer 102

capital and tecnology

Question 103

The shape of the output (and investment) function reflects:

Answer 103

diminishing marginal product to capital

Question 104

In the Solow Model, as capital is added, output (real GDP):

Answer 104

grows at a decreasing rate

Question 105

Economic growth will stall because depreciation eventually catches up to investment. T/F

Answer 105

True