ECON 201S PRACTICE TEST 1

Which of the following would not shift the demand curve for beef?

a reduction in the price of cattle feed

The simple circular flow model shows that:

households are on the selling side of the resource market and on the buying side of the product market

Refer to the diagram. A government-set price floor is best illustrated by:

price C

The demand curve shows the relationship between:

price and quantity demanded

In this market, economists would call a government-set maximum price of $40 a:

price ceiling

If there is a shortage of product X, and the price is free to change:

the price of the product will rise

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. An increase in the prices of resources used to produce X will:

decrease S, increase P, and decrease Q

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:

decrease equilibrium price and increase equilibrium quantity

If X is a normal good, a rise in money income will shift the:

demand curve for X to the right

Refer to the diagram. An improvement in technology will:

shift the production possibilities curve from PP1 to PP2

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:

resources are limited

According to economists, economic self interest:

is a reality that underlies economic behavior

Refer to the diagram. The combination of computers and bicycles shown by point F:

is attainable but implies that the economy is not using all its resources

A normative statement is one that:

is based on value judgements

Refer to the diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

it chooses point A

Refer to the above diagram. A shortage of 160 units would be encountered if price was:

$0.50

Refer to the diagram. A surplus of 160 units would be encountered if the price was:

$1.60

Refer to the diagram. Starting at point E, the production of successive units of bread will cost:

1/8, 1/6, 1/4, and 1/2 units of tractors

Which of the diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software?

A only

Refer to the diagram. Technological advance that improves the ability to produce capital goods but not consumer goods is shown by the shift of the production possibilities curve from AB to:

BE

If two goods are complements:

a decrease in the price of one will increase the demand for the other

Refer to the production possibilities curve. At the onset of the Second World War, the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point:

a to point b

The study of economics is primarily concerned with:

choices that are made in seeking the best use of resources

The point on the production possibilities curve that is most desirable can be found by:

comparing marginal benefits and marginal costs

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. A reduction in the number of firms producing X will:

decrease S, increase P, and decrease Q

Assume product A is an input in the production of product B. In turn, product B is a compliment to product C. We can expect a decrease in the price of A to:

increase the supply of B and increase the demand for C

At the current price there is a shortage of a product. We would expect price to:

increase, quantity demanded to decrease, and quantity supplied to increase

Refer to the tables. Opportunity costs are:

increasing in both Duckistan and Herbania

The main function of the entrepreneur is to:

innovate

Which of the following would not be classified as an economic resource by economists?

money in a business checking account

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than at low prices

An increase in product price will cause:

quantity demanded to decrease

Refer to the diagram. A decrease in supply is depicted by a:

shift from s2 to s1

Refer to the diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3 rather than PP2?

D

Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?

D only

Refer to the table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods, it must:

achieve economic growth

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

an increase in supply

Refer to the table. As compared to production alternative D, the choice of alternative C would:

tend to generate a more rapid growth rate

Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that:

the economy was not employing all of its resources before the policy change

Macroeconomics approaches the study of economics from the viewpoint of:

the entire economy