Contemporary Economic Issues

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11. There are __________ people in the labor force of this society. C. 2,000,000 12. This society’s Unemployment Rate is ______. D. 10% 13. Ilan Moschidae owns Nikola Motors, a company that produces electric cars. He has exploited his political connections in order to get legislators in his state to give Nikola Motors an interest free loan to build a new fact

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ECON1000_Spring2017_Exam1A.pdf-ECON 1000 (Spring 2017 – Section

7. Economics is the social science that A. studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy. B. studies how people make decisions in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein. C. focuses exclusively on determining how businesses can earn larger profits. D. focuses exclusively on determining how households can make good consumption decisions. Answer Questions 8 through 10 based upon the information conveyed in the following graph (which illustrates the Marginal Benefits and two different levels of Marginal Costs of an activity for a decision maker): 8. Suppose Marginal Benefits are given by MB and Marginal Costs are given by MC 1 . Total Benefits (i.e., Total Benefits, not Total Economic Surplus) would be maximized by choosing Q equal to A. 415 (the quantity at which MB is largest). B. 815 (the quantity at which MB is equal to MC 1 ). C. 1,020 (the quantity at which MC 1 is equal to the value of MB at q=0 ). D. 1,105 (the quantity at which MB is equal to zero). 9. Again suppose Marginal Benefits are given by MB and Marginal Costs are given by MC 1 . If the decision maker increased Q from Q=730 to Q=815 , then A. Total Costs would increase, but Total Benefits and Total Economic Surplus would both decrease. B. Total Costs and Total Benefits would both increase, but Total Economic Surplus would decrease. C. Total Costs, Total Benefits, and Total Economic Surplus would all decrease. D. Total Costs, Total Benefits, and Total Economic Surplus would all increase. 10. Finally suppose that Marginal Costs change from MC 1 to MC 2 (with Marginal Benefits still given by MB). It follows that as a result of this change in Marginal Costs, A. the optimal choice of Q would increase, consistent with the Incentive Principle. B. the optimal choice of Q would increase, contradicting the Incentive Principle. C. the optimal choice of Q would decrease, consistent with the Incentive Principle. D. the optimal choice of Q would decrease, contradicting the Incentive Principle. $ 0 0 Q MB MC 2 415 510 730 1,105 10.50 35.00 62.75 MC 1 16.25 815 1,020

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