HW-1/Class Test-1

Eco 101 Sec 9 Fall 2015

Student Name:
Roll No:

Principles of Microeconomics
Market Supply and Demand and Equilibrium Prices

Submission Date: October 7, Wednesday 2015

Course Instructor:
Mohammad Syful Hoque (Adjunct Faculty)
Department of Economics, East West University
Tel: 01914011329 E: msheweco@gmail.com
Ten Principles of Economics
Government policies designed to promote efficiency:

a. usually do so at the expense of equity.

b. tend to cause the economy to grow more slowly.
c. Always fail.
d. require very high taxes.

All of the following can be considered a student's costs of going to college, EXCEPT:

a. textbooks.
2.

b. tuition and fees.

c. room and board (that costs her about the same as she was paying before entering college).
d. the student's time, which can no longer be devoted to earning a salary.

An airline's plane from Los Angeles to New York is about to take off, but it still has a few seats empty. If the average cost per seat is $500, what
price should the airline charge passengers in standby to fill in those remaining seats? (Consider that quantitative decisions are made at the
margin)

a. At least $500.
3.
b. Exactly $500.
c. Any price above zero that will entice standby passengers to take the flight.
d. Slightly less than $500.

The Federal government enacted regulation in the 1960s requiring people to wear seatbelts in their cars. All of the following resulted from this
regulation, EXCEPT:

a. overall deaths due to car accidents changed very little in the United States.
4.

b. fewer deaths occurred per accident.

c. fewer pedestrians were killed in car accidents.
d. the frequency of accidents increased.

When two persons trade goods:

a. one person always gains at the expense of the other.

5.

b. both persons usually gain from the exchange.

c. one person usually gains at the expense of the other.
d. the overall well being of the two persons remains unchanged.

In a market economy, the decisions of what and how much to produce are made by:

a. voters in elections.
6.

b. all producers and consumers.

c. the government only.
d. non governmental agencies.

Even though markets do a great job in organizing economic activity, governments are needed to do all of the following EXCEPT:

a. establish and enforce property rights.

7.

b. intervene when markets fail due to externalities.

c. intervene when markets fail due to market power.
d. decide what and how much should be produced.

Living standards in the United States have risen tremendously over the years, mainly due to:

a. relentless increases in the productivity of labor over the years.

8.
b. the forceful efforts of labor unions.
c. successive increases in the minimum wage.

d. trade protection from competition from countries with low wages, such as China.

Rapid and persistent inflation occurs mainly due to:

a. high wage increases demanded by labor unions.

9.

b. greedy firms that abuse consumers with higher-than-necessary prices.

c. rapid increases in the quantity of money in the economy.
d. trade with other countries.

A government that implements a policy designed to reduce inflation can expect unemployment to:
a. increase in the short-run.

10.

b. decrease in the short-run.

c. increase in the long-run.
d. decrease in the long-run.

Thinking like an Economist

Which of the following is FALSE, regarding economics as a science?

a. Economic knowledge is obtained through the scientific method, just as in any other science.
b. It is difficult to conduct experiments in economic matters.
c. Economists pay close attention to natural experiments resulting from historical events.
d. Economic theories represent irrefutable facts.

Economists use assumptions in order to:

a. recreate real situations accurately, with all their complexity.

12.

b. avoid dealing with issues they would rather not talk about.
c. simplify economic theories, so as to make it possible to answer economic questions.
d. Make their theories more realistic.

13. Economic models are:

a. simplified versions of economic theories.

b. created by making assumptions.
c. usually composed of diagrams and equations.
d. All the other options are true

All of the following are characteristics of the Circular Flow Model of the economy, EXCEPT:

a. the model has two markets: one for goods and services and one for factors of production.
14.

b. the model includes two sectors: the Firms sector and the Households sector.
c. the model describes two circular flows: one for inputs and one for resources.
b. The two force described by the model move to the opposite direction.

The circular flow model of the economy demonstrates that:

a. the economy actually has only two sectors: firms and households.
15.

b. dollars in the economy are used over and over in an endless cycle.
c. Firms produce and provide factors of production.
d. government is the source of revenue for households to purchase goods and services from firms.

Which of the following is true regarding the Production Possibilities Frontier Model of the economy?

a. Any point along the PPF represent the efficient level of production.
16.

b. Any point in the area below the PPF represents a combination of production that is not feasible.
The opportunity cost of producing one more unit of one of the goods represented in the PPF remains
c. the same at any point along the PPF.
d. Increases in the resources available for production will cause the PPF to shift towards the origin.

Economic growth in the economy can be portrayed in the Production Possibilities Frontier model as a:

a. movement up and to the left along the PPF.

17.

b. shift of the PPF away from the origin.

c. movement down and to the right along the PPF.
d. Shift of the PPF towards the origin.

Microeconomics is the study of:

a. how governments can get the economy out of a recession.

18.

b. economy-wide phenomena, including inflation, unemployment, and economic growth.

c. how households and firms make decisions and how they interact in markets.
d. How government can reduce inflation.

Which of the following is an example of a normative statement?

a. Higher interest rate will cause people to borrow and invest less.
19.

b. The government should increase spending during recessions, so that the economy recovers quickly.
When the price of a good increases, consumers respond by reducing the quantity that they want to
c. purchase of the good.
Over the past 50 years, the number of women that participate in the labor force has increased
d. dramatically.

Economists tend to disagree with each because:

a. different economists espouse different theories, so they believe different things are going on in the economy.

20.

b. different economists make different assumptions, leading them to different conclusions in economic matters.
c. different economists have different values and priorities in economic matters.
d. All the other options are true