Deck 1: Economics: Foundations and Models

Question 1

Consider the following three factors:
A. A study conducted by Statistical Bulletin of the GCC General Secretariat found that 435,000 graduates are currently unemployed in the GCC countries.
B. In the next 10 years, 100,000 Emiratis will be seeking employment (including 70,000 in Abu Dhabi) according to estimates from the Abu Dhabi Tawteen Council.
C. Jobseekers in Oman increased to 88,000 at the end of 2008, from 24,000 at the end of 2007. These statements suggest that

A) the likelihood that a graduate would find a job in the GCC countries in the coming years is very low.
B) the GCC needs to improve education, and match graduates' skills, with current and future job market needs.
C) the likelihood of finding a job in the future depends on the size of the foreign labor force.
D) the GCC is not currently creating jobs fast enough to absorb all graduates because of slow economic growth.

Answer 1

the GCC needs to improve education, and match graduates' skills, with current and future job market needs.

Question 2

What is an economic model?

A) It is a detailed version of some aspect of economic life used to analyze an economic issue.
B) It is a description of an economic issue that includes all possible related information.
C) It is a description of an economic issue based on official government information.
D) It is a simplified version of some aspect of economic life used to analyze an economic issue.

Answer 2

It is a simplified version of some aspect of economic life used to analyze an economic issue.

Question 3

If, per child, a woman can get up to 48 months of pension benefits and is guaranteed a maternity allowance two months before and after she gives birth, how will these benefits affect a woman's decision to have children?

A) These incentives will encourage women to have children and increase the birth rate.
B) These incentives will encourage only less educated women to have more children.
C) These incentives will have no effect on having children; the decision to have children is a social and psychological decision, not an economic decision.
D) These incentives will encourage only women with high opportunity costs to have more children.

Answer 3

These incentives will encourage women to have children and increase the birth rate.

Question 4

In the Arab world, young populations and high birth rates threaten public finances. As the population becomes younger, there are more workers needing education and jobs relative to the number of schools and jobs available. Which of the following government policies would NOT help reduce the pressure on public finances?

A) offer incentives to decrease the birth rate
B) reduce child benefit payments
C) reduce taxes paid by current workers
D) raise the retirement age

Question 5

Khaled's Furniture alters, reconstructs, and restores an old French chest. Khaled has just spent US$800 purchasing, cleaning and reconstructing the antique chest which he expects to sell for US$1,500. After having spent US$800, Khaled discovers that he would need some special wood that would cost him US$200 to complete the task. Alternatively, he can sell the chest "as is" now for US$900. What is his marginal benefit if he sells the chest "as is" now?

A) US$100
B) US$900
C) He makes a marginal loss of US$600, not a marginal benefit
D) The marginal benefit cannot be determined

Question 6

Khaled's Furniture alters, reconstructs, and restores an old French chest. Khaled has just spent US$800 purchasing, cleaning and reconstructing the antique chest which he expects to sell for US$1,500. After having spent US$800, Khaled discovers that he would need some special wood that would cost him US$200 to complete the task. Alternatively, he can sell the chest "as is" now for US$900. What is the marginal cost of completing the task?

A) US$1,000
B) US$200
C) US$1,000 plus the value of his time
D) US$500

Question 7

Khaled's Furniture alters, reconstructs, and restores an old French chest. Khaled has just spent US$800 purchasing, cleaning and reconstructing the antique chest which he expects to sell for US$1,500. After having spent US$800, Khaled discovers that he would need some special wood that would cost him US$200 to complete the task. Alternatively, he can sell the chest "as is" now for US$900. What should he do?

A) It does not matter what he does; he is going to take a loss on his project.
B) he should not do anymore work on the chest because he has already spent too much time on it and has not been paid for that time
C) he should cut his losses and sell the chest now
D) he should purchase the wood, complete the task and then sell the chest

Question 8

Mouza shared a one -bedroom apartment with her classmate. Her share of the rent was US$700 per month. She considered moving to a studio apartment so that she wouldn't have to share with anyone. The studio apartment she looked at has a rental value of US$950 per month. She decided to move into the studio apartment. Mouza is as rational as any other person. As an economics major, you can rightly conclude that

A) Mouza did not have a choice; she did not like her roommate.
B) Mouza figures that the benefit of having her own place (as opposed to sharing) is at least US$950.
C) Mouza figures out that the additional benefit of having her own place (as opposed to sharing) is at least US$250.
D) The cost of having one's own space outweighs the benefits.

Question 9

Suppose the extra cost to Apple Computer of producing another iPod is US$270. Then, Apple should not produce this unit if it can only sell it for US$270.

Question 10

Assume that Apple computer can earn an additional US$81 million of revenue from making 300,000 more iPods. What must the additional cost of producing these 300,000 be to make the additional output economically rational?

Question 11

Identify the main difference between the nature of the business cycle in the GCC countries in the past and now.

Question 12

The competition is intensifying between the Gulf states to extend their ties with the rising powers in the east through

A) education exchange programs.
B) hiring investment experts.
C) foreign direct investment and Trade.
D) building better technologies.

Question 13

How are the fundamental economic decisions determined in a centrally planned economy?

A) the government decides
B) individuals, firms, and the government interact in a market to make these economic decisions
C) these decisions are made by the country's elders who have had much experience in answering these questions
D) the United Nations decides

Question 14

The economic system in most Arab countries today is considered

A) unclear; it is not clear what economic systems most Arab countries belong to.
B) a social economy system.
C) a mixed economy system.
D) a market economy system.

Question 15

The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage:
A. The minimum wage law causes unemployment.
B. A minimum wage law benefits some groups and hurts others.
C. In some cities such as Dubai and Doha, it would be impossible for low -skilled workers to live in the city without minimum wage laws.
D. The gains to winners of a minimum wage law should be valued more highly than the losses to losers because the latter primarily comprises businesses.
Which of the consequences above are positive statements and which are normative statements?

A) Only a is a positive statement, b, c and d are normative statements.
B) a and b are positive statements, c and d are normative statement.
C) a and c are positive statements, b and d are normative statements.
D) a, b, and c are positive statements and d is a normative statement.

Question 16

Suppose that in 2010, Alexandria consumed 205,000 tons of sugar. In 2011, sugar consumption rose to 245,000 tons. Calculate the percentage change in sugar consumption.

A) 19.51%
B) 26.33%
C) 11.95%
D) 8.37%

Question 17

-Refer to Figure 1 -2. Calculate the area of the triangle A.

A) US$8.4 million
B) US$6.3 million
C) US$3.15 million
D) US$2.1 million

Question 18

-Refer to Figure 1 -4. Which of the following statements is true?

A) The slope of the tangent at X and the slope of the tangent at Y are positive.
B) The slope of the tangent at X is negative and the slope of the tangent at Y is positive.
C) The slope of the tangent at X is positive and the slope of the tangent at Y is negative.
D) The slope of the tangent at X and the slope of the tangent at Y are negative.

Question 19

What is the "reverse causality" problem in determining cause and effect?

A) It is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X.
B) It is a problem that occurs when one observes that a change in variable X caused a change in variable Y which caused a change in variable Z and concludes that a change in variable X caused a change in variable Z.
C) It is a problem that arises when two variables are inter -connected so that a change in variable
X causes a change in variable Y, and a change in variable Y causes a change in variable X.
D) It is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Z that caused a change in variable Y.

Question 20

You explain to your friend, Hanaa (who runs a catering service) about an economic theory asserts that consumers will purchase less of a product at higher prices than they will at lower prices. She contends that the theory is incorrect because over the past two years she has raised the price of her catered meals and yet has seen a brisk increase in sales. How would you respond to Hanaa?

A) Hanaa is making the mistake of assuming that correlation implies causation.
B) I will explain to her that there are some omitted variables that have contributed to an increase in her sales such as changes in income.
C) Hanaa is right; she has evidence to back her claim. The theory must be erroneous.
D) I will explain to her that she is making the error of reverse causality: it is the increase in demand that has enabled her to raise her prices.