Economics

Adam Smith wrote in The Wealth of Nations, Book II, Chapter 2, In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so.

Adam Smith’s quotation would most likely be used to defend which of the following policies?

Higher taxation of corporate profits
Less stringent regulation of commerce
More subsidies for farmers
Stricter restrictions against monopolies

Question 2 (Multiple Choice Worth 4 points)

(05.02 HC)

Country A has an absolute command economy. Country B has a mixed economy and a population that favors market trade. Both want to increase trade to generate more wealth. Which action would Country B most likely take that Country A would not?

Impose stricter divisions of labor
Increase production quotas
Loosen certain trade regulation
Permit limited private ventures

Question 3 (Multiple Choice Worth 4 points)

(05.05 MC)

Global Free Trade Zones

Map indicates the following free trade zones NAFTA is Canada, Mexico, and the U.S. EU-CARICOM includes Europe, Caribbean islands, and South American countries DR-CAFTA includes the U.S., Central American countries, and Caribbean islands; ALADI is most of South America, Cuba, and Mexico; EEA/EUCZ/CEFTA includes Greenland and most of Europe CISFTA is made of former Soviet states GAFTA is in the Arabian Peninsula and North Africa ECOWAS for West Africa CEMAC for some countries in Africa AFTZ includes all African except members of ECOWAS and CEMAC SAFTA is for Himalayan nations APTA includes India, China, and South Asia ASEAN includes Southeast Asia, China, South Korea, and Japan SPARTECA is Australia and Pacific Islands and AANZFTA is for countries in the South West Pacific and Southeast Asia.
Public Domain

According to the map, which of the following statements is true?

Russia remains heavily interdependent with nations of both Europe and Asia.
The nations of Africa are heavily dependent upon one another for trade.
Economically speaking, the nations of Europe operate independently from one another.
The nations of South America have a high level of interdependence.

Question 4 (Multiple Choice Worth 4 points)

(05.04 MC)

A table with title, Hours to Produce One Liquid Unit. Greece produces olive oil in 35 worker hours and wine in 60 worker hours. France produces olive oil in 35 worker hours and wine in 45 worker hours. Italy produces olive oil in 30 worker hours and wine in 30 worker hours. There is a blank column for each country titled additional worker hours to produce wine instead of olive oil.

Given the data in the chart above, which of the following statements is true?

France has a comparative advantage in olive oil production.
Greece has an absolute advantage in wine and olive oil production.
Greece has a comparative advantage in wine production.
Italy has an absolute advantage in wine and olive oil production.

Question 5 (Multiple Choice Worth 4 points)

(05.06 LC)

The most immediate impact of rising inflation is

decreasing trade
higher prices
increasing money supply
less hiring

Question 6 (Multiple Choice Worth 4 points)

(03.04 MC)

Which of these businesses are in monopolistic competition?

Two clothing shops, one selling women’s clothing and the other selling kids’ clothing
Two agricultural producers, each selling a variety of kinds of citrus fruit
Two pet stores, one of which sells dog products and the other of which sells bird products
Two phone providers, each offering benefits to customers who switch to its service

Question 7 (Multiple Choice Worth 4 points)

(01.04 MC)

Graph titled Quantity Demanded versus Price, with x axis labeled in 10 unit increments from 0 to 70. Y axis is labeled with prices 0 to 60 dollars, in increments of 10. A blue line starts at 5, 50 and drops at an angle down to 60, 10.

A game store sells the latest Dungeoncrawl game at the suggested retail value. Initially, the game sells well, until a combination of bad reviews and word of mouth reduce demand drastically. What should the store do to sell the remaining Dungeoncrawl games?

Buy more Dungeoncrawl games from the supplier.
Increase the price to increase demand.
Keep the price the same until demand goes up again.
Reduce the price until the games are sold.

Question 8 (Multiple Choice Worth 4 points)

(05.03 LC)

Which of the following statements most directly relates to the broad economic goal of freedom?

Allowing parents to choose between public and private schooling for their children, through vouchers
Allowing the National Park Service to initiate a program of controlled forest fires to clear undergrowth
Increasing funding for space exploration to boost high-tech employment and develop new technologies
Increasing income taxes for the rich so that tax money can fund aid for the economically disadvantaged

Question 9 (Multiple Choice Worth 4 points)

(01.06 HC)

Graph with x axis labeled in 500 unit increments from 0 to 3000. Y axis is labeled with prices 0 to 30 dollars in increments of 5. A blue supply line starts at 500, 5 and ascends at an angle upward to 2500, 25. A red line demand starts at 500, 25 and drops at an angle down to 2500, 5.

Look at the graph. A bookstore owner increases the price of art books to $25. Which of these would occur?

A higher equilibrium point, because demand and price increased
A lower equilibrium point, because the supply will increase
A shortage, because the price is lower than equilibrium price
A surplus, because the price is higher than equilibrium price

Question 10 (Multiple Choice Worth 4 points)

(03.06 MC)

Rod has a business making silver and gold jewelry charms in the shapes of molecules. He has five metalsmiths who work for him. One week, his production possibilities curve shifts inward. What could explain this shift?

A prominent actor begins displaying one of Rod’s jewelry charms.
Rod hires two new metalsmiths, and they increase his production.
The price of gold decreases, allowing Rod to increase his gold supply.
Two metalsmiths catch a viral infection and take sick days.

Question 11 (Multiple Choice Worth 4 points)

(03.03 MC)

Paul and his friend Tori make decorative art out of silver spoons. They want to start a business that they can easily dissolve when they move on to their next project. Which of these will suit their needs best?

Corporation
Limited liability corporation
Partnership
Sole proprietorship

Question 12 (Multiple Choice Worth 4 points)

(03.05 MC)

Marginal Cost Analysis Graph

A marginal cost analysis graph with x axis Quantity and y axis Price. There are no units on the x or y axis, but assuming 0 to 10 for both axes. The marginal cost curve starts at 0, 4 and slopes down to 4, 2. It then rises from 4, 2 to 10, 10. There is a marginal cost line at extending from 0, 6 to 10, 6. The letters A to D are on the graph at the following locations: A 2, 2, B 6, 4, C 8, 6, D 10, 10.
© Jarry1250 2010
Creative Commons Attribution-Share Alike 3.0 Unported

Mykha’s company makes jewelry from doll shoes. She increases production but finds that her costs continue to rise while profits decrease. What letter on the graph represents Mykha’s situation?

A
B
C
D

Question 13 (Multiple Choice Worth 4 points)

(03.06 MC)

Two column chart. Headings are Day and Pot stickers per hour. Data as follows 1, 20 2, 22 3, 21 4, 10 5, 15 6, 50 and 7, 55.

Sayuri’s Asian Café makes the best pot stickers in town. Sayuri tracks her production over the course of seven days. What would explain the low production on days 4 and 5?

A new hire was being trained to make pot stickers.
Sayuri bought a better pot sticker machine.
The chef increased his pot sticker production.
Sayuri lowered the price of her pot stickers.

Question 14 (Multiple Choice Worth 4 points)

(05.04 MC)

A table showing worker hours to produce one unit of two common resources. Canada can produce lumber in 5 and oil in 20 worker hours. Russia produces lumber in 10 and oil in 10 worker hours. Saudi Arabia produces lumber in 60 and oil in 5 worker hours. United States produces lumber in 10 and oil in 15 worker hours. Venezuela produces lumber in 40 and oil in 15 worker hours. A third column, Worker Hours to Produce Oil instead of Lumber, has question marks instead of numbers for each country.

Based on this chart, which statement is true?

Saudi Arabia has an absolute advantage over the other countries in lumber production.
Russia has an absolute advantage over the other countries in oil production.
The United States has a comparative advantage over Russia in oil production.
Venezuela has a comparative advantage over Canada in oil production.

Question 15 (Multiple Choice Worth 4 points)

(05.05 LC)

To protect consumers from potentially dangerous manufactured goods, the U.S. government is most likely to use which kind of trade barrier?

License
Quota
Regulation
Tariff

Question 16 (Multiple Choice Worth 4 points)

(03.04 MC)

Merv’s Hardware, a small family-owned store in Middletown, sells a 100-pack of garnet sandpaper for $35. The Home Shoppe, a large retail hardware chain in neighboring Morristown, sells the same product for $29. Based on this scenario, what would you expect Merv’s immediate response to be?

Merv will remove his advertisements and rely on word of mouth.
Merv will reduce his price to respond to the price competition from the HomeShoppe.
The HomeShoppe will initiate non-price competition with Merv.
The HomeShoppe will raise its price to respond to the price competition from Merv.

Question 17 (Multiple Choice Worth 4 points)

(03.06 MC)

Occupation Salary
Attorney $77,000
Software Engineer $63,000
Administrative assistant $33,000
Elemetary school teacher $40,000
Registered Nurse $53,000
Construction project manager $72,000
Based on the chart, which of these statements is true?

Administrative assistants and attorneys require the most training.
Attorneys and construction managers are in high demand.
Attorneys and teachers have the least amount of training.
Nurses and software engineers are in low demand.

Question 18 (Multiple Choice Worth 4 points)

(05.02 MC)

Bar graph titled GDP per capita. The United States GDP is at 48,000. Australia at 41,000. China at 8,400. Ecuador at 8,500. India at 3,700. Namibia at 7,500. Russia at 16,700.

Given the data in the chart, which of the following statements is true?

Australia is more developed than the United States.
China and Ecuador are more developed than Australia.
India and Namibia are less developed than Russia.
The United States is less developed than India.

Question 19 (Multiple Choice Worth 4 points)

(03.02 MC)

Which of these are necessary capital investments for starting a free-range poultry farm?

Bedding, five acres of land, ability to secure permits
Chicks, chicken feed, roosting perches
Shovels, farmhand, delivery trucks
Water-delivery system, nesting boxes, barn

Question 20 (Multiple Choice Worth 4 points)

(01.05 MC)

Graph titled Quantity Supplied versus Price. The x axis is labeled in 500 unit increments from 0 to 3000. Y axis goes from 0 to 0.30 dollars in increments of 0.05. A blue line starts at 500, 0.05 and ascends at an angle upward to 2500, 0.25.

Which scenario does this graph illustrate?

Companies need to maximize production, so they will produce less and charge more.
Companies want to make money, so they increase production as price increases.
Consumers need to spend wisely, so they will purchase more goods at a lower cost.
Consumers want a good deal and will pay more money for a quality product.

Question 21 (Multiple Choice Worth 4 points)

(05.02 MC)

In 2011, Brazil had a GDP of $2.3 trillion and a per capita GDP of $11,800. A fifth of the population lived below the poverty line, and life expectancy was about 73 years. Which of these additional factors would most support the conclusion that Brazil is an emerging economy rather than a developing economy?

A poorly educated workforce
High social security costs
Rapidly increasing exports
Underdeveloped infrastructure

Question 22 (Essay Worth 4 points)

(03.01 MC)

Entrepreneurs

An Wang
Madame C. J. Walker
Samuel F. B. Morse
Joseph A. Unanue
Choose one of the entrepreneurs from this list. Write an essay about how your chosen entrepreneur has affected life today. Detail challenges he or she faced and explain how this person embodies one or more characteristics from the HUNT. Present your response in a clear, organized manner and cite examples as needed.