Final Exam

1. If I have the right to play my music loud, what can my friend do to make both of us happier?

A. call the police

B. provide a subsidy

C. pay me to wear earphones

D. charge him a tax

2. How would an economist reduce congestion on the causeway to Bahrain?

A. only allow white cars to use it

B. charge people more to use it when it is busy

C. build a new causeway

D. subsidize traffic on the weekends

Please use graph 1 to answer the next three questions. Assume that the world price is 10 and importing is allowed

Also assume that a tariff of 10 is imposed.

3. How many pizzas will be sold?

A. 6

B. 7

C. 8

D. 9

4. How much will the government collect in tariff?

A. 40

B. 60

C. 80

D. 120

5. How many pizzas will be sold by domestic producers?

A. 2

B. 5

C. 6

D. 8

Please use the graph 2 to answer the next three questions. Assume that the government would like the price of pizzas to be 20

 

6. How large will the subsidy per pizza need to be?

A. 30

B. 60

C. 80

D. 110

7. How much will this program cost the government?

A. 60

B. 120

C. 240

D. 480

8. How much will the deadweight loss be?

A. 10

B. 90

C. 120

D. 160

9. What is rivalry in consumption?

A. the property of a good whereby a person can be prevented from using it.

B. the property of a good whereby a person cannot be prevented from using it.

C. the property of a good whereby one person’s use diminishes other people’s use

D. the property of a good whereby one person’s use does not diminish other people’s use

10. How do you correct for a negative externality?

A. impose a tariff

B. provide a subsidy

C. impose a price floor

D. impose a tax

11. If you allow exports out of Saudi Arabia, who will be happy?

A. domestic buyers and domestic producers

B. foreign buyers and domestic producers

C. domestic buyers only

D. domestic producers only

12. If fixed costs are 5000 and variable costs are 10 and the sale price is 20, what is the breakeven point?

A. 50,000

B. 100,000

C. 500

D. 4,980

13. If Ali thinks that you should receive services from the government regardless of your income, he is following what principle?

A. ability-to-pay

B. proportional

C. regressive

D. benefits

14. _________ make inventions into innovations and ____________ make ideas into inventions.

A. inventors, entrepreneurs

B. competitors, monopolists

C. entrepreneurs, inventors

D. economists, inventors

15. Use graph 3. What will the total profit be if you are maximizing?

3

 

A. 60

B. 80

C. 120

D. 180

16. Use the following table. What is the marginal cost of the 4^th unit?

Unit         Total Cost

1             10

2             22

3             34

4             41

5             50

A. 10

B. 7

C. 62

D. 75

17. If a monopolist sells 10 units at 49 SAR and 11 units at 48 SAR, what is the marginal revenue when they go from 10 to 11 units?

A. 38

B. 49

C. 39

D. 50

18. Name the four market structures.

A. differentiation, competition, duopoly, monopoly

B. marginal, average, total, variable

C. monopoly, perfect competition, oligopoly, monopolistic competition

D. steep, flat, elastic, inelastic

19. Where are profits maximized?

A. where marginal revenue equals variable costs

B. where marginal revenue equals average total costs

C. where marginal revenue equals marginal costs

D. where marginal revenue equals demand

20. If Ali’s opportunity cost is higher than Ahmed’s opportunity cost, who has the comparative advantage?

A. Ali

B. Ahmed

C. they are equal

21. In every transaction there is one price and _____ values.

A. one

B. two

C. three

D. infinite

22. What economic concept is used to analyze oligopolies?

A. MC=MR

B. marginal analysis

C. game theory

D. ATC = Q

23. If the price of a Big Mac is 12 riyals today and it was 15 riyals last year, what is the percentage change from last year to this year?

A. 12%

B. -20%

C. 25%

D. -3%

24. What do firms sell in the circular flow diagram?

A. finished goods and services

B. haircuts

C. factors of production

D. candy bars

25. If the price increases from 15 to 20 and the quantity demanded decreases from 100 to 60, is the demand elastic or inelastic?

A. elastic

B. inelastic

26. Is there more than one possible efficient combination of products on a production possibilities frontier?

A. yes

B. no

27. If your income goes up by 10% and your demand for Snickers goes up by 20%, what is a Snickers to you?

A. normal

B. substitute

C. luxury

D. inferior

28. If the price of Big Macs increases from 15 to 18, and the quantity demanded for French fries decreases from 5 to 4, what is the cross price elasticity?

A. -1.0

B. 2.0

C. -0.5

D. 0.5

29. If the price of product A increases by 10% and the quantity demanded of product B increases by 8%, what is the relationship between the two products?

A. complements

B. substitutes

C. no relationship

D. normal

30. If demand increases and supply decreases, what will happen to prices?

A. increase

B. decrease

C. no change

D. unknown

31. How do you eliminate a shortage or surplus?

A. have the government set the price

B. allow the price to increase or decrease

C. subsidize sellers

D. subsidize buyers

32. If the government price ceiling is below the equilibrium price what will happen?

A. shortage

B. surplus

C. no effect

D. shift in demand

33. Normative economic statements are?

A. opinions

B. facts

C. utility

D. happiness

34. If your income increases from 1000 to 1200, and your quantity demanded for Applebees decreases from twice a month to once a month, what is Applebees to you?

A. normal

B. substitute

C. luxury

D. inferior

35. If demand decreases and supply decreases, what will happen to the equilibrium quantity?

A. increase

B. decrease

C. no change

D. unknown

36. According to the Laffer Curve, what happens if you increase the tax rate?

A. tax revenues could increase

B. tax revenues could decrease

C. tax revenues could remain the same

D. all of the above are possible

37. What does Ceteris Paribus mean?

A. supply equals demand

B. government price controls

C. equilibrium

D. all other things equal

For the next two questions, assume the following progressive tax rate brackets:

Income         Rate
0-1000           0%
1001-2000    10%
2001-3000    15%
Above 3001   20%

38. If you earn 6000, how much will you pay in taxes?
Dropped from Exam

A. 1500

B. 950

C. 500

D. 300

39. Would you prefer the progressive tax system or a flat tax rate of 15%?
Dropped from Exam

A. progressive

B. flat

40 If the government subsidizes a product, who will be happy?

A. buyers

B. sellers

C. both buyers and sellers

D. neither buyers or sellers

5 short answer questions. Each question is worth 4 points. 20 points potential

1. What type of good is the ring road and explain why. 

Public good - when there is no traffic

Common Resource - when it is crowded.

2. Name four reasons for restricting imports

Protect jobs

National Defense

Infant Industries

Fairness

3. What are the five capitals and which one is most important?

Cultural - most important

Human

Physical

Financial

Intellectual

4. What are the five economic ages?

Hunter-Gatherer

Agricultural

Industrial

Information

Mobile

5. Name five reasons the demand curve shifts.

Population

Income

Tastes and Preferences

Prices of Related Goods

Expectations