Sample Final Examination ECO/212 Version 3

ECO/212 Sample Final Examination

This Sample Examination represents the Final Examination that students complete in Week Five. As in the following Sample Examination, the Final Examination includes questions that assess the course objectives. Although the Sample Examination includes one question per objective, the Final Examination includes three questions per course objective. Refer to the questions in the following Sample Examination to represent the type of questions in the Final Examination. Refer to the weekly readings and content outlines for each week as study references for the Final Examination. Week One: Principles of Economics Objective: Explain how the principles of economics affect decision-making, interaction, and the workings of the economy as a whole. 1. In building economic models, economists often omit a. Assumptions. b. Theories. c. Details. d. Equations. Objective: Compare and contrast market systems and the role of an economist within these systems. 2. A competitive market is one in which a. There is only one seller, but there are many buyers. b. There are many sellers and each seller has the ability to set the price of his product. c. There are many sellers and they compete with one another in such a way that some sellers are always being forced out of the market.

d.

There are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Objective: Describe how the necessity of a good and the availability of substitutions impact price elasticity. 3. You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought, and that this will cause the price of peanuts to double by the end of the year. As a result, a. Your demand for peanut butter will increase, but not until the end of the year. b. Your demand for peanut butter increases today. c. Your demand for peanut butter decreases as you look for a good substitute. d. You will wait for the price of jelly to change before altering your demand for peanut butter. Objective: Determine how changes in price and quantity influence market equilibrium. 4. When the price of a good is higher than the equilibrium price, a. A shortage will exist. b. Buyers desire to purchase more than is produced. c. Sellers desire to produce and sell more than buyers wish to purchase. d. Quantity demanded exceeds quantity supplied.

Sample Final Examination ECO/212 Version 3

Week Two: Markets and Types of Goods Objective: Explain how labor market equilibrium is affected by the supply and demand of labor. 5. A total-cost curve shows the relationship between the a. Quantity of an input used and the total cost of production. b. Quantity of output produced and the total cost of production. c. Total cost of production and profit. d. Total cost of production and total revenue. Objective: Summarize the factors that affect labor supply and demand. 6. Along the vertical axis of the production function we typically measure a. Revenue. b. The marginal product of the input. c. The quantity of input. d. The quantity of output. Objective: Compare and contrast public goods, private goods, common resources, and natural monopolies. 7. A market structure in which there are many firms selling products that are similar but not identical is known as a. Oligopoly. b. Monopoly. c. Monopolistic competition. d. Perfect competition. Objective: Describe the characteristics of competitive markets, monopolies, and oligopolies. 8. The cigarette industry consists of large firms that compete vigorously through advertising which is directed at creating fantasy and image. Economists would characterize this industry as a. Perfectly competitive. b. Monopolistically competitive. c. An oligopoly. d. A monopoly. Week Three: Measuring Economic Health and Fiscal Policy Objective: Describe the use of Gross Domestic Product (GDP) to measure the business cycle. 9. Because every transaction has a buyer and a seller, a. GDP is more closely associated with a nations income than it is with a nations expenditure.

b. c. d.

Every transaction contributes equally to an economys income and to its expenditure. The number of firms must be equal to the number of households in a simple circular-flow diagram. Firms profits are necessarily zero in a simple circular-flow diagram.

Objective: Describe the roles of the government bodies that determine national fiscal policies.

Sample Final Examination ECO/212 Version 3 10. Imagine the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then we would expect that in the short run, a. Real GDP will rise and the price level might rise, fall, or stay the same.

b. c. d.

Real GDP will fall and the price level might rise, fall, or stay the same. The price level will rise, and real GDP might rise, fall, or stay the same. The price level will fall, and real GDP might rise, fall, or stay the same.

Objective: Explain the effects of fiscal policies on the economys production and employment. 11. If the government raises government expenditures, in the short run, prices a. Rise and unemployment falls.

b. c. d.

Fall and unemployment rises. And unemployment rise. And unemployment fall.

Week Four: The Federal Reserve Objective: Describe the purpose and function of money. 12. An increase in the price level makes the value of money a. Increase, so people want to hold more of it.

b. c. d.

Increase, so people want to hold less of it. Decrease, so people want to hold more of it. Decrease, so people want to hold less of it.

Objective: Explain how the central bank manages a nations monetary system. 13. According to the classical dichotomy, which of the following is not influenced by monetary factors? a. The price level.

b. c. d.

Real GDP. Nominal interest rates. All of these are correct.

Objective: Explain the effects of monetary policies on the economys production and employment. 14. Most economists believe the principle of monetary neutrality is a. Relevant to both the short and long run.

b. c. d.

Irrelevant to both the short and long run. Mostly relevant to the short run. Mostly relevant to the long run.

Week Five: International Trade Objective: Define absolute and comparative advantage. 15. Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that, in the production of beef, a. The U.S. has a comparative advantage over other countries and the U.S. will export beef.

b.

The U.S. has a comparative advantage over other countries and the U.S. will import beef.

Sample Final Examination ECO/212 Version 3

c. d.

Other countries have a comparative advantage over the U.S. and the U.S. will export beef. Other countries have a comparative advantage over the U.S. and the U.S. will import beef.

Objective: Describe the influence affecting foreign exchange rates. 16. Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model? a. A firm in Mexico wants to buy corn from a U.S. firm.

b. c. d.

A Japanese bank desires to purchase U.S. Treasury securities. An U.S. citizen wants to buy a bond issued by a Mexican corporation. All of these are correct.

Objective: Debate issues surrounding international trade. 17. When a country moves away from a free trade position and imposes a tariff on imports, this causes a. A decrease in total surplus in the market.

b. c. d.

A decrease in producer surplus in the market. An increase in consumer surplus in the market. A decrease in revenue to the government.

Objective: Evaluate the effects of government policy on economic behavior. 18. The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes a. Benefit the United States as a whole, because they generate revenue for the government. In addition, because the goods are priced below cost, the taxes do not harm domestic consumers.

b. c. d.

Benefit the United States as a whole, because they generate revenue for the government and increase producer surplus. Harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue. Harm the United States as a whole, because they reduce the sum of consumer and producer surplus by an amount that exceeds the increase in government revenue.

The questions contained in the Sample Examination and Final Examination were adapted from Principles of Economics.