Eco 2013 Exam Review 1 (ch 1,2,3) UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS
Which of the following is the strongest definition of the The production of a good or service is split up into separate tasks performed
term division of labor? by different workers.
Division of labor is the way in which the work required to produce a good or
service is divided into tasks performed by different workers. For example, Mary is
very detail oriented whereas Susan is very creative. When they work together on
class assignments, Susan creates most material while Mary proofreads and makes
sure they stay on task.
Specialization in a particular small job allows workers to advantage
focus on the parts of the production process where they
have a(n) _________ _. Specialization in a particular small job allows workers to focus on the parts of the
production process where they have an advantage. People have different skills,
talents, and interests, so they will be better at some jobs than at others. In later
chapters, we will develop this idea by discussing comparative advantage.
True or false? True
The following scenario is an example of scarcity.
Each lake has a limited number of fish living in it. As the When we have limited availability of a given resource, we say that the resource is
number of fishermen who fish at the lake increases in scarce supply. Here in the over fishing example, since fish are a scarce
beyond a certain point, we see the fish population start resource, the needs/wants of the fishermen are constrained by the limited number
to decline. of fish available.
__________ may analyze how a mother of three children Microeconomists; Macroeconomists
spends her money each month ___________ may analyze
various influences on the unemployment rate. Microeconomics focuses on individuals and firms. A microeconomist may analyze
how an individual mother spends her money. Macroeconomics focuses on the
economy as a whole. A macroeconomist may search for stimuli that impact the
unemployment rate.
,True or false? False
A microeconomist would focus their studies on levels of
exports and imports. Levels of exports and imports is a topic that falls under the study of
macroeconomics, not microeconomics. Microeconomics focuses on the actions
of individual agents within the economy, like households, workers, and businesses.
Macroeconomics looks at the economy as a whole. It focuses on broad issues
such as growth of production, the number of unemployed people, the inflationary
increase in prices, government deficits, and levels of exports and imports.
Of the following examples below, which is not an A puppy mill was shut down and all of the dogs went to an overcapacity
example of scarcity? humane society, leading to an increase in the supply of adoptable dogs.
Because a puppy mill was shut down, the animal shelter has an influx of dogs for
interested adopters. John's time is scarce - he cannot study and go to the concert.
Only a limited number of people can receive the flu vaccine each year, thus it is a
scarce resource. There is a shortage of teachers in Hawaii due to the high costs of
living and low wages.
All of the following are accurate descriptions of A person's income is based on his or her ability to convert resources (especially
traditional economies except: labor) into something society values, so there is significant economic progress
and development.
In a market economy a person's income is based on his or her ability to convert
resources (especially labor) into something that society values. A traditional
economy is the oldest economic system and is used in parts of Asia, Africa, and
South America. Traditional economies organize their economic affairs the way
they have always done (i.e., tradition). Occupations stay in the family. Most families
are farmers who grow the crops using traditional methods. What you produce is
what you consume. Because tradition drives the way of life, there is little
economic progress or development.
True or false?The U.S. economy is less affected by True
globalization than most other countries relative to its
GDP. While the US has large levels of exports and imports in a nominal sense, they are
often smaller than those of other countries when considered as proportion of
GDP. The vast array of geographic conditions and natural resources available
within the US allow it to be self-sufficient to a greater extent than many of the
smaller countries of the world.
The purpose of a theory, in general, is to take a complex, real-world issue and simplify it down to its essentials
________________________________.
A theory is a simplified representation of how two or more variables interact with
each other. The purpose of a theory is to take a complex, real-world issue and
simplify it down to its essentials. If done well, this enables the analyst to
understand the issue and any problems around it.
, Which of the following are accurate statements regarding Ø International agreements and treaties between countries have contributed to
globalization? globalization.
Ø One way to measure globalization is examining the amount of imports and
exports.
Recent decades have seen a trend toward globalization, which is the expanding
cultural, political, and economic connections between people around the world.
One measure of this is the increased buying and selling of goods, services, and
assets across national borders—in other words, international trade and financial
capital flows. Another measure is that international agreements and treaties
between countries have encouraged greater trade.
Which of the following, when placed in the empty box Ø households
shown below best completes the circular flow diagram? Firms produce goods and services, which households pay to purchase.
Households provide labor services to firms, for which they are paid wages,
salaries, and benefits.
Which of the following describe benefits of international Ø All of the above.
trade?
International trade and specialization increase worldwide production, improve
the world economy, and improve standards of living all over the globe.
Economic theories and models can give us ideas about Ø all of the above
which of the following?
Although economic models and theories are not always exact, they provide us
with a tool to better understand responsiveness, incentives, the effects of
constantly changing government policies, and human behavior. Models and
theories help us solve new issues and deal with economic challenges in the
future.
True or false? Ø False
In underground economies, governments are heavily
involved in making decisions on the goods sold and the False. The government heavily regulates decisions of what to produce and prices
prices set. to charge. Heavily-regulated economies often have underground economies (or
black markets), which are markets where the buyers and sellers make transactions
without the government’s approval. In these black markets, the buyers and sellers
choose the goods and prices in their transactions.
In a circular flow diagram, who pays wages? Ø Firms
Firms (also known as businesses) pay wages to households in a circular flow
diagram.
ANSWERS
Which of the following is the strongest definition of the The production of a good or service is split up into separate tasks performed
term division of labor? by different workers.
Division of labor is the way in which the work required to produce a good or
service is divided into tasks performed by different workers. For example, Mary is
very detail oriented whereas Susan is very creative. When they work together on
class assignments, Susan creates most material while Mary proofreads and makes
sure they stay on task.
Specialization in a particular small job allows workers to advantage
focus on the parts of the production process where they
have a(n) _________ _. Specialization in a particular small job allows workers to focus on the parts of the
production process where they have an advantage. People have different skills,
talents, and interests, so they will be better at some jobs than at others. In later
chapters, we will develop this idea by discussing comparative advantage.
True or false? True
The following scenario is an example of scarcity.
Each lake has a limited number of fish living in it. As the When we have limited availability of a given resource, we say that the resource is
number of fishermen who fish at the lake increases in scarce supply. Here in the over fishing example, since fish are a scarce
beyond a certain point, we see the fish population start resource, the needs/wants of the fishermen are constrained by the limited number
to decline. of fish available.
__________ may analyze how a mother of three children Microeconomists; Macroeconomists
spends her money each month ___________ may analyze
various influences on the unemployment rate. Microeconomics focuses on individuals and firms. A microeconomist may analyze
how an individual mother spends her money. Macroeconomics focuses on the
economy as a whole. A macroeconomist may search for stimuli that impact the
unemployment rate.
,True or false? False
A microeconomist would focus their studies on levels of
exports and imports. Levels of exports and imports is a topic that falls under the study of
macroeconomics, not microeconomics. Microeconomics focuses on the actions
of individual agents within the economy, like households, workers, and businesses.
Macroeconomics looks at the economy as a whole. It focuses on broad issues
such as growth of production, the number of unemployed people, the inflationary
increase in prices, government deficits, and levels of exports and imports.
Of the following examples below, which is not an A puppy mill was shut down and all of the dogs went to an overcapacity
example of scarcity? humane society, leading to an increase in the supply of adoptable dogs.
Because a puppy mill was shut down, the animal shelter has an influx of dogs for
interested adopters. John's time is scarce - he cannot study and go to the concert.
Only a limited number of people can receive the flu vaccine each year, thus it is a
scarce resource. There is a shortage of teachers in Hawaii due to the high costs of
living and low wages.
All of the following are accurate descriptions of A person's income is based on his or her ability to convert resources (especially
traditional economies except: labor) into something society values, so there is significant economic progress
and development.
In a market economy a person's income is based on his or her ability to convert
resources (especially labor) into something that society values. A traditional
economy is the oldest economic system and is used in parts of Asia, Africa, and
South America. Traditional economies organize their economic affairs the way
they have always done (i.e., tradition). Occupations stay in the family. Most families
are farmers who grow the crops using traditional methods. What you produce is
what you consume. Because tradition drives the way of life, there is little
economic progress or development.
True or false?The U.S. economy is less affected by True
globalization than most other countries relative to its
GDP. While the US has large levels of exports and imports in a nominal sense, they are
often smaller than those of other countries when considered as proportion of
GDP. The vast array of geographic conditions and natural resources available
within the US allow it to be self-sufficient to a greater extent than many of the
smaller countries of the world.
The purpose of a theory, in general, is to take a complex, real-world issue and simplify it down to its essentials
________________________________.
A theory is a simplified representation of how two or more variables interact with
each other. The purpose of a theory is to take a complex, real-world issue and
simplify it down to its essentials. If done well, this enables the analyst to
understand the issue and any problems around it.
, Which of the following are accurate statements regarding Ø International agreements and treaties between countries have contributed to
globalization? globalization.
Ø One way to measure globalization is examining the amount of imports and
exports.
Recent decades have seen a trend toward globalization, which is the expanding
cultural, political, and economic connections between people around the world.
One measure of this is the increased buying and selling of goods, services, and
assets across national borders—in other words, international trade and financial
capital flows. Another measure is that international agreements and treaties
between countries have encouraged greater trade.
Which of the following, when placed in the empty box Ø households
shown below best completes the circular flow diagram? Firms produce goods and services, which households pay to purchase.
Households provide labor services to firms, for which they are paid wages,
salaries, and benefits.
Which of the following describe benefits of international Ø All of the above.
trade?
International trade and specialization increase worldwide production, improve
the world economy, and improve standards of living all over the globe.
Economic theories and models can give us ideas about Ø all of the above
which of the following?
Although economic models and theories are not always exact, they provide us
with a tool to better understand responsiveness, incentives, the effects of
constantly changing government policies, and human behavior. Models and
theories help us solve new issues and deal with economic challenges in the
future.
True or false? Ø False
In underground economies, governments are heavily
involved in making decisions on the goods sold and the False. The government heavily regulates decisions of what to produce and prices
prices set. to charge. Heavily-regulated economies often have underground economies (or
black markets), which are markets where the buyers and sellers make transactions
without the government’s approval. In these black markets, the buyers and sellers
choose the goods and prices in their transactions.
In a circular flow diagram, who pays wages? Ø Firms
Firms (also known as businesses) pay wages to households in a circular flow
diagram.
