ECS4862 - Advanced Microeconomics docx (1).

ECS4862 - Advanced Microeconomics docx (1).3) Most microeconomic models assume that decision makers wish to 1. A) make themselves as well off as possible. 2. B) act selfishly. 3. C) make others as well off as possible. 4. D) None of the above. 4) Society faces trade-offs because of 1. A) government regulations. 2. B) profit motive. 3. C) faceless bureaucrats. 4. D) scarcity. 5) A market 1. A) always involves the personal exchange of goods for money. 2. B) allows interactions between consumers and firms. 3. C) always takes place at a physical location. 4. D) has no influence on prices. 6) What links the decisions of consumers and firms in a market? 1. A) the government 2. B) prices 3. C) coordination officials 4. D) microeconomics 7) The price of a good is 1. A) always equal to the cost of producing the good. 2. B) never affected by the number of buyers and sellers. 3. C) usually determined in a market. 4. D) None of the above. 8) Who or what is responsible for bringing together scarce resources to produce most of the goods and services in the U.S.? 1. A) the U.S. government 2. B) the United Nations 3. C) the Federal Reserve Bank 4. D) markets and prices 9) Which of the following is a fundamental topic addressed by microeconomics? 1. A) whether to extend unemployment insurance 2. B) determining how many new iPhones the Apple company should produce 3. C) the level of inflation in the country 4. D) the impact of interest rates on savings in the economy 10) A "twinkie tax" on fatty foods would aim to 1. A) reduce the consumption of fatty foods. 2. B) reduce the production of fatty foods. 3. C) raise tax revenues for other uses. 4. D) All of the above. 11) Which choice below illustrates the tradeoff faced by surfboard manufacturers after Clark foam shut down in 2005, eliminating 80% of the world's foam blanks used to shape surfboards? The firms decide to 1. A) substitute foam blanks for balsa wood blanks as used in the 1940s. 2. B) advertise their new surfboard wax. 3. C) offer surf classes. 4. D) B and C 12) In the Soviet Union, which boasted about giving every worker a job, some workers were given the task of digging holes and filling them again. What function of microeconomic analysis did this policy address? 1. A) What goods/services to produce 2. B) How to produce the goods and services 3. C) Who gets the goods and services 4. D) A and B 13) The objective of creating a permit trading system for SO2 (sulfur dioxide) is to 1. A) employ environmental protection agency (EPA) workers. 2. B) create a market in which one did not previously exist. 3. C) make annual company tax reporting more difficult. 4. D) increase the incidence of acid rain. 14) Under most circumstances, the application of taxes on goods will only affect who gets the goods. 15) Most modern financial centers use computers to match buyers and sellers. This absence of personal contact contradicts the definition of a market. 16) Governments do not respond to prices. 17) Explain how a market helps determine which goods and services will be produced, how to produce them, and who gets them. 1.2 Models 1) The purpose of making assumptions in an economic model is to 1. A) force the model to yield the correct answer. 2. B) minimize the amount of work an economist must do. 3. C) simplify the model while keeping important details. 4. D) express the relationship mathematically. 2) Einstein was quoted saying "Everything should be made as simple as possible, but not simpler." When it comes to economic models this means that 1. A) models shouldn't be too complex. 2. B) models shouldn't be too simple. 3. C) models should have a level of abstraction appropriate to the topic investigated. 4. D) all of the above 3) Economists tend to judge a model based upon 1. A) the reality of its assumptions. 2. B) the accuracy of its predictions. 3. C) its simplicity. 4. D) its complexity. 4) Which of the following is an example of a normative statement? 1. A) A higher price for a good causes people to want to buy less of that good. 2. B) A lower price for a good causes people to want to buy more of that good. 3. C) To make the good available to more people, a lower price should be set. 4. D) If you consume this good, you will be better off. 5) Every economic model should include money as a variable. This statement is 1. A) true, because every transaction in the economy uses money. 2. B) true, because the federal reserve is very important. 3. C) false, because some transactions in the economy are accomplished without money. 4. D) false, because a model can get unnecessarily complex if it includes money. 6) Which of the following is an example of a normative statement? 1. A) Since this good is bad for you, you should not consume it. 2. B) This good has bad health effects. 3. C) If you consume this good, you will get sick. 4. D) People usually get sick after consuming this good. 7) Which of the following is an example of a positive statement? 1. A) Since this good is bad for you, you should not consume it. 2. B) If this good is bad for you, you should not consume it. 3. C) If you consume this good, you will get sick. 4. D) None of the above. 8) If an important assumption is omitted from an economic model 1. A) the model's predictions will be accurate 50% of the time. 2. B) the model's predictions will be inaccurate. 3. C) the model will not predict anything. 4. D) the model will be rejected by other economists. 9) Economic models are most useful in 1. A) predicting changes in one variable due to a change in one or more other variables. 2. B) predicting the direction of the stock market. 3. C) explaining the future with the past. 4. D) generating untestable hypotheses. 10) Economic modeling requires 1. A) mathematics. 2. B) logic. 3. C) calculus. 4. D) trigonometry. 11) Economic models are most often tested 1. A) using computer simulations. 2. B) using data from the distant past. 3. C) using data from the real world. 4. D) using logic alone. 12) Which of the following is not considered an ingredient to an economic model? 1. A) Assumptions 2. B) Logic 3. C) Hypotheses 4. D) Experience 13) Economists make simplifying assumptions to 1. A) understand extremely complex phenomenon. 2. B) build a model that is as close to the real world as possible. 3. C) focus on the variables that are important to an economic theory. 4. D) A and C 14) Economists will use a model such as the law of demand 1. A) forever, ignoring all criticism. 2. B) until it is refuted by someone. 3. C) until the model produces the same results with added complexity. 4. D) until every microeconomic courses uses the model. 15) Which of the following is an example of a positive statement? 1. A) Prices determine what goods and services are produced in a market economy. 2. B) The government of the Soviet Union determined the three fundamental questions of microeconomics (i.e., what is produced, how it is produced, who receives the product). 3. C) The production of goods and services should be determined by market prices. 4. D) A and B 16) Which of the statements below is/are normative? 1. A) Economists need to include more reality in their models. 2. B) Economists will use a model until it is refuted by someone. 3. C) Microeconomists study economic growth. 4. D) B and C 17) Normative analysis offers decision makers the most valuable information when choosing among alternatives. 18) If a model fits reality but doesn't generate testable predictions, it is of little value to economists. 19) If actual experience supports two competing theories, then both theories are proven to be true. 20) Normative statements are easily debated whereas positive statements are simply rhetorical. 21) Legislators argue that a minimum wage law is instituted to help poor people. Economists can attack the minimum wage law on two fronts. First, some argue that government should not help the poor. Second, some argue that minimum wage laws actually hurt the poor because it creates unemployment. Which argument is normative and which is positive? 1.3 Uses of Microeconomic Models 1) Economic policy of the government is often based on 1. A) microeconomic models. 2. B) educated guessing. 3. C) intuitive reasoning. 4. D) hints. 2) Microeconomic models are used to 1. A) make predictions. 2. B) explain real-life phenomena. 3. C) evaluate policy alternatives. 4. D) All of the above. 3) A microeconomic model CANNOT be used to 1. A) evaluate the impact of a price change on a firm's revenue. 2. B) predict the impact of an increase in the minimum wage on unemployment. 3. C) evaluate the fairness of a proposal to nationalize health insurance. 4. D) evaluate the effect of an increase in stadium size on the price of a sport team's tickets. 4) The testing of economic models facilitates 1. A) proving a model is false. 2. B) proving a model is true. 3. C) proving that one person's opinion is morally incorrect. 4. D) proving that one society's legal structure is better than another country's. 5) Economic models are only useful in analyzing government policy. 1. A) True, individuals are irrational and therefore economic models are useless. 2. B) False, economic models can be used to predict individual and firm behavior. 3. C) True, economists only model those questions for which they are hired. 4. D) False, economic models are not even useful in analyzing government policy.