Econ Ch 1 test

B

An inferior good is a good for which demand A) increases when income increases. B) decreases when income increases. C) decreases when population increases. D) increases when population increases.

C

Economics is best defined as the study of how people, businesses, governments, and societies A) choose abundance over scarcity. B) use their infinite resources. C) make choices to cope with scarcity. D) attain wealth.

A

If OPEC cuts oil production to increase the total revenue, they know that the demand for oil in the global market is A) inelastic. B) elastic. C) perfectly elastic. D) unit elastic

C

If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher is the A) price of substitutes. B) income elasticity of demand for that good. C) price of the good. D) income of consumers.

C

If the price elasticity is between 0 and 1, demand is A) unit elastic. B) perfectly elastic. C) inelastic. D) elastic.

A

In broad terms the difference between microeconomics and macroeconomics is that A) microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy. B) they use different sets of tools and ideas. C) microeconomics studies the effects of government taxes on the national unemployment rate. D) macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas microeconomics does not.

A

Increasing opportunity cost is due to A) the fact that resources are not equally suited for different types of production. B) ever increasing taxes. C) firmsʹ needs to earn more and more profits. D) the fact that it is more difficult to use resources efficiently the more society produces.

B

Suppose people buy more of good 1 when the price of good 2 falls. These goods are A) inferior. B) complements. C) normal. D) substitutes.

D

The demand for hot dogs is given by QD = 8000 - 7000P, where QD is the quantity demanded and P is the price in dollars. The supply for hot dogs is given by QS = 4000 + 1000P, where QS is the quantity supplied and P is the price in dollars. Given these supply and demand relationships, A) At the equilibrium, the price = $0.50 and the quantity = 4500 hot dogs. B) At a price of $1, there is a shortage of 4000 hot dogs. C) At a price of $1, there is a surplus of 4000 hot dogs. D) Both answers A and C are correct.

C

The income elasticity of demand is the percentage change in A) the price divided by the percentage change in income. B) income divided by the percentage change in price. C) the quantity demanded divided by the percentage change in income. D) income divided by the percentage change in quantity demanded.

C

The price of a good will fall if A) the quantity demanded exceeds the quantity supplied. B) the current price is less than the equilibrium price. C) there is a surplus at the current price. D) the price of a complement falls.

B

The production possibilities frontier illustrates A) all goods that can be produced by an economy. B) the combination of goods and services that can be produced efficiently. C) all goods and services that are desired but cannot be produced due to scarce resources. D) all possible production of capital goods.

C

When income increases from $30,000 a year to $40,000 a year, the quantity demanded of weekend vacations by Sara increases from 2 a year to 5 a year. For Sara, the income elasticity of demand of weekend vacations is ________ and weekend vacations are ________ good. A) 1/3; an inferior B) 1/3; a normal C) 3; a normal D) 4.5 a normal

B

Which of the following is a normative statement? A) The price of candy bars is $1.25 each. B) You should eat less candy. C) Popcorn and candy are sold in movie theaters. D) Candy bars are more expensive than newspapers - involves words like should or ought

D

You observe that the price of a good rises and the quantity decreases. These observations can be the result of A) the supply curve shifting rightward. B) the demand curve shifting leftward. C) the demand curve shifting rightward. D) the supply curve shifting leftward.

C

A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is A) 20.0. B) 0.5. C) 2.0. D) 10.0.

C

A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is A) 1.25. B) 0.80. C) 1.20. D) 8.00.

A

A 10 percent increase in income has caused a 5 percent decrease in the quantity demanded. The income elasticity is A) -0.5. B) 0.5. C) 2.0. D) -2.0.

A

During the next hour John can play basketball, watch television, or read a book. The opportunity cost of reading a book A) is the value of playing basketball if John prefers that to watching television. B) is how much the book cost when it was purchased. C) is the value of playing basketball and the value of watching television. D) equals how much John enjoys the book.