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Econ 101 Final Exam 50 multiple choice questions




Question;Economics 101Last Name ___________________________________Final ExamTA Name and Recitation Number __________________During this examination, students may not use notes, books, computers, programmable calculators, cell phones or any electronic device other than a simple calculator. Students may not talk with other students or look at the exam papers of other students. Once the exam begins, students may not leave the room until they finish and turn in their exams.Honor Pledge: I have neither given nor received unauthorized aid on this examination. I know and have abided by the examination rules and instructions.Signed: ______________________________________________________________Instructions1. the blue Scantron sheet:a. Bubble in your last name, first name and PID.b. Bubble in your recitation number in the sequence number area as 1017xx where xx isdetermined by your section number. For example, someone in section 712 would bubble in101712. See below for a list of section numbers.c. Students who incorrectly bubble their name, PID, or section number are penalized 2 points.d. Write the form color of the examination on the upper left corner of the bubble sheet. The formis white, green, blue or yellow.The examination includes 50 equally weighted questions. Answer all questions by marking thebubble sheet and by circling the correct answer on the examination itself. In the case of conflict, theScantron answer is the official answer.If you believe there is no right answer or more than one right answer to any question, explain yourreasoning on the back of this sheet (not the Scantron sheet). We will not consider an appeal unlessyou have recorded your argument on the exam sheet during the exam period.When you have finished the examination, sign the honor pledge. We will not consider anexamination valid unless you sign the pledge.When you are finished, turn in the answer sheet and the examination by putting them on the correctpiles at the podium.Economics 101.007Final Examination, page 212 December 20131. In his Wall Street Journal article by Jon Hilsenrath on our Archive page, we learned thatreal GDP grew by 1.6 percent in the third quarter of 2013 (i.e., the months of July,August and September), but would have grown 2.7 percent in that quarter if_____________ had not happened. What did Mr. Hilsenrath put in this blank?a.b.c.d.e.Super Storm Sandy.Government waste, fraud and abuse.Operation Twist.Decline in government expenditure.All of the above.Background for questions 2, 3, 4: Matty has just come up with a great idea for a ringtone: aninstrumental version of Hark the Sound for UNC alums. Hes the only one making this product.Here is the demand curve for the product for a year.Price$9$8$7$6Quantity (thousands)36912$515$418$321$2242. The fixed cost of renting the taping equipment for a year is $15000, and the marginal costof putting the ringtone on the purchasers cellphone (including the opportunity cost ofMattys time) is $3. If Matty follows the optimal supplier rule, how many ringtones willhe sell?a. 6 thousandb. 9 thousandc. 12 thousandd. 15 thousande. None of the above3. What will Mattys total cost and profit be at P=$8?a. $33000, $15000b. $42000, $11000c. $51000, $21000d. $60000, $23000e. None of the above4. Matty has just discovered the reason that no one else is making this product. UNC (theuniversity) has a copyright (like a patent) on Hark the Sound, and will only let Mattycontinue if he pays UNC a royalty each year. If UNC wished to get the highest possiblerent from its copyright, what yearly fee will it charge Matty to continue his business?a. Equal to Mattys total revenueb. Equal to Mattys economic profitc. Equal to Mattys accounting profitd. No feee. None of the aboveEconomics 101.007Final Examination, page 312 December 20135. The optimal labor hiring rule states that a firm should continue to hire workers so long asthe ______________ of labor is greater than the _______________.a. productivity, average total costb. productivity, wagec. marginal revenue product, average total costd. marginal revenue product, wagee. none of the above6. China recently lowered its reserve requirement for banks in an attempt to stimulateeconomic demand. How does this policy change affect the money supply in China?a. it reduces bank assets.b. it increases bank liabilities.c. it forces banks to borrow more from other banks.d. it forces the banks to lend more to their customers.e. it allows banks to make more loans and thus increase deposits inthe banking system.MoneyPrice indexReal GDPVelocity2012$5 billion100$ 1 billion20a.b.c.d.e.2013$10 billion100??????7. In the table to the left you areprovided information about moneysupply, velocity, real GDP and the priceindex in Elbonia (they use the $ ascurrency) for 2012 and 2013.According to the quantity equation, thereal GDP and velocity can be for 2013:$2 billion, 20$ 1 billion, 10$ 4 billion, 40all of the abovenone of the above8. We have a number of readings about Bitcoins on our Archive page. When we considerBitcoins in those readings from the perspective of the three characteristics of money,what do we conclude?a. Bitcoins serve as a store of valueb. Bitcoins serve as a medium of exchangec. Bitcoins serve as a unit of accountd. All of the abovee. Both a and b.Background information for questions 9, 10 and 11. Youve been given the followinginformation about the US economy for 2014 (all in trillions of US dollars) by your boss at theCouncil of Economic Advisers. Potential real GDP (Y*) = $ 22. Government expenditure (G)Economics 101.007Final Examination, page 412 December 2013= $2. Investment expenditures (I)= $1. Tax revenues (T)= $ 1. Exports (EX)= $3.Consumption expenditures (C) = $ 2 +.9 (Y-T). Imports (IM) = $ 3 +.1(Y-T). Consumerprices are constant. Actual real GDP (Y) is not yet known, and its your job to discover it.9. What is the marginal propensity to consume (MPC) in this example, and how is it relatedto the income-expenditure multiplier?a. 0.1, as the MPC rises the multiplier fallsb. 0.1, as the MPC rises the multiplier risesc. 0.9, as the MPC rises the multiplier fallsd. 0.9, as the MPC rises the multiplier risese. none of the above.10. What is the equilibrium value of real GDP that you predict?a. $ 4b. $ 10c. $ 20d. $ 22e. none of the above11. If the government chooses to increase both G and T by $1 trillion, what will be thechange in Y?a. reduction of $1 trillionb. zero effectc. increase of $1 trilliond. increase of $2 trillione. none of the above.12. An open-market purchase is the purchase of government Treasury bills from the___________ by the __________ for the purpose of increasing the supply of bankreserves and the money supply.a. public, Federal Reserveb. government, Federal Reservec. public, US Treasuryd. government, US Treasurye. none of the above13. A fixed exchange rate is an exchange rate whose value is __________ by ____________policy.a. varying, private demandb. varying, official governmentc. set, private demandd. set, official governmente. none of the aboveEconomics 101.007Final Examination, page 512 December 201314. A recessionary output gap exists when ___________________ is _______ than potentialoutput.a. employment, lessb. employment, morec. actual output, lessd. actual output, moree. none of the above15. The fractional reserve banking system is a banking system in which required________________ are less than _______________.a. liabilities, excess reservesb. liabilities, depositsc. bank reserves, excess reservesd. bank reserves, depositse. none of the above16. Which of the following is a component (are components) of M2 but not of M1?a. Saving depositsb. Small-denomination time depositsc. Money-market mutual fundsd. All of the abovee. None of the aboveBackground for questions 17, 18 and 19. Consider two countries, the US and China. Theyproduce two goods, aircraft and televisions. The number of people that it takes to produce 1 ofeach good in each country is given in the following table.1 Aircraft1 TelevisionChina100,000100US75050Suppose for this question that there are 1 million people in China and 75,000 in the US.17. What are the two endpoints for the production possibility curve for China?a. 100,000 Aircraft, 100 Televisionsb. 10 Aircraft, 10,000 Televisionsc. 100 Aircraft, 1500 Televisionsd. 750 Aircraft, 50 Televisionse. None of the aboveEconomics 101.007Final Examination, page 612 December 201318. What is the opportunity cost of one aircraft for China and the US, respectively?a. 1,000 Televisions for China, 15 Televisions for the USb. 15 Televisions for China, 1,000 Televisions for the USc. 1/1,000 of an aircraft for China, 1/15 of an aircraft for the USd. 750 workers for China, 100,000 workers for the USe. None of the above.19. Can the two countries both benefit from international trade in these goods? If so, whatproduct should China export?a. No.b. Yes, Aircraft.c. Yes, Televisionsd. Yes, both goodse. Yes, neither good20. Hot dogs and hot-dog buns are ______________________ goods because when the priceof hot dogs rises, the demand for hot-dog buns _______________________.a. Substitute, rises.b. Substitute, falls.c. Complement, rises.d. Complement, falls.e. None of the above.Background for questions 21, 22 and 23. The graph below illustrates the supply anddemand curves for unskilled workers in Chapel Hill in December 2013. The curvelabeled supply is the supply curve of workers, while the curve labeled demand is thedemand curve for workers. The wage is stated in dollars per hour. The horizontal axisindicates the number of full-time workers (in thousands) either demanded or supplied ateach wage.21. Equilibrium in the market for workers will be observed when the wage and number ofworkers are:a. 6, 8 thousandb. 3, 10 thousandc. 9, 6 thousandd. 12, 4 thousande. none of the above.Economics 101.007Final Examination, page 712 December 2013Wage per hourThe Market for Unskilled Workers1817161514131211109876543210Worker Demand123456Worker supply7891011Number of workers (in thousands)22. If the town of Chapel Hill established a minimum wage of $12 per hour for December,then we will observe an excess _______________ of workers of _________________thousand.a. supply, 4b. supply, 7c. demand, 4d. demand, 3e. none of the above.23. In a segmented labor market, increasing the minimum wage for unskilled workers willhave ______________ effect on the wage of skilled workers.a. a large positiveb. a small positivec. nod. a small negativee. a large negativeEconomics 101.007Final Examination, page 812 December 2013Background toquestions 24 and 25:Lily has a weekly budgetof $80 to spend on threethings she loves: BetterGrind coffee, Subwaysandwiches, and CatsCradle shows. She hasfound that her favorite6165105530coffee costs $2 per cup,7167107530the Subway sandwich is$5 apiece, and each showat Cats Cradle costs her $20. The table to the left indicates the total utility received fromconsuming the given number of each of these three items in a given week.Number12345Total Utility of Consuming this Number of:CoffeeSubwayCat's Cradle603015010055350130754501509050016010052024. Which of the following combinations of coffee, Subway and Cats Cradle can Lilyafford?a. 1 Cats Cradle, 1 Subway, 1 Coffee.b. 2 Cats Cradle, 2 Subway, 2 Coffeec. 3 Cats Cradle, 3 Subway, 3 Coffeed. Just choices a and b.e. All of a, b and c.25. If we choose the affordable combination of the three goods that maximizes utility, what isthe marginal utility per dollar spent on the last unit of each good and the total utility?a. 5, 665b. 1, 792c. 10, 555d. 7, 804e. None of the above26. Which of the following actions illustrate moneys attribute of store of value?a. holding a $20 bill in your wallet for spending next month.b. buying a Treasury bond as a financial investment.c. purchasing ocean property on the Atlantic coast.d. when you sell your car, listing the price in dollars.e. none of the aboveBackground to questions 27 and 28: Harry and his three suitemates at Granville Towersare all M&M fanatics they love eating M&Ms at any time of day or night. Once a week onSunday they go shopping, they each chip in $10 to buy a supply of M&Ms for the week.Theyve tried two ways of serving the M&Ms. First, theyve poured all the M&Ms into aEconomics 101.007Final Examination, page 912 December 2013communal bowl that they all share. Second, theyve created separate bowls for eachsuitemate with just his share of the M&&Ms;with this method, suitemates cant take candyfrom bowls belonging to others. They discovered that with the communal serving bowl theM&Ms were gone by Monday at noon. With the separate serving bowls each suitemate stillhad candy in the bowl on Friday.27. What is the economics term for this phenomenon?a. Optimal suppliers rule.b. Tragedy of the commons.c. Buyer willingness to payd. price discriminatione. None of the above28. Why does each individual eat the candy more slowly in the individual-bowl servingstyle?a. The marginal benefit of an additional M&M is higherb. The marginal benefit of an additional M&M is lowerc. The marginal cost of an additional M&M is lowerd. The marginal cost of an additional M&M is highere. None of the above.Background to questions 29 and 30. Ford and GM are in a competitive battle this year to sellpick-up trucks. Whether the F-150 or the Silverado, these are profitable products for thecompanies. In the table below I state each companys profit based upon its pricing strategy.Each company can choose either high-price or low-price as a strategy, the profit associated witheach pair of choices is reported in this table. (The first number is GMs profit, the secondnumber is Fords profit.)FordLow-priceHigh-priceGMLow-price20, 2050, 10High-price10, 5040, 4029. Ford has a _____________ pricing strategy because for each GM choice, Fords profitmaximizing choice is ______________.a. Value, low-price.b. Value, high-price.c. Dominant, low-priced. Dominant, high-pricee. None of the above.30. The combination _________________, __________________ is a Nash equilibrium.a. Ford low-price, GM low-price.b. Ford low-price, GM high-price.c. Ford high-price, GM low-price.d. Ford high-price, GM high-price.e. None of these.Economics 101.007Final Examination, page 1012 December 201331. When the price of gasoline rises by 50 percent (for given customer income), the quantitypurchased at the pump falls by 10 percent. When the customer income rises by 10percent (for given price), the quantity purchased at the pump rises by 3 percent. This isan illustration of the property of ___________________ ___________________curve.a. an inferior, demandb. an inferior, supplyc. a normal, demandd. a normal, supplye. none of the above32. The town of Sunnyvale has sunshine every day in the year (it only rains at night). It has asolar-power plant that generates electricity at 6 cents per kilowatt-hour, but only duringthe daytime. At night it has a coal-fired power plant that generates electricity with a costof 16 cents per kilowatt-hour. Either plant has sufficient capacity to satisfy the demandfor electricity, but the solar-power plant does not operate at night. What is the sociallyoptimal pricing scheme of electricity (per kilowatt-hour) in Sunnyvale, and why?a. 16 cents day and night, because that is the cost of the higher-costunit used.b. 6 cents day and night, because that is the lower-cost alternative.c. 6 cents by day and 16 cents by night, because that is the cost forthe lowest-cost plant operating.d. 6 cents day and night, because that will maximize consumersurplus.e. None of the above.33. Gilbert has just started his own business doing state-certified inspections of cars. First,he had to pay $1000 to the state in a one-time license fee. Then, he rented work spacefrom a local car dealer. The dealer is charging him $500/month for the use of the space.Finally, he got a good deal on the equipment he needs: the owner will rent it to him at acost of $2 per car inspected. If he inspects no cars, he pays no rent, while the more carshe inspects the more he pays in rental for that equipment. We can call the $1000 licensefee a ____________ cost, the $500/month a ______________ cost, and the $2 per carpayment a __________________ cost.a.b.c.d.e.Variable, fixed, sunkFixed, sunk, variableSunk, fixed, variableVariable, sunk, fixedFixed, variable, sunkEconomics 101.007Final Examination, page 1112 December 201334. An oligopoly is a market in which a _________________ number of large firms competewith one another in selling goods that are ____________________ substitutes.a.b.c.d.e.Large, not closeLarge, closeSmall, not closeSmall, closeNone of the above.35. The production possibilities frontier is a graph that describes the ______________amount of one good that can be produced for _______________ level of production ofthe other good.a. required, every possibleb. required, the minimumc. maximum, the minimumd. maximum, every possiblee. none of the above36. Structural unemployment is the ___________________ unemployment that existsbecause workers _________________ are no longer in demand.a. long-term, skillsb. long-term, assistantsc. short-term, skillsd. short-term, assistantse. none of the aboveDemand for coffee*Background forquestions 37 and 38. Theweekly market for designercoffees in Chapel Hill canbe represented by the graphto the left. Use theinformation from this graphto answer the followingquestions.Price of one cup of coffee (in $)7654321001020304050Cups of coffee (in thousands)6070Economics 101.007Final Examination, page 1212 December 201337. If the quantity is 20 thousand, the buyer willingness to pay is _____________. If theprice in this market is $2, the net willingness to pay at quantity of 20 thousand is_________________.a. 5, 2b. 5, 5c. 4, 4d. 4, 2e. 3, 438. If the price in this market is $2, the consumer surplus is _________.a.b.c.d.e.100 thousand80 thousand60 thousand40 thousandnone of the aboveBackground for questions 39,40, and 41. At the left is a tabledescribing the problem facingthe government of Uzbekistanwith regard to the Aral Sea.Cotton will sell for $5 per bale(or $5 million per million bales)on international markets. Forthis problem, lets assume thefollowing: 80 million cubicmeters of water per year flow tothe Aral Sea through the rivers. Water can be diverted from the rivers to the cotton fields bythe farmers at no cost. There is a $4 per bale variable cost to cotton production. For each rowof the table, you are given the quantity of water diverted from the rivers to the cotton fields, theresulting output of cotton, and the resulting cost (in dollars) to residents of the Aral Sea area ofthe water diversion.Water diverted(Millioncubic meters)10203040506070Quantityof cotton(million bales)40607075777775Cost to AralSea residents(millions of dollars)30609012015018021039. If the cotton farmers ignore the costs of their actions to the Aral Sea residents, theiroptimal choices will lead to how much water diversion?a. 10 million cubic metersb. 20 million cubic metersc. 30 million cubic metersd. 40 million cubic meterse. 50 million cubic metersEconomics 101.007Final Examination, page 1312 December 201340. If the Uzbekistan government takes into consideration both the gains to the cottonfarmers and the losses to the Aral Sea residents of diverting water from the rivers, what isthe optimal amount of water diversion it should allow?a. no diversionb. 10 million cubic metersc. 20 million cubic metersd. 30 million cubic meterse. 40 million cubic meters41. The Uzbekistan government is considering using a tax on cotton farmers to internalizethe external costs to Aral Sea residents. Which tax will be better at internalizing theexternality?a. a tax per cubic meter on water diversionb. a tax per bale of cotton producedc. a fixed tax for operating a cotton farmd. an income tax on cotton farmers (who may have noncotton income)e. the four are equivalentExportsBusiness investmentPurchase of pre-existing homesGovernment expenditureConsumer expendituresImportsSales from last year's inventories$400$200$300$500$1000$500$10042. The accompanying tableprovides information on categories ofexpenditures on final goods and services(in billions of US dollars) in 2013. Ifthis is a complete list, what is the USgross domestic product for 2013?a.b.c.d.e.$3000$2600$2100$1600none of the aboveBackground for 43, 44, 45, 46: Three UNC grads (they call their company Electro-Heels)have a bold new business plan establish a network of charging stations for electric carsthroughout the Research Triangle area. Theyve researched their business plan, and this iswhat they found.Fixed cost per year of establishing the network: $10 millionMarginal cost (explicit plus implicit) of charging one car one time: $20.Demand for electric-car charges per year in 2020.PriceQuantity1200demanded (millions)1000.2900.3800.4700.5600.6500.7400.8300.9201.0101.1Economics 101.007Final Examination, page 1412 December 201343. If the Electro-Heels produce one million car charges in 2020, what is the total cost andaverage total cost at that level of production?a. $20 million, $30 millionb. $30 million, $20 millionc. $30 million, $30d. $20 million, $20e. None of the above44. Create a graph of the average total cost of Electro-Heel production for 0.2 million, 0.4million, 0.6 million, 0.8 million, and 1 million charges. What do we call a firm that hasaverage total cost curve with this shape?a. Monopolyb. Natural monopolyc. Oligopolyd. Natural Oligopolye. Monopolistic competitor45. What is the outcome (in terms of price and quantity) that will maximize total economicsurplus?a. Price $20, Quantity 1 million chargesb. Price $70, Quantity 0.5 million chargesc. Price $30, Quantity 0.9 million chargesd. Price $50, Quantity 0.7 million chargese. None of the above46. If the government wished to regulate Electro-Heels using average-cost pricing, whatwill be the outcome (in terms of price and quantity):a. Price $20, Quantity 1 million chargesb. Price $70, Quantity 0.5 million chargesc. Price $30, Quantity 0.9 million chargesd. Price $50, Quantity 0.7 million chargese. None of the above47. A quota is a legal ________________ on the ___________________ of a good that maybe imported.a. tax, valueb. tax, quantityc. limit, valued. limit, quantitye. None of the aboveEconomics 101.007Final Examination, page 1512 December 201348. When the value of a countrys imports exceeds the value of a countrys exports in a givenperiod, the country has a trade ______________ that must be offset by an equal amountof _______________ foreign residents.a. surplus, lending tob. surplus, borrowing fromc. deficit, lending tod. deficit, borrowing frome. none of the above.49. Hybrid automobiles (like the Toyota Prius) are substitutes for non-hybrid automobiles.When the US government introduced a tax credit for the purchasers of hybridautomobiles, this ______ the ________ curve for non-hybrid automobiles.a.b.c.d.e.Increased (shifted toward higher quantities), DemandDecreased (shifted toward lower quantities), DemandIncreased (shifted toward higher quantities), SupplyDecreased (shifted toward lower quantities), Supplynone of the above50. The interest rate is the amount that borrowers pay ____________ per dollar of moneyborrowed. It is the opportunity cost of ________________________________.a.b.c.d.e.In taxes, spending todayIn taxes, spending in the futureTo lenders, spending todayTo lenders, spending in the futureNone of the above.


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