Econ Unit 1 and 2 AP classroom questions
After graduating from high school, Maria chose to go to college, while Omar chose to work full- time. Which of the following best describes the opportunity costs for these decisions? A. Maria's opportunity cost includes the salary she could have earned if she had gone to work. B. Maria's opportunity cost is her living expenses while attending college. C. Omar's opportunity cost is the salary he will earn from working. D. Omar's opportunity cost is the tuition and expenses he would have paid for college. E. Omar's opportunity cost is definitely greater than Maria's.
A
Assume a 10 percent increase in price increased the market quantity supplied by 20 percent. Which of the following is true? A. The value of the price elasticity of supply is 2. B. The value of the price elasticity of supply is 0.5. C. Supply is price inelastic. D. Demand is price elastic. E. This price-quantity combination violates the law of supply.
A
Compared to a market economy, in a command economy there is greater A. government involvement in the allocation of resources B. protection of private property rights C. reliance on prices for allocating scarce resources D. reliance on private businesses for the allocation of resources and distribution of goods E. consumption of consumer goods
A
In the market shown in the graph above, at a price of $5, there will be A. a surplus and the price will eventually fall B. a surplus generating a decrease in demand C. a shortage and the price will eventually rise D. a shortage generating an increase in supply E. an increase in supply and a decrease in demand
A
In which of the following situations is a good NOT scarce? A. Consumer give up nothing to obtain more of the good. B. Consumer can purchase as much of the good as they want at its current market price. C. Large quantities of the good are available in the marketplace. D. There is a surplus of the good at some positive price. E. There is a shortage of the good at some positive price.
A
Nation Alpha can produce either 3 units of good X or 1 unit of good Y with one hour of labor, whereas nation Beta can produce either 4 units of good X or 2 units of good Y with one hour of labor. Assuming that labor is the only input, which of the following is true? A. Beta has an absolute advantage in the production of good X. B. Alpha has an absolute advantage in the production of good Y. C. Beta has a comparative advantage in the production of good X. D. Alpha has a comparative advantage in the production of good Y. E. Alpha has both an absolute and comparative advantage in the production of good Y.
A
The diagram above shows the production possibilities curve for Country Y. Which of the following statements is true? A. If Country Y is producing at point C, it is using all its resources efficiently. B. The opportunity cost of producing more machines is constant. C. Producing at point C is the most preferable, because butter is a nondurable good. D. Country Y cannot produce at point E. E. The economy is not producing at its potential, since it is not producing at point D.
A
The fundamental difference between a market economy and a command economy lies in which of the following? A. Property rights and protection of private property B. Absolute and comparative advantages C. Specialization and trade D. Taxes and subsidies E. Positive and negative externalities
A
The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price elasticity of supply for peanuts over this price range is A. elastic B. inelastic C. unit elastic D. perfectly elastic E. perfectly inelastic
A
The supply schedule gives two points on a market supply curve. Which of the following is true about the supply curve between the given points? A. The supply curve is inelastic, because the percentage change in the price is greater than the percentage change in the quantity supplied. B. The supply curve is unit elastic, because the change in price is $10 and the change in quantity supplied is 10 units. C. The supply curve is perfectly elastic, because the change in price is $10 and the change in quantity supplied is 10 units. D. The supply curve is elastic, because the price elasticity of supply is equal to 10. E. The supply curve is unit elastic, because the price elasticity of supply is equal to 1.
A
Which of the following best illustrates the concept of consumer surplus? A. A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink. B. An individual who is willing to accept a job at $7.50 per hour is offered $7.00 per hour. C. An individual pays the sale price of $15.00 for the same shirt that the individual refused to purchase earlier at $18.00. D. An individual finds that the price of artichokes, a food she dislikes, has been reduced by 50 percent. E. A wood-carver has a marginal cost of $5.00 for a unit of output, but sells that unit at $6.00.
A
Which of the following economic systems primarily relies on prices for allocating resources and goods? A. Free-market B. Traditional C. Command D. Mixed E. Socialism
A
Which of the following events will cause the demand curve for hamburgers to shift to the right? A. An increase in the price of pizza, a substitute for hamburgers B. An increase in the price of a french fries, a complement to hamburgers C. An increase in the price of hamburgers D. A decrease in the price of hamburgers E. A decrease in the cost of producing hamburgers
A
Which of the following is true of a price floor? A. The intention of the government in creating the price floor is to assist the producers of the good. B. To have an impact in the market for the good, the price floor should be set below the existing market price of the good. C. An effective price floor will increase the quantity demanded of the good. D. The price floor would tend to create a shortage of the good in the market. E. The creation of the price floor would not change the quantity supplied of the good if the supply curve were upward-sloping to the right.
A
Which of the following statements describes an economy confronting scarcity? A. If more of one good is produced, less of another good must be produced. B. An economy can produce a limitless amount of all goods. C. All individuals are able to satisfy their consumption desires. D. Scarcity is eliminated by government provision of goods. E. Scarcity only exists as a problem when there is more than one good to produce.
A
Which of the following will occur as a result of a decrease in the prices of the inputs used to produce a good? A. The quantity supplied would increase at each possible price for the good. B. The price of the good would increase for any given quantity supplied. C. The quantity supplied would increase as the price of the good increased. D. The quantity supplied would increase as the price of the good decreased. E. The price of the good would increase as the quantity supplied decreased.
A
A 10 percent increase in the price of a good results in a 4 percent increase in total revenue. From this information, it can be concluded that the demand over this range of prices A. is upward sloping B. is inelastic C. has a price elasticity of demand equal to 2.5 D. has increased by 14% E. has increased by 40%
B
A country produces computers and rice. If resources are fully employed and there is technological progress only in the production of rice, the opportunity costs of producing computers and rice will change in which of the following ways? A. Opportunity Cost of Computers Opportunity Cost of Rice Increase Increase B. Opportunity Cost of Computers Opportunity Cost of Rice Increase Decrease C. Opportunity Cost of Computers Opportunity Cost of Rice No change Decrease D. Opportunity Cost of Computers Opportunity Cost of Rice Decrease Increase E. Opportunity Cost of Computers Opportunity Cost of Rice Decrease Decrease
B
A power company decides to use wind turbines to provide electricity instead of coal. Which basic economic question does this decision answer in a free market economy? A. What goods or services will be produced? B. How will goods or services be produced? C. Who will consume the goods or services? D. What economic system should be adopted? E. Who gets to decide?
B
An effective price floor placed on a market for a good will have which of the following effects on the quantity purchased by consumers and the consumer surplus? A. Quantity will decrease, and consumer surplus will increase B. Quantity will decrease, and consumer surplus will decrease C. Quantity will increase, and consumer surplus will not change D. Quantity will increase, and consumer surplus will increase E. Quantity will not change, and consumer surplus will decrease
B
An increase in the price of good X causes buyers to want to buy more of good Y. Which of the following explains the resulting change in the market? A. The demand curve for good X will shift to the right because the goods are substitutes in consumption. B. The demand curve for good Y will shift to the right because the goods are substitutes in consumption. C. The demand curve for good X will shift to the left because the goods are complements in consumption. D. The demand curve for good Y will shift to the left because the goods are complements in consumption. E. There will be a downward movement along the demand curve for good X because the goods are complements in consumption.
B
At a price of $10, the quantity demanded of pizzas is 100 and the quantity supplied is 150. Which of the following statements must be true? A. There is a shortage of pizza at a price of $10. B. The equilibrium price of pizza is below $10. C. The quantity of pizzas sold will be 150. D. At equilibrium, fewer than 100 pizzas will be sold. E. The pizza market is in equilibrium.
B
Cost-benefit analysis assumes rational agents do which of the following? A. Always make a decision that is best for society B. Compare additional costs and additional benefits when making a decision C. Consider only what they will lose when making a decision D. Consider only what they will gain when making a decision E. Always make the same decision
B
Following a decrease in the supply of oranges, the price of orange juice increased by 20 percent, which resulted in a 10 percent increase in the quantity of apple juice consumed. This implies that the cross elasticity of demand between orange juice and apple juice is A. 0 B. 0.5 C. 1 D. 2 E. indeterminate
B
If a hurricane reduced the crab population, the price of crabs and quantity sold would change in which of the following ways? A. Price Quantity Increase Increase B. Price Quantity Increase Decrease C. Price Quantity Decrease Increase D. Price Quantity Decrease Decrease E. Price Quantity No change Decrease
B
Individuals and societies must make choices regarding which goods and services will be produced and consumed because A. unlimited wants can only be satisfied by allocating resources efficiently B. resources are insufficient to satisfy the unlimited wants of people C. allocating scarce resources efficiently reduces the equitable distribution of goods D. income is not equally distributed to ensure that everyone can participate in the market E. a country cannot have a comparative advantage in the production of all goods
B
Leather and beef are jointly produced such that an increase in the production of one results in an equal increase in the production of the other. An increase in the demand for leather will most likely cause A. a decrease in the price of leather B. a decrease in the price of beef C. a decrease in the equilibrium quantity of beef sold D. an increase in the demand for beef in the short run E. an increase in the supply of leather
B
The above data describes a bakery's daily production possibilities curve for doughnuts and sweet rolls. Which of the following is true about the PPC? A. The PPC illustrates decreasing opportunity cost. B. The PPC illustrates increasing opportunity cost. C. The PPC illustrates constant opportunity cost. D. Producing 100 doughnuts and 10 sweet rolls illustrates efficiency in production.
B
The amount of product Z that must be forgone in order to obtain some amount of product Y is called A. factor payments B. opportunity cost C. marginal product D. income effect E. substitution effect
B
The diagram above shows the demand curve for a good. If the price increases from P1 to P2, and quantity consumed decreases from Q2 to Q1 , consumer surplus decreases by the area A. BDC B. P1P2BC C. P1P2BD D. Q1DCQ2 E. P2P3B
B
The market for tomatoes is in equilibrium at the price of $10, and quantity of 50 tomatoes. If consumer surplus is $400 and total economic surplus is $650, what is the producer surplus in the tomato market and why? A. The producer surplus is $0, because producer surplus is offset by the costs of producing tomatoes. B. The producer surplus is $250, because the total surplus less what consumers receive must go to producers. C. The producer surplus is -$400, because consumer and producer surplus must offset one another. D. The producer surplus is $500, because the producer surplus is the equilibrium price times the equilibrium quantity =$10x50=$500. E. The producer surplus is $650, because producer surplus and total economic surplus are always equal.
B
The table below shows the per-unit prices and marginal utility for the last unit of video games and comic books that Kyle purchased. Kyle spent all of his allocated budget on video games and comic books. To maximize his utility, Kyle should have purchased A. more video games and fewer comic books B. fewer video games and more comic books C. fewer of both goods D. equal amounts of both goods E. more of both goods
B
What is the price elasticity of supply between $3 and $4 in the graph above? A. It is greater than 1, and the supply is relatively inelastic. B. It is greater than 1, and the supply is relatively elastic. C. It is equal to 1, and the supply is unit elastic. D. It is less than 1, and the supply is relatively elastic. E. It is less than 1, and the supply is relatively inelastic.
B
Which of the following best explains why individuals and societies must make choices when presented with alternatives? A. People possess limited knowledge. B. Resources are scarce. C. People cannot agree on societal goals. D. Resources are not fully employed. E. People are more interested in their own well-being than in society's well-being.
B
Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another? A. A decrease in demand will cause the equilibrium price, equilibrium quantity, and total surplus to increase. B. An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase. C. A decrease in supply will cause the equilibrium price to decrease, the equilibrium quantity to increase, and consumer surplus to decrease. D. An increase in supply will cause the equilibrium price to increase, the equilibrium quantity to decrease, and consumer surplus to increase. E. A decrease in supply and increase in demand will cause the equilibrium quantity to decrease but the equilibrium price to be indeterminate.
B
Which of the following statements is true about the demand curve above? A. Demand is elastic at each given price because the slope is constant and equal to -2. B. The elasticity of demand decreases when moving from point X to point Y. C. The elasticity of demand increases when moving from point X to point Y. D. Demand is inelastic between quantities 0 and 4. E. Demand is elastic between quantities 4 and 8.
B
A change in which of the following causes a movement along a given demand curve for a normal good? A. Consumer income B. The demand for the good C. The price of the good D. The price of a substitute good in consumption E. The number of buyers
C
A city is considering building playgrounds in city parks located near residential areas. The city planner presented to the township the following cost and benefit estimates to help the city council decide how many playgrounds to build. What is the optimal number of playgrounds to maximize net benefits? A. 6 B. 5 C. 4 D. 3 E. 2
C
After the government imposed a $0.20 per gallon tax on gasoline, the price of a gallon of gasoline increased from $1.00 to $1.15. Which of the following statements is true? A. Consumers bear the entire burden of the tax, since producers can pass the tax along to consumers. B. Consumers and producers share the tax burden equally. C. Consumers bear most, but not all, of the tax burden. D. Producers bear the entire burden of the tax, since the tax was levied on producers, not consumers. E. There is no tax burden, since gasoline is a normal good.
C
Assume that apple juice and grape juice are substitutes. Which of the following will cause an increase in the quantity of apple juice supplied? A. A decrease in subsidies to apple juice producers B. A decrease in the price of grape juice C. An increase in the price of apple juice D. An increase in the price of insecticides used on apple trees E. The imposition of a price ceiling in the market for apple juice
C
Assume that the demand for a certain good is perfectly inelastic and the supply curve of the good is upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the good increases? A. A decrease in both the quantity supplied and the equilibrium amount consumed B. A decrease in the quantity supplied and an increase in the equilibrium price C. A decrease in the supply and an increase in the equilibrium price D. A decrease in both the demand and the equilibrium amount consumed E. A decrease in both the quantity demanded and the equilibrium price
C
Assume that the market for a good is characterized by a downward-sloping demand curve and an upward-sloping supply curve. Suppose that there is an improvement in technology for producing the good. Which of the following would occur? A. The impact on consumer surplus would be indeterminate, because of the offsetting impact of the changes in equilibrium price and quantity. B. The change in equilibrium price would cause producer surplus to increase. C. The total economic surplus in the market would increase. D. The demand curve would shift right in response to an increase in the equilibrium price. E. The supply curve would shift up resulting in an increase in the equilibrium price and the producer surplus.
C
Assume that the market for beef is perfectly competitive and in equilibrium. Which of the following would most likely result in an increase in both the equilibrium price and the equilibrium quantity of beef? A. An increase in the supply of chicken, a substitute good B. A decrease in consumers' income, assuming that beef is a normal good C. An increase in the supply of potatoes, a complementary good D. An increase in the price of corn, an input in the production of beef E. An announcement by the medical community that consumption of beef increases the risk of heart disease
C
Assume that the price elasticity of supply for good Y is 0.5. If the price of good Y decreases by 30 percent, the quantity supplied of good Y will A. decrease by 60 percent B. decrease by 30 percent C. decrease by 15 percent D. increase by 0.5 percent E. increase by 0.15 percent
C
Based on a comparison of points X, Y, and Z, the opportunity cost of an additional consumer good is A. highest at point X B. highest at point Y C. highest at point Z D. lowest at point Y E. the same at points X, Y, and Z
C
Based on the graph above, the producer surplus at the market equilibrium price and quantity is shown by which area? A. GMK B. GMN C. GZN D. ZMN E. MNK
C
In the figure above, at which of the given points is demand most elastic? A. X B. Y C. Z D. The elasticity is the same for all points. E. The relative elasticity cannot be determined with the given information.
C
In the market described by the diagram above, the total economic surplus will be maximized at which of the following price and quantity combinations? A. P3 and Q1 B. P3 and Q3 C. P2 and Q2 D. P1 and Q1 E. P1 and Q3
C
Nation Aga can produce either 3 units of good X or 1 unit of good Y with one hour of labor, while nation Kaza can produce either 4 units of good X or 2 units of good Y with one hour of labor. Assuming that labor is the only input, mutually beneficial exchange can take place between Aga and Kaza if A. Aga exchanges 1/2 unit of good X for 1 unit of good Y from Kaza. B. Aga exchanges 1 1/2 units of good X for 1 unit of good Y from Kaza. C. Aga exchanges 2 1/2 units of good X for 1 unit of good Y from Kaza. D. Kaza exchanges 1 unit of good Y for 1 unit of good X from Aga. E. Kaza exchanges 2 units of good Y for 1 unit of good X from Aga.
C
Oren's father tells Oren he can have one dessert after dinner. He can choose from a scoop of ice cream, a slice of apple pie, a cup of chocolate pudding, or a piece of fruit. Oren prefers chocolate pudding to a piece of fruit; he prefers apple pie to chocolate pudding; and he prefers ice cream to apple pie. If Oren chooses a scoop of ice cream, what is his opportunity cost? A. A piece of fruit. B. A cup of chocolate pudding. C. A slice of apple pie. D. A scoop of ice cream. E. A piece of fruit, a cup of pudding and a slice of apple pie.
C
Suppose the price elasticity of supply for gasoline in the short run is estimated to be 0.4. Due to an unexpected surge in the demand for gasoline, the price of gasoline increases by 20 percent. As a result, the quantity supplied of gasoline will A. increase by 50 percent B. increase by 20 percent C. increase by 8 percent D. decrease by 0.2 percent E. be impossible to determine from the given information
C
The economic concept of total consumer surplus refers to which of the following? A. The difference between the quantity of a good or service that people purchase and the amount that they actually consume B. The overproduction of goods and services relative to the socially optimal level of output C. The sum of the differences between the prices that consumers are willing to pay for a good or service and the price they actually pay D. The sum of the differences between the prices that consumers are willing to pay for a good or service and the minimum prices that sellers must receive to offer that quantity E. The difference between the quantity demanded and the quantity supplied of a product at a given price
C
The following questions refer to the graph below. The market is currently in equilibrium If a price floor is set at X, the quantity demanded will A. increase from 0R to 0S B. increase from 0R to 0T C. decrease from 0S to 0R D. decrease from 0T to 0R E. not change
C
The graph above shows the marginal benefit that a student receives from additional hours of study, and the marginal cost the student will incur from additional hours of study. Which of the following is true? A. Beyond S0 hours of study, there is no further benefit from devoting additional hours to study. B. At S1 hours of study, the extra cost of study time exceeds the extra benefit of study time. C. The optimal number of hours that the student should study is S0 hours. D. The rational individual should study more than S0 hours. E. The marginal cost of studying decreases as more time is spent studying.
C
The marginal utility per dollar spent on the last orange consumed is 75. If the price of an apple is $0.50, how many apples would Johnny have to consume before he considers purchasing another orange? A. 2 B. 3 C. 4 D. 5 E. 6
C
The table above shows the supply and demand schedules in the orange market. Assume that the demand and supply curves are linear. At the market equilibrium price, what are the consumer surplus and the producer surplus? A. Consumer surplus is $200; producer surplus is $200 B. Consumer surplus is $100; producer surplus is $100 C. Consumer surplus is$50; producer surplus is $50 D. Consumer surplus is $45; producer surplus is $15 E. Consumer surplus is $10; producer surplus is $10
C
The table below shows the number of hours it takes for Kim to install a computer or to paint a garage and for Maria to install a computer or to paint a garage. If tasks are assigned according to comparative advantage, which of the following is true? A. Kim should perform both tasks. B. Maria should perform both tasks. C. Kim should install computers and Maria should paint garages. D. Kim should paint garages and Maria should install computers. E. Kim and Maria should both install computers.
C
The table below shows the values of different elasticities of demand for good J at the market equilibrium price. Which of the following is true about good J? A. Good J is a normal good. B. Good J's demand is elastic. C. Good J is an inferior good. D. Good J is a complement in consumption to good Y. E. Good J is a substitute in consumption to good Z.
C
The table below shows the values of different elasticities of demand for good J at the market equilibrium price. Which of the following would result in the greatest rightward shift of the demand curve for good J? A. A 50% decrease in the price of good J. B. A 20% increase in the price of good X. C. A 10% increase in the price of good Y. D. A 10% increase in the price of good Z. E. A 10% decrease in income.
C
Which of the following describes how a market will respond when the scarcity of a good increases? A. Consumers will increase their demand for the good B. Consumers will decrease their demand for the good. C. The price of the good will increase. D. The price of the good will decrease. E. Producers will increase the supply of the good.
C
Which of the following is an example of a nonrival resource? A. National park camping sites that can be reserved by anyone B. Farmland that can be used to grow corn or soybeans C. Solar energy D. Fish in the ocean E. Timber in a forest
C
Which of the following policies would result in an increase in the quantity supplied of a good in a market? A. Eliminating a per-unit subsidy from sellers B. Levying a per-unit tax on sellers C. Imposing a binding price floor D. Imposing a nonbinding price floor E. Imposing a binding price ceiling
C
Which of the following would cause the supply of good X to become more elastic? A. Greater availability of substitutes for good X B. Increased prices of inputs required to produce good X C. The ability to easily reallocate inputs to production of good X D. A short time frame for making production decisions E. More elastic demand for good X
C
A firm estimates that the absolute value of the price elasticity of demand for its signature sandwich is 2. If the firm increases its sandwich price by 10 percent, what will happen to the quantity demanded? A. It will increase by 5 percent B. It will increase by 20 percent C. It will decrease by 5 percent D. It will decrease by 20 percent E. It will remain unchanged
D
Assume that the original supply and demand curves of a commodity are S and D, respectively. Also assume that the government imposes an excise tax (per unit tax) of t dollars on the commodity, which shifts the supply curve to S1. The deadweight loss created by the tax is equal to A. P1GHP0 B. P1GKP0 C. GHK D. GKI E. zero
D
Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true? A. The demand for orange juice is elastic. B. The price of grapefruit juice, a substitute good, will fall. C. The absolute value of the price elasticity of demand for orange juice is 4. D. The absolute value of the price elasticity of demand for orange juice is 0.25. E. The absolute value of the price elasticity of demand for orange juice is 10.
D
Assume the government imposes a price floor above the current equilibrium price in the market for a good. Which of the following will occur? A. Since the price floor is set above the equilibrium price, nothing will change because the price floor is not binding. B. There will be a shortage of the good. C. Compared to the equilibrium price, there will be an increase in the quantity exchanged. D. There will be an excess supply of the good. E. At the quantity sold, the marginal cost of production will exceed the marginal benefit to consumers.
D
At the current prices of goods X and Y, the quantity demanded of good X is 10 units, and the quantity demanded of good Y is 5 units. The cross-price elasticity of demand between goods X and Y is 0.6. A 10 percent increase in the price of good Y will result in which of the following? A. A 0.5 percent decrease in the quantity demanded of good Y. B. A 3 percent increase in the quantity demanded of good Y. C. A 1 percent increase in the quantity demanded of good X. D. A 6 percent increase in the quantity demanded of good X. E. A 60 percent increase in the quantity demanded of good X.
D
Because of conflict and political instability in Country Y, millions of its citizens emigrate to Country X. Which of the following best explains what will happen to Country X? A. Country X's PPC will not change, but its consumption of goods will decrease. B. Country X's production will move to a point inside its PPC, indicating slower growth. C. Country X's production will move to a point on its PPC at which it produces only consumer goods. D. Country X's PPC will shift outward over time. E. Country X's PPC will shift inward over time.
D
Cindy and Martin both sew t-shirts in a small factory. Using the same resources, Martin can sew twelve t-shirts and Cindy can sew nine t-shirts in one day. Which of the following can be concluded from the given information? A. Martin has a higher opportunity cost of sewing t-shirts than Cindy does. B. Cindy has a comparative advantage in sewing t-shirts. C. Martin has a comparative advantage in sewing t-shirts. D. Martin has an absolute advantage in sewing t-shirts. E. Cindy has an absolute advantage in sewing t-shirts.
D
If Nation X produces coffee at a higher opportunity cost than Nation Y, which of the following is true? A. Nation X must have an absolute advantage in producing coffee. B. Nation X must have a comparative advantage in producing coffee. C. Nation Y must have an absolute advantage in producing coffee. D. Nation Y must have a comparative advantage in producing coffee. E. There is insufficient information to determine both absolute and comparative advantage.
D
If the demand for potatoes increases whenever a person's income increases, then potatoes are an example of A. an inferior good B. a free good C. a Giffen good D. a normal good E. a public good
D
If the price of an apple is $0.50, the marginal utility per dollar spent on the fifth apple is: A. 20 B. 30 C. 40 D. 60 E. 100
D
If the supply of fish increases, there will be A. an increase in the demand for chicken, a substitute good B. an increase in the demand for fish C. an increase in the price of fish tacos D. a decrease in the price of fish E. a decrease in the supply of potatoes, a complementary good
D
If the value of the price elasticity of supply is 3, which of the following is true? A. Supply is inelastic. B. A percentage increase in price will lead to a relatively smaller percentage increase in quantity supplied. C. The supply curve is downward sloping with respect to the price of output. D. A 10 percent decrease in price will decrease the quantity supplied by 30 percent. E. A 3 percent increase in price will decrease the quantity supplied by 10 percent.
D
In the country Beta it takes two hours of labor to produce a unit of tea and four hours of labor to produce a unit of bread. In the country Zeta it takes three hours of labor to produce a unit of tea and nine hours of labor to produce a unit of bread. Which of the following is true? Country Zeta has an absolute advantage in producing both tea and bread. Country Zeta has an absolute advantage and a comparative advantage in producing tea. Country Beta has an absolute advantage and a comparative advantage in producing tea. Country Beta has the lower opportunity cost in producing bread and therefore a comparative advantage in producing bread. Country Beta, with trade, will export both tea and bread to country Zeta.
D
Suppose that Habib has a weekly fixed budget and spends it all on music downloads and snacks. At his current combination of consumption, the marginal utility of the last dollar spent on music downloads is greater than the marginal utility of the last dollar spent on snacks. Has Habib maximized his utility? A. Yes, because he has purchased the maximum possible with his limited budget. B. Yes, because he has purchased the two goods in proportion so that he can get the maximum utility from each. C. Yes, because changing his current consumption combination will reduce his total utility. D. No, because he can increase his total utility by purchasing more music downloads and fewer snacks. E. No, because he can increase his total utility by purchasing fewer music downloads and more snacks.
D
The demand curve for a normal good slopes down for which of the following reasons? I. An increase in the price of the good induces consumers to purchase substitute products. II. An increase in the price of the goods reduces consumers' purchasing power. III. An increase in the price of the good increases consumers' utility from consuming that good. A. I only B. II only C. III only D. I and II only E. I and III only
D
The graph above shows the supply and demand curves for a particular brand of computers. In 1988, 10,000 computers were sold for $1,000 each, but in 1989, 9,000 computers were sold for $1,000 each. Which of the following changes in the supply and demand curves could most likely have caused this change? A. Demand Curve Supply Curve Shift right Shift right B. Demand Curve Supply Curve Shift right Shift left C. Demand Curve Supply Curve No change Shift left D. Demand Curve Supply Curve Shift left Shift left E. Demand Curve Supply Curve Shift left No change
D
The market supply curve for a product is derived from the individual firm supply curves by A. multiplying the equilibrium quantity sold by the number of consumers in the market B. multiplying the equilibrium quantity sold by the number of producers in the market C. multiplying the quantities each producer sells by the market price D. summing the quantities each producer sells at each possible price E. summing the quantities each producer sells and multiplying by the market price
D
The price elasticity of demand for a product is 0.5. If the price of the product increases by 20 percent, which of the following will occur? A. The quantity demanded of the good will increase by 10%. B. The quantity demanded of the good will increase by 20%. C. The quantity demanded of the good will increase by 40%. D. The quantity demanded of the good will decrease by 10%. E. The quantity demanded of the good will decrease by 40%.
D
The study of economics is based on the premise that A. goods and services are scarce but capital is unlimited B. the growth of government is limited but resources are unlimited C. natural resources are scarce but labor is unlimited D. factors of production are scarce but goods and services people desire are unlimited E. consumer products are scarce but resources are unlimited
D
The table above shows the maximum number of palm leaves or coconuts that Robert and Frank can pick respectively in a single day. Which of the following is true? A. Robert has a comparative advantage in picking coconuts. B. Frank has a comparative advantage in picking palm leaves. C. Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 1 palm leaf. D. Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 3 palm leaves. E. Robert and Frank can both benefit from trade with each other if 1 coconut is traded for 5 palm leaves.
D
Which of the following best describes the law of demand? A. When income increases, the demand for goods increases. B. When the price of a good decreases, the demand for the good increases. C. When the price of a good decreases, the quantity demanded of the good decreases. D. When the price of a good increases, the quantity demanded of the good decreases. E. When the demand for a good increases, consumers' willingness and ability to buy the good increases.
D
Which of the following is the best example of a scarce factor of production? A. Money B. Food C. Air D. Airplanes E. Established knowledge
D
Which of the following statements about the price elasticity of demand is true? A. When demand is price inelastic, total revenue will decrease as price increases. B. When demand is price elastic, an increase in price will increase total revenue. C. Demand tends to be more elastic in the short run compared to the long run. D. As more close substitutes become available, demand tends to be more price elastic. E. As a good becomes viewed as a necessity, demand becomes more price elastic.
D
Which of the following statements relating to supply is true? A. An increase in an input price will lead to an increase in supply. B. An increase in the price of a good will lead to an increase in the supply of the good. C. A decrease in consumers' income will lead to a decrease in the supply of the good. D. A decrease in the price of a good will lead to a decrease in the quantity supplied of the good. E. A decrease in the price of a substitute good in production will lead to a decrease in the supply of another substitute good.
D
Which of the following will enable an economy to reach point F on the diagram above? A. Reallocating currently available resources from apple production to production of oranges B. Reallocating currently available resources from orange production to production of apples C. Fully allocating currently available and unemployed resources efficiently D. Creating or discovering new resources E. Becoming a mixed economy
D
Which of the following will initially result from an increase in the market demand for a good? A. There will be a matching increase in supply. B. There will be a decrease in quantity supplied. C. The equilibrium price will decrease. D. There will be a temporary shortage at the original equilibrium price. E. Total producer surplus in the market will decrease.
D
According to the law of demand, which of the following occurs when the price of a good increases? A. The demand for the good decreases. B. The quantity demanded of a substitute good decreases. C. The quantity demanded of a complementary good increases. D. The quantity demanded of the good increases. E. The quantity demanded of the good decreases.
E
According to the production possibilities curve above, which of the following is true? A. The opportunity cost of producing another unit of good Y in terms of good X increases as more of good Y is produced. B. The opportunity cost of producing another unit of good Y in terms of good X decreases as more of good Y is produced. C. The opportunity cost of producing another unit of good X in terms of good Y increases as more of good X is produced. D. The opportunity cost of producing another unit of good X in terms of good Y decreases as more of good X is produced. E. The opportunity cost of producing another unit of either good remains constant as the production of the other good increases.
E
Consider the market for arugula, a normal good. Which of the following changes would result in an increase in both the equilibrium price and the equilibrium quantity of arugula? A. A decrease in consumer income B. An increase in the price of salad dressing, a complement in consumption C. A decrease in the price of radicchio, a substitute in consumption D. An increase in the price of water irrigation for arugula farms E. An increase in population
E
In a perfectly competitive market, which of the following shifts in the supply and demand curves will definitely cause both equilibrium price and quantity to decrease? A. Supply Curve Demand Curve Shifts to the left Shifts to the left B. Supply Curve Demand Curve Shifts to the left No shift C. Supply Curve Demand Curve Shifts to the right Shifts to the right D. Supply Curve Demand Curve No shift Shifts to the right E. Supply Curve Demand Curve No shift Shifts to the left
E
In which of the following cases would government intervention in a market result in an increase in the quantity sold? A. Setting a price ceiling above the equilibrium price B. Setting a price ceiling below the equilibrium price C. Setting a price floor above the equilibrium price D. Levying a per-unit tax on producers E. Providing producers of a product with a per unit subsidy
E
On the basis of the graph above, which of the following statements concerning changes in the demand for and supply of tomatoes is correct? A. If both the demand and supply increase, the price of tomatoes will definitely increase. B. If both the demand and supply decrease, the quantity of tomatoes sold will definitely increase. C. If the demand decreases while the supply increases, the price of tomatoes sold will definiftely increase D. If the demand decreases while the supply increases, the quantity of tomatoes sold will definitely decrease. E. If the demand increases while the supply decreases, the price of tomatoes will definitely increase.
E
Suppose the government sets a price floor at $9 in the market. The resulting consumer surplus, producer surplus, and deadweight loss will be which of the following? A. Consumer Surplus(B+E) Producer Surplus(C+F) Deadweight Loss(A+B) B. Consumer Surplus (A + B) Producer Surplus(C+D) Deadweight Loss(E+F) C. Consumer Surplus(A) Producer Surplus(C+D+F) Deadweight Loss (E) D. Consumer Surplus(A+B+E) Producer Surplus(C+D+F) Deadweight Loss (0) E. Consumer Surplus(A) Producer Surplus(B+C+D) Deadweight Loss (E+F)
E
The allocation of resources in a market economy is described by which of the following statements? I. The government decides which goods will be produced and which consumers will receive them. II. Buyers and sellers exchange goods and services on a voluntary basis. III. Prices and costs help producers decide whether they are producing too little or too much of a good. A. I only. B. II only. C. III only. D. I and III only. E. II and III only.
E
Which of the following correctly describes the income effect associated with the law of demand? A. If consumer income increases, there will be an upward movement along the demand curve for a normal good. B. If consumer income increases, the demand curve will shift to the right for an inferior good. C. If the price of a good increases, the demand for the good decreases because the demand for its substitute in consumption increases. D. If the price of a good decreases, the demand for the good increases because the lower price increases the demand for its complement in consumption. E. If the price of a normal good decreases, the purchasing power of a consumer's income increases and therefore consumers will be willing and able to purchase more of the good.
E
Which of the following explains why the supply curve is upward sloping? A. At a higher price, consumers are willing to buy more of the good. B. At a lower price, consumers are able to buy more of the good. C. Producers receive subsidies as they increase production. D. At a higher quantity, producers are more able to control the market price. E. At a higher price, producers are willing to sell more to increase their profits.
E
Which of the following occurs if the price of oranges is below the equilibrium price? A. There is a surplus of oranges. B. The quantity supplied of oranges is greater than the quantity demanded. C. The quantity supplied of oranges is greater than the quantity sold. D. The quantity purchased of oranges is greater than the quantity sold. E. The quantity demanded of oranges is greater than the quantity supplied.
E
