1. The fundamental economic problem all societies face is that choice is necessitated by
   ______
   democracy.
   scarcity.
   capitalism.
   utilitarianism.
   

2. In which of the following is scarcity the least likely to be relevant?
   The last cookie in the cookie jar.
   Clean air in the atmosphere.
   One hour of your time.
   Love and spirituality.
   

3. True of false: The benefits of biodiversity, wilderness areas, and clean air are not
   economic because these aspects of the natural environment are not bought and sold in
   markets and thus do not have a price to indicate scarcity and value.
   True.
   False.
   

4. The opportunity cost of an action is:
   The sum of the value generated by each of the possible alternatives available
   when a choice is to be made.
   The value of the next-best alternative, which was passed up when the action
   was taken.
   The penalty associated with opportunistic behavior such as cheating on tests or shop-lifting.
   The incentive for effort and risk-taking--normally associated with an opportunity economy--that is lost in centrally-planned economies.
   

5. Structural unemployment refers to
   Permanent job losses due to technological or other changes in markets, a classic example being the permanent decline in horse-drawn buggy manufacturing.
   The unemployment that occurs as people voluntarily change jobs.
   The unemployment that occurs as a consequence of recessions.
   A problem that only occurs in centrally-planned economies such as those of the former Soviet Union.
   

6. Empirically, the most important overall explanation for why U.S. manufacturing firms re-locate their plants in developing countries appears to be that:
   Stringent US pollution regulation reflects at least one-half of the overall cost of producing manufactured goods in the US, which drives manufacturers to "pollution havens" in developing countries.
   People in developing countries consume a larger volume of consumer goods per capita than do Americans.
   Immigration into the US has kept labor costs relatively low in the US.
   Labor costs are commonly an order of magnitude lower in developing countries, and labor costs are commonly at least one-half of the overall cost of producing manufactured goods.
   

7. What share of the world's income does the wealthiest 20% of the world's population receive?
   28.7%.
   82.7%.
   45.3%.
   99%.
   

8. How much of the world's income does the poorest 20% of the world's population receive?
   1.4%.
   16.4%.
   20.1%.
   30.67%.
   

9. Deontological ethics proposes theories of action based on
   The premise of an open society featuring diverse values, cultures, and attitudes toward civic virtue.
   Duty or moral obligation to select an intrinsically correct action, regardless of the desirability of the outcome anticipated as the consequence of the action.
   The desirability of the outcome anticipated as the consequence of the action.
   Appropriating the earths resources to satisfy human wants.
   

10. Teleological ethics proposes theories of action based on
    The premise of an open society featuring diverse values, cultures, and attitudes toward civic virtue.
    Duty or moral obligation to select an intrinsically correct action, regardless of the desirability of the outcome anticipated as the consequence of the action.
    The desirability of the outcome anticipated as the consequence of the action.
    Appropriating the earths resources to satisfy human wants.
    

11. According to act utilitarianism a social rule is ethical if
    The rule benefits the people in power.
    After adding up all the utility and disutility the rule causes for all members of society, a net positive value for social utility results that is larger than under any alternative social rule.
    The rule is held to be intrinsically right based on shared social values in the community.
    Aggregate costs exceed aggregate benefits, but the costs are borne by a few while the benefits accrue to the majority of society.
    

12. According to Jeremy Bentham, an effective and ethical policy is one:
    That maximizes profit for corporations.
    That best instills a system of deontological ethics.
    That maximizes the net utility to society relative to all other options under consideration.
    That does not reduce the utility of any member of society.
    

13. With regard to solutions for environmental degradation, Neo-Lockeans would advise
    That ecosystems and biodiversity have large intrinsic value, and therefore should be preserved regardless of opportunity cost.
    Comprehensive pollution-control regulation, followed closely by performance monitoring and sanctions for violations.
    That more environmental degradation is better than less.
    That environmental degradation can be averted by comprehensively assigning private property rights to all aspects of the natural environment, and allowing market forces to resolve shortages and surpluses by way of market price.
    

14. Positive Economics is...
    A method of analysis based on the western scientific tradition of modeling the world, then subjecting these models to empirical testing.
    A method of analysis based on determining the best course of action for a given objective and set of constraints.
    The process of comprehensively measuring and then adding up all of the positive and negative utility values associated with various social policy alternatives, and then choosing the policy with the largest net positive social value.
    A method for selecting "efficient" social policies, and utilizes the rule that the efficient policy alternative contributes the largest overall increase in Gross Domestic Product (GDP).
    

15. True or false: Society's dominant values, as reflected in the structure of it's social, economic, political, and cultural institutions, determine how the three fundamental economic questions are answered: what good/services are produced, how they are produced, and who gets the good/services. Economic systems in turn can shape the institutions they develop from.
    True.
    False.
    

16. Market capitalism is defined as...
    A socio-economic system in which scarce resources are owned by corporations and allocated by way of complex systems of gift exchange.
    A socio-economic system in which scarce resources are allocated by way of a complete set of centrally-planned government agencies.
    A socio-economic system in which scarce resources are privately rather than collectively owned, and these resources are allocated by way of a complete set of decentralized markets.
    A socio-economic system which establishes markets for resources owned by government and community agencies.
    

17. Which of the following is NOT consistent with the existence of a well-functioning competitive market?
    Well defined and enforceable private property rights.
    Low transaction costs.
    The presence of significant positive or negative externalizes.
    Easy entry and exit into and out of the market.
    

18. An equilibrium price exists in a market when...
    Marginal willingness-to-pay values are maximized.
    Price < Marginal Cost.
    There is neither a shortage nor a surplus.
    There is a maximum variety of goods on supermarket shelves, and substantial surpluses of each of these goods.
    

19. Given the following equation for supply, P=10+.05Q, what is the quantity supplied at a price of $20?
    55.55
    100.
    200.
    1000.
    

20. Given the following equation for demand, P=10-.05Q, what is the quantity demanded at a price of $5?
    100.
    200.
    1000.
    2222.22.
    

21. If supply is expressed as P=40+2Q, and demand is expressed as P=100-4Q, what is the equilibrium quantity in this market?
    100.
    50.
    10.
    5.
    

22. Using the two equations given in question 21 above, determine the equilibrium price:
    $60.
    $50.
    $70.
    $10.
    

23. _____ occurs when a full-information, well-functioning competitive market is in equilibrium:
    A fair and equitable distribution of income.
    Maximum efficiency, as measured by the sum of producer and consumer surplus.
    The satisfaction of all human wants and needs.
    Hegemony by a few huge multinational corporations.
    

24. Which of the following will cause a market failure?
    Monopoly supply.
    Large numbers of self-interested buyers.
    Large numbers of self-interested sellers, each of whom is small in size relative to the overall market.
    Both a&b above are correct.
    

25. Negative externalities can be defined as;
    External forces such as the price of substitute or complementary goods that shift market demand.
    External regulation imposed on firms by government regulatory bodies.
    Costs which are borne by the firm, and for which they are compensated by way of market price.
    Uncompensated costs generated from market or nonmarket transactions that are borne by others in society.
    

Questions:
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