Economics Part 2 Exam

A highly charitable person, such as Mother Theresa, will be influenced by

• changes in benefits, but not costs.
• changes in costs, but not benefits.
• both changes in benefits and costs.
• neither changes in benefits nor costs.

Susan is trying to decide whether to quit her $20,000 per year job so she can return to college next year as a full-time student. If she goes to college next year, her books and supplies will cost $500, tuition will cost $3,000, and her other expenses (transportation, housing, and food) will increase by $2,000. What is Susan's opportunity cost of attending college next year?

• $3,000
• 3,500
• $5,500
• $25,500

According to the law of supply, as the price of a good increases,

• buyers will buy more of the good.
• buyers will buy less of the good.
• sellers will produce more of the good.
• sellers will produce less of the good.

Caitlyn buys a new phone for $700. We can conclude that

• she must value the new phone more than the $700.
• she is $700 worse off.
• she would have been happier if she had saved the money instead.
• whoever sold her the phone is $700 worse off.

Does voluntary exchange create wealth (value)?

• No, exchange does not expand output.
• No, if one person gains, the other party must lose an equal amount.
• Uncertain: it does when it results in the creation of additional goods and services; otherwise, it does not.
• Yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of the exchange.

Voluntary trade promotes economic progress because it

• moves goods, services and resources from people who value them more to individuals who value them less.
• encourages individuals to become self-sufficient.
• makes larger outputs possible as a result of specialization.
• benefits buyers at the expense of sellers.

When competition is present and property rights protected and enforced, market prices will

• discourage profit-seeking business firms from producing efficiently.
• direct entrepreneurs toward production of goods that are inferior in quality.
• encourage self-interested individuals to develop skills that are expected to be valuable in the future.
• always decrease.

"More companies are avoiding rising oil prices by converting their energy equipment from oil to natural gas." This situation could be described as

• a shift in the demand curves for oil and natural gas.
• a movement along the demand curve for oil and a shift in the demand curve for natual gas.
• a movement along the demand curves for both oil and natural gas.
• a movement along the demand curve for natural gas and a shift in the demand curve for oil.

Which of the following would most likely increase the supply of gasoline?

• Lower prices of gas at the pump.
• Lower housing prices.
• A major oil boom in North Dakota.
• A fire destroys main refineries.

If you want to earn a high income you should figure out what others value because

• others will be willing to pay attractive prices for things they value.
• you will be able to gain at the expense of others
• you will not have to compete in the job market.
• you will then be able to charge higher prices than alternative suppliers.