BECO Quiz

Question 1

An institution, in economics is

Answer 1

A rule governing social behavior, like a property right

Question 2

Rationality, in economics, means

Answer 2

individuals pursue their self interest, however they perceive it.

Question 3

The Scientific aspect of economics is

Answer 3

positive- it deals in statements of “is”

Question 4

Self-interest, in economics, means

Answer 4

trying to satisfy one’s preferences

Question 5

The first law of demand states

Answer 5

Price and quantity demanded are inversley related.

Question 6

All else being equal, consuming additional quantities of a good makes you less and less additionally happy. This principle is known as

Answer 6

Diminishing marginal utility

Question 7

In economics “cost” means

Answer 7

The value of the next best forgone alternative

Question 8

If a bakery currently is earning 2% accounting profit, but all other bakeries in town are earning 5% then the first bakery’s profit economically speaking is?

Answer 8

-3%

Question 9

Which of these is an example of a variable cost ( in the short run)

Answer 9

wage payments to labor

Question 10

A firm’s Average cost curve will typically have what shape?

Answer 10

Parabola- U shaped

Question 11

Which of the following laws of economics is the best description of what determines a worker’s wages?

Answer 11

Diminishing marginal returns.

Question 12

A firm maximizes profit by producing at the point where?

Answer 12

Marginal revenue = marginal cost

Question 13

The chief feature of markets is

Answer 13

Facilitating anonymous cooperation, and harnessing dispersed knowledge.

Question 14

Which of the following is a shifter of demand

Answer 14

changes in income, and changes in expected future price.

Question 15

Which of the following is shifter in supply?

Answer 15

Price of a factor of production

Question 16

Which of the following is the best descriptor of how markets work, according to the supply and demand model

Answer 16

Market activity is mostly random

Question 17

In economics, a situation from which nobody has any incentive to change his or her behavior is called

Answer 17

equilibrium

Question 18

the variable that adjust to “clear” markets is

Answer 18

price

Question 19

Which of the following conceptions of entrepreneurship was discussed in chapter 4?

Answer 19

entrepreneurship as ‘creative destruction’ and entrepreneurship as ‘alertness to profit opportunities’

Question 20

Hayek’s article “ The Use of Knowledge in Society.” was published in what year

Answer 20

1945

Question 21

Hayek’s article is about

Answer 21

How markets harness dispersed knowledge

Question 22

Which of the following are examples of price price discrimination

Answer 22

volume discounts, personal characteristic discounts, knowledge-based discounts

Question 23

socialism is best defined as

Answer 23

a system where all the means of production are publicly owned . e.g., no private property.

Question 24

what role do prices perform in a market economy

Answer 24

provide information about potentially profitable production ex ante
provide feedback about actual profitability ex post
provide and environment for creative arbitrage and entrepreneurship

Question 25

What phenomenon do Fama and Jensen explain in their article

Answer 25

Separation of ownership and control

Question 26

Which of the following assumptions is used in building the 'perfect competition model'

Answer 26

homogeneous product (output) Large number of buyers and sellers zero transaction costs

Question 27

According to Coase, which of the following best explain why firms exist

Answer 27

minimization of transaction cost

Question 28

What role does profit perform in a market economy

Answer 28

an incentive roe: profits reward successful production | an information role: profits give firms the knowledge they need to know if they are producing successfully.

Question 29

The best prediction of whether a firm will behave like a monopolist is

Answer 29

if there are legal barriers to entry

Question 30

According to Alchian and Demsetz, which of the following is not part of the explanation as to why firms exist?

Answer 30

separation of ownership and control

Question 31

A government's budget deficit is

Answer 31

the excess of spending over revenue

Question 32

Which of the following is not of one of Adam Smith's Taxation

Answer 32

Taxes should be flat, i.e., directly proportional to wealth, regardless of an individuals' level of wealth

Question 33

Which of the following does not partly determine a bond's price

Answer 33

interest rate on the bond

Question 34

The chief function of banks is

Answer 34

financial intermediary's.

Question 35

All else being equal , $100 today is worth more than $100 a year from now. what concept explains why

Answer 35

time value of money

Question 36

according to Salter (2014), monetary policy is best conceived as

Answer 36

adjustment of the money supply to meet macroeconomic goals

Question 37

Which of the following rules or institutions is not discussed by Salter (2014)

Answer 37

100% reserve banking

Question 38

Which of the following is an example of s real variable

Answer 38

unemployment rate

Question 39

Inflation can be socially costly because

Answer 39

- it may change the relative prices of goods and services - it may induce individuals to expend resources hedging against it. - it may result in individuals confusing genuine supply and demand changes with purely monetary changes.

Question 40

What is the phrase that refers to the erosion of the value of government bonds by inflation.

Answer 40

debt monetization

Question 41

Which of the following equations is relevant to understanding fiscal policy

Answer 41

Y=C+I+G+NX

Question 42

in order to have a stimulation effect, fiscal policy must

Answer 42

increase the deficit

Question 43

if fiscal policy significantly raises interest rates, the result can be

Answer 43

crowding out

Question 44

in order to be most effective, fiscal policy must be

Answer 44

timely, targeted,and temporary

Question 45

Which of the following economist developed ideas that challenged orthodox notions of fiscal policy

Answer 45

- F.A. Hayek - Milton Friedman - James Buchanan

Question 46

Normal spending , also called nominal GDP, is the same thing as

Answer 46

aggregate demand.

Question 47

Which of the following are not concepts Salter (2014) employs to argue in favor of monetary policy rules

Answer 47

Irrationality problems

Question 48

Which of the following can result from taxation

Answer 48

- individuals work less - individuals expend resources to avoid the tax - individuals emigrate.

Question 49

The (false) belief that a nation's weatlh depends on its trade balance is known as?

Answer 49

Mercantilism

Question 50

Which of the following statements accurately describes international trade?

Answer 50

- Trade is positive-sum - Trade fosters specialization and growth - Trade contributes to a level economic playing field

Question 51

The principle stating that nations can benefit from trade with each other, even if one nation is better at producing everything than another nation is called

Answer 51

comparative advantage

Question 52

if a country has a current account deficit. what also must be the case?

Answer 52

The country has a capital account surplus

Question 53

If interest rates in the U.S. rise relative to interest rates in the U.K., what would you expect to happen

Answer 53

The dollar will appreciate against the pound