Question

1) The rules and laws that govern economic life are called ___________.

a) Incentives

b) Scarcity

c) Terms of Trade

d) Institutions

2) When supply increases, the supply curve shifts _______.

a) Up and to the right

b) Up and to the left

c) Down and to the right

d) Down and to the left

3) A competitive equilibrium is efficient because it maximizes ______.

a) Consumer surplus

b) Producer surplus

c) Total surplus

d) All of the above

4) Consider the market for ice cream. Which of the following would you expect to cause the equilibrium price of ice cream to increase?

a) A decrease in the price of cream

b) An increase in the prize of frozen yogurt

c) Both a and b

d) Neither a nor b

5) Which of the following would NOT be counted as part of U.S. GDP in 2017?

a) A 2016 model year car sold in the United States in 2017

b) Eggs produced in the United States in 2017 and sold to consumers

c) The wages of an American soldier

d) A hockey stick produced by a Canadian worker in Detroit

6) Which of the following variables corrects for the effects of population but no inflation?

a) Real GDP

b) Real GDP per capita

c) Nominal GDP

d) Nominal GDP per capita

7) Which of the following is TRUE?

a) There was a lot of variation in real GDP per capita across countries in the year 1000

b) There was a lot of variation in real GDP per capita across countries in the year 2016

c) Both a and b

d) Neither a nor b

8) In the Solow growth model, why do countries grow faster when their capital stock is low?

a) Countries invest a larger fraction of output when the capital stock is low

b) When the capital stock is low, it is used less intensively, causing less depreciation

c) A country's economic institutions are stronger when it has a lower capital stock

d) The marginal product of capital is higher when the capital stock is low, increasing the return on investment.

9) Which of the following countries would the Solow growth predict to have the highest growth rate?

a) A poor country with bad economic institutions

b) A poor country with good economic institutions

c) A rich country with bad economic institutions

d) A rich country with good economic institutions

10) In the Solow growth model, what can explain long-run economic growth, such as that experienced in the United States?

a) Increases in technical knowledge

b) Increases in physical capital

c) Increases in human capital

d) Increases in investment rate

Answer 1

1) b) Scarcity

Human wants are unlimited but resources are scarce. So, to attain maximum utility, consumers have to make choices.

2) c) Down and to the right

Increase in supply means supply increases due to change in factors other than the price of commodity itself. It shifts supply curve rightwards.

3) d) All of the above

Competitive equilibrium is where there is no deadweight loss. All who wants to buy the good get the good. Consumer and producer surplus are maximized.

4) b) An increase in the prize of frozen yogurt

Frozen yogurt and ice cream are substitutes of each other which means it is consumed in place of each other. Increase in the price of frozen yogurt increases the demand of ice cream which shifts demand curve rightwards and increases the equilibrium price of ice cream.

5) a) A 2016 model year car sold in the United States in 2017

GDP contributes value of final goods and services produced within a given period of time.