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					AEB 2014 – Economic Issues, Food, and You
Exam # 1; Thursday, September 21st, 2006
Please write down your name and UF ID here 

1. Approximately what percentage of TODAY’S world economies experience scarcity? (1 point)
      a. 0 %
      b. 50 %
      c. 75 %
      d. 100 %
2. Economics is the study of (1 point)
      a. production methods.
      b. how society manages its scarce resources.
      c. how households decide who performs which tasks.
      d. the interaction of business and government.
3.   In a particular country in 1995, the average worker needed to work 20 hours to produce 40 units of
       output. In that same country in 2005, the average worker needed to work 20 hours to produce 60
       units of output. In that country, the productivity of the average worker (1 point)
       a. decreased between 1995 and 2005, so we would expect the standard of living to have decreased
           accordingly.
       b. increased between 1995 and 2005, so we would expect the standard of living to have increased
           accordingly.
       c. decreased between 1995 and 2005, so we would expect inflation to have decreased accordingly.
       d. increased between 1995 and 2005, so we would expect inflation to have increased accordingly.

3’. How much did the standard of living increase from 1995 to 2005 in the country of question # 3?
        (1 point)
      a. We don’t have enough information to calculate
      b. 50 %
      c. 100 %
      d. Remains constant. Productivity is related to inflation, not to the standard of living.
4.   Sarah buys and sells real estate. Two weeks ago, she paid $140,000 for a house on Oak Street, intending
       to spend $20,000 on repairs sell the house for $175,000. Last week, the city government announced
       a plan to build a “halfway house” for convicted criminals on Oak Street. As a result of the city’s
       announced plan, Sarah is weighing two alternatives: She can go ahead with the $20,000 in repairs
       and then sell the house for $135,000, or she can forgo the repairs and sell the house as it is for
       $120,000. Sarah should (2 point)
       a. keep the house and live in it.
       b. go ahead with the $20,000 in repairs and sell the house for $135,000.
       c. forgo the repairs and sell the house as it is for $120,000.
       d. move the house from Oak Street to a more desirable location, irrespective of the cost of doing so.
5. An increase in the overall level of prices in an economy is referred to as (1 point)
       a. economic growth.
       b. inflation.
       c. the price effect.
       d. the demand effect.




Page 1 of 3
AEB 2014 – Economic Issues, Food, and You
Exam # 1; Thursday, September 21st, 2006
Please write down your name and UF ID here 


6.   Refer to Previous Figure. The opportunity cost of obtaining 15 additional toasters by moving from
      point D to point C is (1 point)
      a. 10 toothbrushes.
      b. 20 toothbrushes.
      c. 30 toothbrushes.
      d. none of the above; the economy cannot move from point D to point C.


7.   Draw a production possibilities frontier showing increasing opportunity cost for hammers in terms of
      horseshoes. (4 points)
      a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes.
      b. On the graph, label a point that is efficient as point "E" and a point that is inefficient as point "I".
      c. On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to
          make both horseshoes and hammers, on this economy.
      d. On a second graph, illustrate the effect of a new computerized assembly line in the production of
          hammers on this economy.


8. In the circular-flow diagram, (1 point)
        a. factors of production flow from government to firms.
        b. goods and services flow from households to firms.
        c. income paid to the factors of production flows from firms to households.
        d. spending on goods and services flows from firms to households.

                                             Dolls       Fire Trucks
                                           400             0
                                           300           200
                                           200           350
                                           100           450
                                             0           500

9.   Refer to Previous Table. What is the opportunity cost to Toyland of increasing the production of dolls
      from 200 to 300? (1 point)
      a. 200 fire trucks
      b. 150 fire trucks
      c. 100 fire trucks
      d. It is impossible to tell what the opportunity cost is since in this example costs are not constant.


10. A normative statement describes how the world (1 point)
      a. was in the past.
      b. is in the present.
      c. will be in the future.
      d. ought to be.




Page 2 of 3
AEB 2014 – Economic Issues, Food, and You
Exam # 1; Thursday, September 21st, 2006
Please write down your name and UF ID here 


Answers:

# 1, d; # 2, b; # 3, b;
# 3’, b  LOGIC: Principle # 8 states that high productivity implies a high standard of
living; enough numerical information for calculating an increase in productivity was
provided in question # 3; ergo, we can calculate the approximate percentage in which the
standard of living increased.
# 4, c; # 5, b;
# 6, d  LOGIC: Point C is an unfeasible point. Unfeasible means: impracticable: not
capable of being carried out or put into practice; ergo answer is (D)

# 8, c; # 9, b; # 10, d;

#7




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