SOC SCI 104 – Basic Economics
I. MULTIPLE CHOICE (2 pts each)
1. Your roommate leaves trash in your room. The trash doesn’t bother her,
but you would be willing to pay P400 to live in a clean room. Your
opportunity cost of cleaning the trash would be P500, but hers would be
only P300. Which would be economically efficient?
a. You leave a dead mouse in her bed as punishment for her behavior.
b. You offer to pay her P300 to clean up the trash.
c. You clean up the trash yourself.
d. You do nothing and live with the trash.
2. Which of the following does NOT affect a consumer's demand curve for
cotton shirts?
a. the consumer’s income
b. expectations about future clothing prices
c. current fashion
d. manufacturing costs
3. A perfectly competitive market is efficient, partly because
a. those with the lowest costs sell the goods.
b. those willing to pay the most obtain the goods.
c. goods are produced if and only if the value to
the consumer exceeds the cost of production.
d. ALL of the above
4. From the point of view of most economists, which of the following cost
types should be included in the price of gasoline?
a. the cost of congestion on public streets and roads
b. the cost of pollution
c. the cost of maintenance for public streets and roads
d. ALL of the above
5. Suppose a tax of $1 per unit is imposed on a good. Then the more elastic is
the supply of the good,
a. the larger is the tax burden on sellers relative to
the tax burden on buyers.
b. the smaller is the response of quantity supplied
to the tax.
c. the larger is the deadweight loss of the tax.
d. ALL of the above are correct.
6. A government fulfills a protective function when it
a. taxes some citizens in order to provide income transfers to others.
b. provides funds for flood control projects and builds highways.
c. prevents illegal seizure of private property.
d. established and enforces minimum wage laws.
7. Which of the following is the best example of a public good?
a. an amusement park like Disney World
b. a civic center owned and operated by the government
c. a state university
d. a regional flood control project
8. The political structure that is most consistent with economic growth and
progress is
a. rule by the majority.
b. a dictatorship.
c. limited government, protection of individuals from aggression by
others, and decentralized political decision-making.
d. centralization of power in the hands of an elected legislature and a
president or prime minister.
II. ESSAY – (Please write legibly. Answer that cannot be read properly will not
be graded.)
1. Discuss the positive and negative impacts of economic growth. (10 pts)
2. A consumer wants to buy a television set. She is deciding between a
standard model with a 19” screen or a more expensive deluxe model with a
bigger screen and a built-in DVD player. How can she use cost-and-benefit
analysis to help her choose? (8 pts)
3. The government of Country A does not subsidize haircuts for its citizens
but it does subsidize public education. From an economic standpoint, explain
why this is a reasonable position for the government. (6 pts)
BONUS: Name, draw, and describe your favorite mythical creature. (3 pts)