Assignment
I.. Multiple Choice
1. What does it mean for a nation to have an absolute advantage in the production of a good?
a. It can produce the good more efficiently than another nation.
b. It takes more raw materials than another nation to produce the good.
c. if the cost of producing that good relative to the cost of producing another good is lower than another country's cost to produce the same two goods.
d. It must automatically have a comparative advantage in the production of this good.
2. What does it mean for a nation to have a comparative advantage in the production of a good
a. It can produce the good more efficiently than another nation.
b. It takes more raw materials than another nation to produce the good.
c. It can produce the good at a lower opportunity cost than another nation.
d. It must have an absolute advantage in the production of this good.
3. When referring to a free enterprise system, "private property" includes ...
a. Things cannot be traded in a market
b. Equipment and buildings can be owned by individuals or businesses
c. Software that has been placed in the public domain
d. Public lands that are owned by governments
4. Which ones of the following are not examples of markets?
a. wartime food rationing coupons
b. auction websites such as eBay
c. A scalper selling tickets outside National stadium
d. Sale of illegal drugs
5. Which of the following statements are correct regarding hours of work and income?
a. The "price" of an hour of work is the hourly wage rate.
b. An increase in the real wage rate would would encourage you to work less as the opportunity cost of leisure becomes higher.
c. An decrease in the real wage rate would encourage you to work more as your income is now lower.
6. Recall that if they completely specialized, Greta could produce either 1,250 apples or 50 tonnes of wheat (or 25 apples per ton of wheat); Carlos could produce 1,000 apples or 20 tonnes of wheat (50 apples per ton of wheat). Which of the following is correct:
a. The exchange could take place at 50 apples per ton for each ton of wheat.
b. Carlos would not be better off if he could trade 35 apples for one ton of wheat.
c. The exchange could take place at 25 apples per ton of wheat.
d. If Greta traded 16 tons of wheat to Carlos for 560 apples, both she and Carlos would be better off.
7. The best description of Capitalism is:
a. how people interact with each other and with their natural surroundings in providing their livelihoods, and how this changes over time.
b. the institutions that organize the production and distribution of goods and services in an entire economy.
c. the process of taking a set of materials and other inputs, including the work of people and machines, to produce an output.
d. The important role that private property, markets, and firms play in an economic system
8. What are the most important featuresof a market economic system?
a. Producers and consumers are motivated by self-interest and profit.
b. Prices adjust based on supply and demand.
c. All resources are privately owned by producers.
d. All of the above
9. Malthus was wrong that a sustained increase in income per capita would be impossible because:
a. His population growth model was wrong.
b. His production and average product of labor model was wrong.
c. He did not foresee the changing economic system in which sustained technological change would increase income faster than population.
d. All of the above.
10. What is economic rent:
a. The extra profit that a firm makes when it doubles in size and there are no changes to costs or the price for each unit of its output
b. The cost of leasing property.
c. The normal profit that each firm earns in a competitive market.
d. The extra profit a firm earns from introducing a new innovation relative to its competitors.
11. Consider an individual's indifference curves for the consumption of two goods (things you would like to have more of). Which of the following is not true:
a. The indifference curves are downward-sloping.
b. The indifference curves can cross.
c. The indifference curves cannot be or have sections that are straight lines.
d. The indifference curves cannot have kinks.
12. In economics, a model is a simplified representation (diagrammatical or physical) that helps us to understand what is going on. Which of the following about economic models are not true.
a. Ceteris paribus is an assumption in economic models where the unimportant variables that you are focusing on are kept constant.
b. An equilibrium is a self-perpetuating situation that does not change except when a force for change is introduced from the outside that alters the basic data describing the situation.
c. A model's conclusions must be consistent with its assumptions about how people behave.
d. All of the above.
13. The following game represents the interaction between two software engineers, Astrid and Bettina, who are working together to write code as a part of a project. Astrid is better at writing Java code, while Bettina prefers C++. The numbers represent the pay in dollars for completion of the project. Based on this information, which one of the following are true?
a. There are two Nash equilibria: (Java, Java) and (C++, C++).
b. If Astrid can choose the format first and commit to it, then (Java, Java) will be chosen.
c. If the two can make an agreement beforehand, including a transfer of $500 from Bettina to Astrid, then (C++, C++) will be chosen.
d. If the two cannot make an agreement beforehand, then they may end up with the (Java, C++) outcome.
14. In a simultaneous one-shot prisoners' dilemma game: which of the following is correct:
a. Aplayer takes into account what other players may do in the future to decide his/her action today.
b. Players coordinate to find the actions that lead to the optimal outcome for society.
c. Players coordinate to find the actions that lead to the optimal outcome for society.
d. A player chooses an action taking into account the possible actions that other players can take before deciding how to act.
15. Given the following information about the total and relative costs of coal and labor inputs in producing the same output using different combinations of inputs:
a. The isocost curves indicate that B is lower cost if labor is the higher cost input.
b. Technology A is lower cost if coal is the higher cost input.
c. Cost changes along the curves.
d. B is lower cost at the lower cost of labor.
16. The economic cost of going to a Nat's game is:
a. The cost of (1) the ticket and (2) travel to and from.
b. The benefit of watching the game on my 52 inch high def TV in the comfort of my home.
c. A(1) but not a(2).
d. The total of a. plus b.
17. Figure 3.5 shows that grades depend on hours studying. Free time (a good I want more of) is given by 24 hours minus study time. What can we say about the Figure:
a. The feasibility frontier provides a constraint on choices.
b. Points along the frontier reflect a tradeoff between higher grades versus more free time which is called the marginal rate of transformation or MRT.
c. Points within the frontier are feasible.
d. All of the above are true.
18. Four farmers benefit from a common irrigation project. If only one farmer contributes $10 each farmer gets a benefit of $8. If all four contribute each farmer gets a benefit of $32-$10 or $22. Which of the following is true:
a. If all the farmers are selfish the first farmer may contribute anyway.
b. If all the farmers are selfish the first farmer's contribution may motivate the others to contribute.
c. The project can only be financed by the state since because the selfish incentive is to free ride.
d. If the need for financing is repeated each year and the first farmer contributes in year 1 the others may reciprocate in year 2 and thereafter even if they are selfish.
19. You work 35 hours a week and earn $700 income. If your wage increases to $25 per hour you would:
a. If the substitution effect dominates you might increase your consumption to $875 per week without any change in work hours.
b. If the substitution effect dominates you might increase your consumption to $875 per week without any change in work hours.
c. If the income effect dominates you might Increase your hours to 40 earning $1000 a week.
d. You might keep your hours at 35 per week earning $875 per week combining an increased income reflecting both substitution and income effects.
20. The Marginal rate of Substitution is:
a. The amount of one good that you are willing to trade for another.
b. The change in utility when an amount of one good is substituted another.
c. The slope of the highest indifference curve you can attain given the feasibility constraint.
d. At any point on the indifference curve how much of one good the consumer is willing to give up for a one unit increase in the other good.
II. Explain why capitalism might cause the sustained increase in technology which led to the industrial revolution.