QUESTION 1 Suppose that X and Y are substitute goods. If the price of good X inc
ID: 1196832 • Letter: Q
Question
QUESTION 1
Suppose that X and Y are substitute goods. If the price of good X increases, we can expect
a downward movement along the demand curve for good Y
an upward movement along the demand curve for good Y
the demand curve for good Y to shift to the left
the demand curve for good Y to shift to the right
the demand for good X to shift to the left
10 points
QUESTION 2
Which of the following represents a way that a government can help the private market to internalize an externality?
taxing goods that have negative externalities
subsidizing goods that have positive externalities
Both answers are correct
10 points
QUESTION 3
A positive externality arises when a person engages in an activity that has
a beneficial effect on a bystander who pays the person who causes the effect
an adverse effect on a bystander who is not compensated by the person who causes the effect
an adverse effect on a bystander who is compensated by the person who causes the effect
a beneficial effect on a bystander who does not pay the person who causes the effect
10 points
QUESTION 4
15. If the price of trombones rises by 15 % while the quantity supplied rises by 3 %:
a) The price elasticity of demand for trombones is 0.2
a) The price elasticity of demand for trombones is 5
a) The income elasticity of demand for trombones is 0.2
a) The price elasticity of supply for trombones is 5
a) The price elasticity of supply for trombones is 0.2
10 points
QUESTION 5
In accordance with the law of supply, both individual and market supply curves are drawn
vertical
upward-sloping
downward-sloping
horizontal
10 points
QUESTION 6
Graph D
Graph B
Graph A
Graph C
10 points
QUESTION 7
3,000
0
6,000
5,000
1,000
10 points
QUESTION 8
Which of the following is an implicit cost of going to college?
Future income
Room and board
Books
Tuition
Lost income
10 points
QUESTION 9
A
E
D
B
C
10 points
QUESTION 10
equal to marginal revenue
$75 per unit
$175 per unit
$100 per unit
10 points
QUESTION 11
The first federal antitrust law was
Clayton Act
Sherman Antitrust Act
Federal Trade Commission Act
Interstate Commerce Act
10 points
QUESTION 12
Exhibit 8-4 Marginal cost and revenue for a firm
Unit
Quantity
Marginal
Cost
Marginal
Revenue
12
$ 5
$9
13
6
9
14
7
9
15
8
9
16
9
9
17
10
9
In Exhibit 8-4, this firm is currently producing 14 units of output. What would you advise this firm to do?
Increase output to 15
Increase output to 17
Remain at 14 units of output
Increase output to 16
Decrease output to 13
10 points
QUESTION 13
Which of the following will not cause a change in demand for crackers?
A change in the number of cracker-eaters
A change in consumers' tastes for crackers
A change in the price of cheese
A change in consumers' income
A change in the price of crackers
10 points
QUESTION 14
A natural disaster in Year X which leads to a destruction of resources.
Higher unemployment in Year X.
An advance in technology occurred in Year X.
More efficient production in Year X.
10 points
QUESTION 15
Three determinants of price elasticity of demand are:
Availability of complements, technology, length of time to adjust to a price change
None of the above
Availability of substitutes, share of budget spent on the product, length of time to adjust to a price change
10 points
QUESTION 16
The most fundamental concepts underlying the discipline of economics are
scarcity and choice.
inflation and unemployment
money, stocks, and bonds
supply and demand
10 points
QUESTION 17
increase in demand and an increase in supply
decrease in demand and a decrease in quantity supplied
increase in quantity demanded and an increase in quantity supplied
increase in supply and an increase in quantity demanded
decrease in supply and a decrease in quantity demanded
10 points
QUESTION 18
15 units per day
10 units per day
5 units per day.
20 units per day
10 points
QUESTION 19
Price elasticity of demand refers to the ratio of the
percentage change in price of a good in response to a percentage change in quantity demanded
percentage change in price of a good to a percentage increase in income.
none of the choices
percentage change in the quantity demanded of a good to a percentage change in its price.
10 points
QUESTION 20
Variable inputs are defined as any resource that
can be changed as output changes
varies with the size of the firm's plant
can be changed as output changes
cannot be changed as output changes
10 points
QUESTION 21
The best number of workers for any employer to hire is that quantity in which
none of the above
the marginal revenue product exceeds the marginal factor cost
the marginal revenue product equals the marginal factor cost
total costs are minimized
total revenue is maximized
10 points
QUESTION 22
As consumption of a good increases, the extra satisfaction received from consuming an additional unit of the good decreases." This statement is known as the law of
diminishing marginal utility
demand
total utility.
increasing costs
diminishing marginal returns
10 points
QUESTION 23
E and W
A, B, C, D
A, B, C, D, U
A, B, C, U
, C, D, U
10 points
QUESTION 24
An oligopoly is a market structure in which
there are few firms selling either a homogeneous or differentiated product
there are many firms with no control over price
there are many small firm
one firm has 100 percent of a market
10 points
QUESTION 25
If an employer currently finds that the MRP of its labor resources equals $67, and the MFC equals $56, what would you advise the firm to do?
Raise product prices.
Stay at its current output level
Purchase new technology.
Hire additional workers
Reduce employment
10 points
QUESTION 26
If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:
product A is more price elastic than product B
consumers are more sensitive to price changes in product A than in product B
product B is more price elastic than product A
products A and B must be substitutes
product B is more price inelastic than product A
10 points
QUESTION 27
Exhibit 9-1 Use the table below for the following 3 questions. Assume the numbers in the table represent the amount that each nation can produce using one labor hour and that labor is the only factor of production.
Based on exhibit 9-1, if each nation produces according to its comparative advantage
Both nations would produce only bananas
Burundi would produce more apples and Albania would produce more bananas
Albania would produce more apples and Burundi would produce more bananas
Both nations would produce only apples
10 points
QUESTION 28
Because a competitive firm is a price taker, it faces a demand curve that is
perfectly elastic
relatively inelastic
perfectly inelastic
relatively elastic
10 points
QUESTION 29
. If a business firm is not operating at the point where MR = MC, then
it should shut down
it is not earning the maximum potential profit
it will incur losses
its profit is zero
it cannot be earning a profit.
10 points
QUESTION 30
If a nation has a comparative advantage then:
Its opportunity cost is lower than its trading partner
It must also have an absolute advantage over its trading partner
Its opportunity cost is higher than its trading partner
a) None of the the choices
10 points
QUESTION 31
Exhibit 3-3 Demand curves
Graph B
Graph D
Graph C
Graph A
10 points
QUESTION 32
A normal good is a good for which demand increases as
the total number of consumers increases
the price of close substitutes decreases
the income of consumers increases
a reflection of changing consumer tastes
its own price increases
10 points
QUESTION 33
When total utility is at a maximum, marginal utility is:
one.
infinite
negative.
positive
zero.
10 points
QUESTION 34
The production possibility curve is bowed outward from the origin because of:
inefficiency
improper output mix
the finite nature of the resource base.
the law of increasing opportunity costs
unemployment.
10 points
QUESTION 35
Exhibit 7-1 Production of pizza data
Workers
Pizzas
0
0
1
4
2
10
3
15
4
18
5
19
Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the second employee equals
10
4
6
14
15
10 points
QUESTION 36
When a nation totally bans trade with another country, it is imposing a (an)
a quota
dumping
an embargo
a tariff
10 points
QUESTION 37
Inferior goods have an income elasticity of demand that is
equal to 1 in absolute value
0.
greater than 1 in absolute value
negative
positive.
10 points
QUESTION 38
A consumer makes purchases of an existing product X such that the marginal utility is 10 and the price is $5. The consumer also tries a new product Y and at the current level of consumption it has a marginal utility of 8 and a price of $1. The utility-maximizing rule suggests that this consumer should:
increase consumption of product Y and decrease consumption of product X.
increase consumption of product X and increase consumption of product Y
increase consumption of product X and decrease consumption of product Y.
decrease consumption of product Y and decrease consumption of product X.
10 points
QUESTION 39
Comparative advantage is related most closely to which of the following?
opportunity cost
input requirements per unit of output
output per hour
locational and logistical circumstances
10 points
QUESTION 40
If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is
$70 million
$10 million
-$10 million
-$20 million
$200 million
10 points
QUESTION 41
According to the law of demand, if
supply increases, demand will increase
product price increases, quantity demanded will decrease
consumer income increases, quantity demanded will decrease
product price increases, quantity demanded will increase
consumer income increases, quantity demanded will increase
10 points
QUESTION 42
Increase in the demand for the product
Decrease in demand for the product
Decrease in wages
Decrease in price of product
Increase in wages.
10 points
QUESTION 43
Exhibit 2-3 Production possibilities curve data
A
B
C
D
E
0
10
20
30
40
200
180
140
80
0
According to the data given in Exhibit 2-3, the production of 140 units of consumer goods and 10 units of capital goods
none of the choices.
all of the choices.
may be a result of unused natural resources
may be a result of unemployment.
is possible but would be inefficient
10 points
QUESTION 44
If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue is:
more than $10
$10
less than $10
$5300
10 points
QUESTION 45
Which of the following is the best example of an oligopoly
Local utilities
Area restaurants
The automobile industry
Agricultural markets free of government support
10 points
QUESTION 46
Suppose that an economy can produce various combinations of fish and bread. If more people with strong fishing skills became employed in this economy, how would the production possibilities curve (PPC) change?
The PPC would shift outward equally along both the fish and the bread axes
The PPC would shift outward on the fish axis, but would not change on the bread axis
The PPC would shift inward equally along both the fish and the bread axes.
The PPC would shift inward on the bread axis, but would not change on the fish axis
10 points
QUESTION 47
Marginal utility is the change in
average utility when an extra unit of output is consumed.
marginal utility when an extra unit of output is consumed
marginal utility when an extra unit of output is produced.
total utility when an extra unit of output is consumed
10 points
QUESTION 48
Tariffs and quotas are different in the sense that
tariffs enhance the well-being of domestic producers, while quotas diminish the well-being of domestic producers
tariffs raise revenue for the government, while quotas do not raise revenue for the government
tariffs cause deadweight losses, while quotas do not cause deadweight losses
tariffs enhance the well-being of domestic consumers, while quotas diminish the well-being of domestic consumers
10 points
QUESTION 49
The law of diminishing marginal returns implies that, in the short run
total cost must fall beyond a certain point
the marginal product of the variable input must decrease after a certain point
wages of workers must eventually increase
price must fall beyond a certain point
output must fall beyond a certain point
10 points
QUESTION 50
The short run is a period of time
in which a firm uses at least one fixed input
that is long enough to permit changes in the firm's plant size
in which production occurs within six months
in which production occurs within one year
a.a downward movement along the demand curve for good Y
b.an upward movement along the demand curve for good Y
c.the demand curve for good Y to shift to the left
d.the demand curve for good Y to shift to the right
e.the demand for good X to shift to the left
Explanation / Answer
(1) (d)
When price of one good increases, demand for its substitute increases.
(2) (c)
Government often internalizes externalities by taxing negative externality & subsidizing positive externality.
(3) (d)
A positive externality arises from benefit generated by an entity which is available to other entities enjoying the benefit without paying for it.
(4) (e)
Price elasticity of supply = change in quantity supplied / change in price
= 3% / 15% = 0.2
(5) (b)
Law of supply states that quantity supplied increases with price, for individual firms as well as markets.
(6), (7), (9), (10) - Graph is not visible.
(8) (e)
Implicit cost is the opportunity cost of an option, which is a lost income in case of current education.
(11) (b)
(12) (d)
When Q = 4, MR > MC yielding marginal profit. So the firm will earn more profits by producing more output until MR = MC.
(13) (e)
Demand for a good changes when any determinant of demand other than the good's own price changes (which causes a movement along the demand curve, representing change in quantity demanded).
NOTE: First 9 questions are answered.
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