ECON 312 Final Exam-Summer A

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1ECON 312 Final Exam-Summer A1.(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 economicdecision.2.(TCO1) Which is not a factor of production? (Points : 4)MoneyLandLaborCapital3.(TCO1) A point outside the production possibilities curve is (Points : 4)attainable, but there is not full employmentattainable, but there is not optimal allocationunattainable because the economy is inefficientunattainable because of limited resources4.(TCO1) A basic characteristic of a command system is that (Points : 4)wages paid to labor are highergovernment owns most economic resourcesfreemarkets are never permitted in a command economygovernment planners play a limited role in deciding what goods will be produced5.(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 demandedAn increase in the price of pizza causes an increase in the quantity of pizza demandedAn increase in the price of hamburgers causes a decrease in the quantity of hamburgersdemandedA decrease in the price of turkey sandwiches causes a decrease in the quantity of turkeysandwiches demanded6.(TCO 2) A decrease in supply and a decrease in demand will (Points : 4)increase price and affect the equilibrium quantity in an indeterminate waydecrease the equilibrium quantity anddecrease priceincrease the equilibrium quantity and affect price in an indeterminate waydecrease the equilibrium quantity and affect price in an indeterminate way7.(TCO 2) You are the sales manager for a software company and have been informed that theprice elasticity of demand for your most popular software is less than one.To increase totalrevenues, you should (Points : 4)

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2increase the price of the softwaredecrease the price of the softwarehold the price of the software constantincrease the supply of the software8.(TCO 2) The price elasticity of demand increases with the length of the period consideredbecause (Points : 4)consumers' incomes will increase over timethe demand curve will shift outward as time passesall prices will increase over timeconsumers 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 riseuntil total revenue equals total costuntil marginal cost equalsaverage variable costas long as marginal revenue is greater than marginal cost10.(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 sellstickets 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 nothave 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 productenlarge the market share for each producerminimize the costs of productionmaximize joint profits12.(TCO 3) The main difference between the short run and the long run is that (Points : 4)firms earn zero profits in the long runthe long run always refers to a time period of one year or longerin the short run, some inputs arefixedin the long run, all inputs are fixed13.(TCO 4) A recession is a decline in (Points : 4)the inflation rate that lasts six months or longerthe unemployment rate that lasts six months or longerreal GDP that lasts six months or longerpotential GDP that lasts six months or longer

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314.(TCO 4) The unemployed are those people who (Points : 4do not have jobs.are not employed but are seeking workare not workingare not working15.(TCO 4) GDP is the market value of (Points : 4)resources (land, labor, capita, and entrepreneurship) in an economy in a given yearall final goods and services produced in an economy in a given yearconsumption and investment spending in an economy in a given yearall output produced and accumulated over the years16.(TCO 4) Nominal GDP differs from real GDP because (Points : 4)nominal GDP is based on constant pricesreal GDP is based on current pricesreal GDPis adjusted for changes in the price levelnominal GDPis adjusted for changes in the pricelevel17.(TCO 6) When the federal government uses taxation and spending actions to stimulate theeconomy it is conducting (Points : 4)fiscal policyincomes policymonetary policyemployment policy18.(TCO 6) Refer to the graph.Whatcombination would most likely cause a shift from AD1 toAD3?Increases in taxes andgovernment spendingDecrease in taxes andincrease in government spendingIncrease in taxes anddecrease in government spending

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