ECON 312 Final Exam-Summer

1. (TCO 1) Opportunity cost is best defined as (Points : 4)
marginal cost minus marginal benefit.
the time spent on an economic activity.
the value of the best forgone alternative.
the money cost of an economic decision.
2. (TCO1) Which is not a factor of production? (Points : 4)
3. (TCO1) A point outside the production possibilities curve is (Points : 4)
attainable, but there is not full employment
attainable, but there is not optimal allocation
unattainable because the economy is inefficient
unattainable because of limited resources
4. (TCO1) A basic characteristic of a command system is that (Points : 4)
wages paid to labor are higher
government owns most economic resources
free markets are never permitted in a command economy
government planners play a limited role in deciding what goods will be produced
5. (TCO 2) Which is consistent with the law of demand? (Points : 4)
A decrease in the price of tacos causes no change in the quantity of tacos demanded
An increase in the price of pizza causes an increase in the quantity of pizza demanded
An increase in the price of hamburgers causes a decrease in the quantity of hamburgers demanded
A decrease in the price of turkey sandwiches causes a decrease in the quantity of turkey sandwiches demanded
6. (TCO 2) A decrease in supply and a decrease in demand will (Points : 4)
increase price and affect the equilibrium quantity in an indeterminate way
decrease the equilibrium quantity and decrease price
increase the equilibrium quantity and affect price in an indeterminate way
decrease the equilibrium quantity and affect price in an indeterminate way
7. (TCO 2) You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than one.  To increase total revenues, you should (Points : 4)
increase the price of the software
decrease the price of the software
hold the price of the software constant
increase the supply of the software
8. (TCO 2) The price elasticity of demand increases with the length of the period considered because (Points : 4)
consumers' incomes will increase over time
the demand curve will shift outward as time passes
all prices will increase over time
consumers will be better able to find substitutes.
9. (TCO 2) A profit-maximizing firm in the short run will expand output (Points : 4)
until marginal cost begins to rise
until total revenue equals total cost
until marginal cost equals average variable cost
as long as marginal revenue is greater than marginal cost
10. (TCO 2) Which case below best represents a case of price discrimination? (Points : 4)
An insurance company offers discounts to safe drivers.
A major airline sells tickets to senior citizens at lower prices than to other passengers.
A professional baseball team pays two players with identical batting averages different salaries.
A utility company charges less for electricity used during "off-peak" hours, when it does not have to operate its less-efficient generating plants.
11. (TCO 3) A major reason that firms form a cartel is to (Points : 4)
reduce the elasticity of demand for the product
enlarge the market share for each producer
minimize the costs of production
maximize joint profits
12. (TCO 3) The main difference between the short run and the long run is that (Points : 4)
firms earn zero profits in the long run
the long run always refers to a time period of one year or longer
in the short run, some inputs are fixed
in the long run, all inputs are fixed
13. (TCO 4) A recession is a decline in (Points : 4)
the inflation rate that lasts six months or longer
the unemployment rate that lasts six months or longer
real GDP that lasts six months or longer
potential GDP that lasts six months or longer
14. (TCO 4) The unemployed are those people who (Points : 4
do not have jobs.
are not employed but are seeking work
are not working
are not working
15. (TCO 4) GDP is the market value of (Points : 4)
resources (land, labor, capita, and entrepreneurship) in an economy in a given year
all final goods and services produced in an economy in a given year
consumption and investment spending in an economy in a given year
all output produced and accumulated over the years
16. (TCO 4) Nominal GDP differs from real GDP because (Points : 4)
nominal GDP is based on constant prices
real GDP is based on current prices
real GDP is adjusted for changes in the price level
nominal GDP is adjusted for changes in the price level
17. (TCO 6) When the federal government uses taxation and spending actions to stimulate the economy it is conducting (Points : 4)
fiscal policy
incomes policy
monetary policy
employment policy
18. (TCO 6) Refer to the graph.  What combination would most likely cause a shift from AD1 to AD3?
Increases in taxes and government spending
Decrease in taxes and increase in government spending
Increase in taxes and decrease in government spending
Decreases in taxes and government spending
19. (TCO 6) The American Recovery and Reinvestment Act of 2009 included mostly (Points : 4)
increases in taxes and government spending
decreases in taxes and government spending
increases in government spending and decreases in taxes
decreases in government spending and increases in taxes
20. (TCO 6) The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the (Points : 4)
crowding-out lag
recognition lag
operational lag
administrative lag

Page 2
1. (TCO 5) A decrease in government spending will cause a(n) (Points : 4)
increase in the quantity of real domestic output demanded
decrease in the quantity of real domestic output demanded
decrease in aggregate demand
increase in aggregate demand
2. (TCO 5) The long-run aggregate supply curve is (Points : 4)
upward-sloping and becomes steeper at output levels above the full-employment output
upward-sloping and becomes flatter at output levels above the full-employment output
3. (TCO 5) Which would most likely increase aggregate supply? (Points : 4)
An increase in the prices of imported products
An increase in productivity
A decrease in business subsidies
A decrease in personal taxes
4. (TCO 5) Deflation refers to a situation where (Points : 4)
price level falls
price level rises
the rate of inflation falls
the rate of inflation rises
5. (TCO 6) Dissaving occurs when (Points : 4)
income is greater than saving
income is less than consumption
saving is greater than consumption
saving is greater than the interest rate
6. (TCO 7) The M1 money supply is composed of (Points : 4)
all coins and paper money held by the general public and the banks
bank deposits of households and business firms
bank deposits and mutual funds
checkable deposits and currency in circulation
7. (TCO 7) The basic requirement of money is that it be (Points : 4)
backed by precious metals--gold or silver
authorized as legal tender by the central government
generally accepted as a medium of exchange
some form of debt or credit
8. (TCO 7) The Federal Reserve System of the U.S. is the country's (Points : 4)
financial adviser
comptroller or accountant
central bank
deposit insurance provider
9. (TCO 7) Which of the following is the most important function of the Federal Reserve System? (Points : 4)
Setting reserve requirements
Controlling the money supply
Lending money to banks and thrifts
Acting as fiscal agent for the U.S. government
10. (TCO 7) Money is "created" when (Points : 4)
a depositor gets cash from the bank's ATM
a bank accepts deposits from its customers
people receive loans from their banks
people spend the incomes that they receive
11. (TCO 7) During the financial crisis of 2007-2008, the FDIC increased deposit insurance coverage from (Points : 4)
$50,000 to $100,000 per account
$100,000 to $250,000 per account
$200,000 to $500,000 per account
$500,000 to $1,000,000 per account
12. (TCO 7) The purchase and sale of government securities by the Fed is called (Points : 4)
federal funds market
open market operations
money market transactions
term auction facility
13. (TCO 7) The Federal Reserve could reduce the money supply by (Points : 4)
selling government bonds in the open market
buying government bonds in the open market
operating the term auction facility
reducing the discount rate
14. (TCO 8) Which country is the United States' largest trading partner in terms of volume of trade? (Points : 4)
15. (TCO 8) The principal concept behind comparative advantage is that a nation should (Points : 4)
maximize its volume of trade with other nations
use tariffs and quotas to protect the production of vital products for the nation
concentrate production on those products for which it has the lowest domestic opportunity cost
strive to be self-sufficient in the production of essential goods and services
16. (TCO 8) A tariff is a (Points : 4)
Price ceiling
Quantity limit
17. (TCO 8) Tariffs and quotas are costly to consumers because (Points : 4)
the price of the imported good falls
the supply of the imported good increases
import competition increases for domestic goods
consumers shift purchases to higher-priced domestic goods
18. (TCO 8) Tariffs and import quotas would benefit the following groups, except (Points : 4)
consumers of the product
domestic producers of the product
workers in domestic firms producing the product
the government of the importing country
19. (TCO 8) Which organization meets regularly to establish rules and settle disputes related to international trade? (Points : 4)
The United Nations Commission on Trade Law
The United Nations Conference on Trade and Development
The World Trade Organization
The Federal Reserve Board
20. (TCO 9) U.S. businesses are demanders of foreign currencies because they need them to (Points : 4)
produce goods and services exported to foreign countries
pay for goods and services imported from foreign countries
receive interest payments from foreign governments
receive interest payments from foreign businesses.
Page 3
1. (TCO 9) In the balance of payments statement, a current account surplus will be matched by a (Points : 4)
capital and financial accounts deficit
capital and financial accounts surplus
trade deficit
trade surplus
2. (TCO 9) A trade deficit means a net (Points : 4)
inflow of payments for goods and services
outflow of goods and services
inflow of goods and services
excess of exports over imports
3. (TCO 9) Foreign exchange rates refer to the (Points : 4)
price at which purchases and sales of foreign goods take place
movement of goods and services from one nation to another
price of one nation's currency in terms of another nation's currency
difference between exports and imports in a particular nation
4. (TCO 9) When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has (Points : 4)
5. (TCO 9) The monetary system for conducting international trade is usually described as a system of (Points : 4)
fixed exchange rates
freely floating exchange rates
a managed gold standard
managed floating exchange rates.
6.  (TCO 8) a) Explain four problems with the argument that trade protection is needed to protect American jobs.  b) Describe the economic reasons why businesses use offshoring.
7.  (TCO 6) a) Identify the four major tools of monetary policy. b) How can monetary policy address the problem of inflation? 


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    Attached: ECON 312 Final Exam.docx


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