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Final Exam November 2005 Section I: Multiple Choice - 20 marks Select the best answer for the following multiple choice questions below. Then write the answer clearly on the line next to the answer. Make sure you mark it very clearly. Select the best answer. _____ 1. What statement below is the best definition of opportunity cost? a. The resources that are used to produce a particular good to satisfy one want instead of another. b. The cost of one good compared to that of another. c. The satisfaction we gain from choosing one good instead of another. d. The cost of all that is lost from choosing one good or action instead of another. _____ 2. Which of the following is the best example of a positive or analytical statement? a. The unemployment rate declined for two months in Indonesia by more than 0.5%. b. An unemployment rate of more than 7% should be acceptable to the government. c. A change in government will surely cause the unemployment rate to fall. d. A high unemployment rate is unacceptable to most people. _____ 3. In a command economy, who or what decides what will be produced? a. The people decide through their elected representatives. b. The managers of state enterprises and factories decide. c. The needs and wants of people “decide” what will be produced. d. The central planners decide based upon the priorities of the nation. _____ 4. What does Adam Smith’s theory of the “invisible hand” mean? a. In a competitive environment, business prosperity in the economy by pursuing profits for themselves. b. Government is the invisible hand, promoting economic welfare. c. Consumers are the invisible hand, directing production within the market economy. d. Monopolies impose and invisible hand, reducing competition between producers.
_____ 5. What was Karl Marx’s major criticism of capitalism? a. It would inevitably be overthrown by the working middle class. b. It led to the exploitation of workers by a minority of capitalists. c. It produced insufficient goods and services to provide a decent living for all. d. Governments would never try to improve working and living conditions for workers. _____ 6. Which of the following best defines supply? a. The cost of producing a good or service. b. The cost of producing a good or service at a particular price. c. The quantity a producer will supply at a given price. d. The quantity supplied is based on suppliers’ desire for profit. _____ 7. Arrange the order of the following market structure from most competitive to least competitive: (1) monopolistic competition; (2) oligopoly; (3) monopoly; (4) pure competition. a. 1,2,3,4 b. 4,1,2,3 c. 2,1,3,4 d. 3,2,4,1 _____ 8. Which of the following would most likely would be a fixed cost for a manufacturing business? a. Rent b. Wages c. Raw Materials d. Electricity ____ 9. Which of the following would most likely be a variable cost for a manufacturing business? a. Property taxes b. Labour c. Rent d. Insurance _____ 10. Which of the following is a complete summary of expenditure-based GDP? a. C+I+G-X+M b. C+I-G+X+M c. C+I+G+X-M d. C-I+G+X-M
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Page 5 and 6: _____ 17. GDP falls and unemploymen
Page 7 and 8: 3. Calculate the unemployment rate
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