PRACTICE #1

Refer to the diagram. A surplus of 160 units would be encountered if the price was: A) $1.10, that is, $1.60 minus $.50. B) $1.60. C) $0.50. D) $1.00.

B) $1.60

(SEE SG FOR CHART) Refer to the diagram. Starting at point E, the production of successive units of bread will cost: A) a constant 6 units of tractors. B) 1/8, 1/6, 1/4, and 1/2 units of tractors. C) 1/2, 1/4, 1/6, and 1/8 units of tractors. D) a constant 8 units of tractors.

B) 1/8, 1/6, 1/4, and 1/2 units of tractors.

(SEE SG FOR CHART) 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: A) GH. B) BE. C) CD. D) AF.

B) BE.

Which of the following would not be classified as an economic resource by economists? A) Water in a town's reservoir. B) Money in a business checking account. C) The manager of the local hamburger restaurant. D) A professional soccer player.

B) Money in a business checking account.

If two goods are complements: A) they are consumed independently. B) a decrease in the price of one will increase the demand for the other. C) they are necessarily inferior goods. D) an increase in the price of one will increase the demand for the other.

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

Answer the question on the basis of the data given in the following production possibilities table: (look at SG for chart) 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: A) use its resources more efficiently than the data in the table now indicate. B) achieve economic growth. C) achieve the full employment of available resources. D) allocate its available resources most efficiently among alternative uses.

B) achieve economic growth.

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: A) decrease S, decrease P, and increase Q. B) decrease S, increase P, and decrease Q. C) increase D, increase P, and increase Q. D) increase S, decrease P, and increase Q.

B) 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 complement to product C. We can expect a decrease in the price of A to: A) decrease the supply of B and decrease the demand for C. B) increase the supply of B and increase the demand for C. C) decrease the supply of B and increase the demand for C. D) increase the supply of B and decrease the demand for C.

B) increase the supply of B and increase the demand for C.

According to economists, economic self-interest: A) means that people never make wrong decisions. B) is a reality that underlies economic behavior. C) is usually self-defeating. D) has the same meaning as selfishness.

B) is a reality that underlies economic behavior.

(SEE SG FOR CHART) Refer to the diagram. Other things equal, this economy will achieve the most rapid rate of growth if: A) it chooses point B. B) it chooses point A. C) it chooses point C. D) the ratio of capital to consumer goods is minimized.

B) it chooses point A.

The demand curve shows the relationship between: A) consumer tastes and quantity demanded. B) price and quantity demanded. C) money income and quantity demanded. D) price and production costs.

B) price and quantity demanded.

An increase in product price will cause: A) quantity demanded to increase. B) quantity demanded to decrease. C) the supply curve to shift to the left. D) quantity supplied to decrease.

B) quantity demanded to decrease.

(SEE SG FOR CHART) 19) Refer to the diagram. An improvement in technology will: A) move the economy from A to C along PP1. B) shift the production possibilities curve from PP1 to PP2. C) shift the production possibilities curve from PP2 to PP1. D) move the economy from A, B, or C on PP1 to D.

B) shift the production possibilities curve from PP1 to PP2.

Macroeconomics approaches the study of economics from the viewpoint of: A) governmental units. B) the entire economy. C) the operation of specific product and resource markets. D) individual firms.

B) the entire economy.

The point on the production possibilities curve that is most desirable can be found by: A) calculating where economic growth will be greatest. B) determining where least-cost production occurs. C) comparing marginal benefits and marginal costs. D) estimating the marginal costs of both products in real or physical terms.

C) comparing marginal benefits and marginal costs.

(SEE SG FOR CHART) Refer to the tables. Opportunity costs are: A) larger in Duckistan than in Herbania. B) increasing in Duckistan and constant in Herbania. C) increasing in both Duckistan and Herbania. D) constant in both Duckistan and Herbania.

C) increasing in both Duckistan and Herbania.

The main function of the entrepreneur is to: A) create market demand. B) purchase capital. C) innovate. D) make routine pricing decisions.

C) innovate.

(SEE SG FOR CHART) Refer to the diagram. A government-set price floor is best illustrated by: A) price A. B) quantity E. C) price C. D) price B.

C) price C.

The law of supply indicates that, other things equal: A) producers will offer more of a product at low prices than at high prices. B) the product supply curve is downsloping. C) producers will offer more of a product at high prices than at low prices. D) consumers will purchase less of a good at high prices than at low prices.

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

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: A) resources are specialized and only imperfectly substitutable. B) of the law of increasing opportunity costs. C) resources are limited. D) economic wants are insatiable.

C) resources are limited.

(SEE SG FOR CHART) Refer to the diagram. A decrease in supply is depicted by a: A) shift from S1 to S2. B) move from point y to point x. C) shift from S2 to S1. D) move from point x to point y.

C) shift from S2 to S1

Answer the question on the basis of the data given in the following production possibilities table: (look at SG for chart) Refer to the table. As compared to production alternative D, the choice of alternative C would: A) be unattainable. B) entail unemployment. C) tend to generate a more rapid growth rate. D) tend to generate a slower growth rate.

C) tend to generate a more rapid growth rate.

Which of the following would not shift the demand curve for beef? A) A widely publicized study that indicates beef consumption increases one's cholesterol. B) An effective advertising campaign by pork producers. C) A change in the incomes of beef consumers. D) A reduction in the price of cattle feed.

D) A reduction in the price of cattle feed.

(SEE SG FOR CHART) 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? A) D. B) B. C) C. D) A.

D) A.

(SEE SG FOR CHART) Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles? A) A only. B) B only. C) C only. D) D only.

D) D only.

If X is a normal good, a rise in money income will shift the: A) supply curve for X to the left. B) demand curve for X to the left. C) supply curve for X to the right. D) demand curve for X to the right.

D) demand curve for X to the right.

At the current price there is a shortage of a product. We would expect price to: A) decrease, quantity demanded to increase, and quantity supplied to decrease. B) increase, quantity demanded to increase, and quantity supplied to decrease. C) increase, quantity demanded to increase, and quantity supplied to increase. D) increase, quantity demanded to decrease, and quantity supplied to increase

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

A normative statement is one that: A) is based on the law of averages. B) applies only to macroeconomics. C) applies only to microeconomics. D) is based on value judgments.

D) is based on value judgments.

In this market, economists would call a government-set maximum price of $40 a: A) price floor. B) fair price. C) equilibrium price. D) price ceiling

D) price ceiling

If there is a shortage of product X, and the price is free to change: A) the price of the product will decline. B) the supply curve will shift to the left and the demand curve to the right, eliminating the shortage. C) fewer resources will be allocated to the production of this good. D) the price of the product will rise.

D) the price of the product will rise.

Refer to the above diagram. A shortage of 160 units would be encountered if price was: A) $0.50. B) $1.10, that is, $1.60 minus $.50. C) $1.00. D) $1.60.

A) $0.50

(SEE SG FOR CHART) Which of the diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software? A) A only. B) D only. C) A and D. D) B only.

A) A only.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? A) An increase in supply. B) A decrease in supply. C) An increase in demand. D) A decrease in demand

A) An increase in supply.

(SEE SG FOR CHART) 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) a to point b. B) c to point b. C) c to point d. D) b to point c.

A) a to point b.

The study of economics is primarily concerned with: A) choices that are made in seeking the best use of resources. B) keeping private businesses from losing money. C) determining the most equitable distribution of society's output. D) demonstrating that capitalistic economies are superior to socialistic economies.

A) choices that are made in seeking the best use of resources.

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: A) decrease S, increase P, and decrease Q. B) increase S, increase P, and increase Q. C) decrease S, decrease P, and decrease Q. D) increase D, increase P, and increase Q

A) 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: A) decrease equilibrium price and increase equilibrium quantity. B) decrease equilibrium price and quantity. C) increase equilibrium price and quantity. D) increase equilibrium price and decrease equilibrium quantity.

A) decrease equilibrium price and increase

The simple circular flow model shows that: A) households are on the selling side of the resource market and on the buying side of the product market. B) households are on the buying side of both product and resource markets. C) businesses are on the buying side of the product market and on the selling side of the resource market. D) businesses are on the selling side of both product and resource markets.

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

(SEE SG FOR CHART) Refer to the diagram. The combination of computers and bicycles shown by point F: A) is attainable but implies that the economy is not using all its resources. B) suggests that opportunity costs are constant. C) is unattainable given currently available resources and technology. D) is irrelevant because it is inconsistent with consumer preferences.

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

Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that: A) the economy was not employing all of its resources before the policy change. B) the law of increasing opportunity costs does not apply in this society. C) the economy's production possibilities curve has been shifted to the left as a result of the policy decision. D) this economy's production possibilities curve is convex (bowed inward) to the origin.

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