Principles of Economics

EC 201
Cal Poly Pomona
Dr. Bresnock

Kenneth Berns
Quiz 1
4/6/2016

Spring 2016
Quiz 1 (10 points)
1. When we are forced to make choices we are facing the concept of:
A)
B)
C)
D)

exploitation.
efficiency.
scarcity.
the margin.

A)
Incorrect: Exploitation is benefiting from resourses which doesnt have to do with
making choices.
B)
Incorrect: Efficiency refers to how optimally we use resourses, not forcing us to
make choices.
C)
Correct: When making choices we face scarcity. If there wasnt scarcity, we could
just have everyting. Because scarcity exists, we are forced to make choices.
D)
Incorrect: The margin is a set of restraints conceptualized as a border and not a
reason for us making choices.
2. Which question is an illustration of a microeconomic question?
A)
Is capitalism superior to socialism?
B)
Is the purchasing power of the dollar higher or lower today than it was in 2000?
C)
Is the quantity of wine purchased in one year dependent upon the price of wine?
D)
Does government spending influence the total level of employment in the
economy?
A)
B)
C)
D)

Incorrect: This is a poitical / philosophical question.

Incorrect: This is a macroeconomic question.
Correct: This is a microeconomic question because it deals with a scarcity.
Incorrect: This is a macroeconomic question.

3. The basic economic problem is the combined existence of:

A)
growing populations and the depletion of natural resources.
B)
inflation and unemployment.
C)
economic freedom and income equality.
D)
scarce economic resources and unlimited economic wants.
A)
B)

Incorrect: This is an economic problem, but not the basic economic problem.
Incorrect: This is an economic problem, but not the basic economic problem.
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C)
Incorrect: This is an economic problem, but not the basic economic problem.
D)
Correct: There are scarse economic resources and unlimited economic wants,
which is the basic economic problem. Since people always want more and there isnt always
more to give, economics become an issue.
4. Economists would classify all of the following as land except:
A)
a hydroelectric dam.
B)
crude oil reserves.
C)
iron ore deposits.
D)
two thousand acres of virgin forest.
A)
B)
C)
D)

Correct: A hydroelectric dam would be considered capital. Its not natrual capital.
Incorrect: Crude oil reserves are land, they are natrual capital.
Incorrect: Iron ore deposits are land, they are natrual capital.
Incorrect: Two thousand acres of virgin forest is land, they are natrual capital.

5. Clara states that "there is a high correlation between the level of people's education and
the level of their income." Ellie replies that the correlation occurs because "more
education is the best way to earn more income in this country."
A)
Clara's statement is normative and Ellie's statement is positive.
B)
Clara's statement is positive and Ellie's statement is normative.
C)
Both Clara's and Ellie's statements are normative.
D)
Both Clara's and Ellie's statements are positive.
A)
Incorrect: A is incorrect for the reasons B is correct.
B)
Correct: Claras statement is positive because it just stating factual information.
Ellies statement is normative because shes subjectively saying that getting an education is the
best way to earn a higher income.
C)
Incorrect: C is incorrect for the reasons B is correct.
D)
Incorrect: D is incorrect for the reasons B is correct.

A)
B)
C)
D)

6. Which would not be considered as capital (or an economic resource) by an economist?

an automobile used by General Electric
a razor used by a barber
a share of corporate stock issued by General Motors
a crane used by a building contractor
A)

Incorrect: An automobile used by General Electric is capital because its a tool or

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equiptment.
B)
C)
D)
equiptment.

Incorrect: A razor used by a barber is capital because its a tool or equiptment.

Correct: Corporate stock is not capital, because it is just money!
Incorrect: A crane used by a building contractor is capital because its a tool or

7. With allocative efficiency:

the available supplies of factors of production are fixed in both quantity and
quality.
B)
there is production of that particular mix of goods and services most wanted by
society.
C)
the state of technology, or methods used to produce output, do not change.
D)
there is production of any particular mix of goods and services in the least costly
way.
A)

A)
Incorrect: Allocative efficiency is about the income costs, not quality or quantity.
B)
Incorrect: Allocative efficiecny is about the consumers benefits, not societys.
C)
Incorrect: The state of technology not changing is not allocative efficiency.
D)
Correct: This is dealing with allocative efficiency because consumers want to
have the same or less marginal costs when producing a particular mix of goods and services.
Use the following to answer Questions 8-9:
The question(s) below are based on the following four data sets: (1), (2), (3), and (4). In each set,
the independent variable is in the left column and the dependent variable is in the right column.

8. There is an inverse relationship between the independent and dependent variable in the
above data sets:
A)
3 and 4.
B)
2 and 4.
C)
2 and 3.
D)
1 and 3.
A)
B)
C)
D)

Incorrect: 4 in not an inverse relationship because they both increase.

Incorrect: 2 and 4 are not inverse relationships because they both increase.
Incorrect: 2 is not an inverse relationship because they both increase.
Correct: 1 and 3 show an inverse relationship because as one increases, the other

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decreases.
9. The linear equation for data set 1 above is:
A)
B = 6 - 7B .
B)
B = 7A.
C)
B = 6 - .14A.
D)
A = .14B.
A)
Incorrect: see C
B)
Incorrect: see C
C)
Correct: B = 6 - .14A 6 = 6 - .14(0)
D)
Incorrect: see C.
Use the following to answer Question 10:

6=6

10. Refer to the above graph. The slope of the line tangent to the curve at point C is:
A)
-2.0.
B)
-1.0.
C)
0.
D)
-.5.
A)
B)
C)
D)

Correct: -6 / 3 = -2
Incorrect: see A
Incorrect: see A
Incorrect: see A

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