4. What is TRUE of all output combinations represented by points on the producti
ID: 1090939 • Letter: 4
Question
4. What is TRUE of all output combinations represented by points on the production possibilities curve?
(a) They all represent an efficient use of resources.
(b) They all represent an equal distribution of income.
(c) They all represent politically popular outcomes.
(d) They all represent outcomes in which scarcity has been eliminated.
28 of 100
Any improvement in overall production technology that permits more output to be produced with the same level of inputs causes
(a) an increase in demand.
(b) a rightward shift of the supply curve so that more is offered at each price.
(c) no movement of the supply curve, but a fall in price and a decrease in quantity supplied.
(d) a leftward shift of the supply curve so that less is offered for sale at each price.
Table 3.1
Price per
Constant-Quality Unit
Quantity Demanded
of Constant-Quality
Units per Year
Quantity Supplied
of Constant-Quality
Units per Year
$1.00
1,000
200
2.00
800
400
3.00
600
600
4.00
400
800
5.00
200
1,000
According to Table 3.1, at a price of $2 per unit, which of the following would exist?
Table 3.1
Price per
Constant-Quality Unit
Quantity Demanded
of Constant-Quality
Units per Year
Quantity Supplied
of Constant-Quality
Units per Year
$1.00
1,000
200
2.00
800
400
3.00
600
600
4.00
400
800
5.00
200
1,000
In a free market economy, the market clearing (equilibrium) price in Table 3.1 would adjust to
Table 3.1
Price per
Constant-Quality Unit
Quantity Demanded
of Constant-Quality
Units per Year
Quantity Supplied
of Constant-Quality
Units per Year
$1.00
1,000
200
2.00
800
400
3.00
600
600
4.00
400
800
5.00
200
1,000
In looking at Table 3.1, what happens as the price rises further above the equilibrium price?
Table 4.6
Price
Quantity Demanded
$20
90
$16
110
$12
130
$ 8
150
10 of 100Why does an economy need a rationing mechanism?
(a) Because of scarcity
(b) Because it preserves the power of the wealthy
(c) Because it eliminates poverty
(d) All of the above are correct. 12 of 100
GDP does NOT include
(a) the value of goods produced for government purchase.
(b) the value of what businesses spend on plant and equipment.
(c) the value of what consumers purchase to give as gifts.
(d) the value of goods sold on the second-hand market. 13 of 100
How do consumers typically react to a decline in the market price of a good they like to buy frequently?
(a) They lose interest in this item.
(b) They reduce their work effort since they no longer need such a high income to buy the same amount of this item.
(c) They investigate the industry producing this item to see if there was a legitimate reason for production costs to decline.
(d) They buy more of the item. 14 of 100
How could GDP increase without there also being an increase in real GDP?
(a) The rate of population growth matched the rate of growth in output.
(b) The rate of population growth matched the growth of the labor force.
(c) Output increased, but it was not shared equally among all consumers.
(d) All of the increase in GDP was due to higher prices. 15 of 100
An increase in real per capita GDP means that
(a) the size of the labor force has grown.
(b) the distribution of income has become more equal.
(c) the distribution of income has become less equal.
(d) the amount of output per person has risen. 16 of 100
What must be true in order for per capita real GDP to increase when the population is also increasing?
(a) The rate of inflation must be zero.
(b) The rate of inflation must be less than the rate of economic growth.
(c) The rate of growth of output must exceed the population growth rate.
(d) The economy must be importing some essential goods. 17 of 100
Which one of the following is a good measure of the average standard of living?
(a) GDP
(b) The inflation rate
(c) The median age
(d) Real per capita GDP 18 of 100
Capital refers to
(a) natural resources present as gifts of nature.
(b) the skills workers acquire through training and education.
(c) manufactured items used to produce goods or provide services.
(d) the time workers spend carrying out their jobs. 19 of 100
You start up an internet-based business run from your apartment, offering economic advice to subscribers to your website. Which one of the following statements correctly describes how a factor of production contributes to your business?
(a) The computer you use is a land resource.
(b) The computer you use is a capital resource.
(c) The computer you use is an entrepreneurial resource.
(d) Your knowledge of economics is a land resource. 20 of 100
The factors of production are
(a) abundant without limit on the planet.
(b) valuable only because they are owned by corporations seeking to make a profit from them.
(c) scarce resources.
(d) never as useful as people expect them to be. 21 of 100
Which of the following is a determinant of demand?
(a) Cost of production
(b) Income
(c) Number of suppliers
(d) Technology of production 22 of 100
If two goods are substitutes, then
(a) an increase in the price of one causes a decrease in demand for the other.
(b) an increase in the price of one causes a decrease in supply of the other.
(c) a decrease in the price of one causes a decrease in demand for the other.
(d) a decrease in the supply of one increases demand for the other. 23 of 100
After a decrease in the price of CDs, Samia buys fewer cassette tapes and purchases a new CD player. For Samia,
(a) CD players and cassette tapes are complements.
(b) CDs, CD players, and cassette tapes are all complements.
(c) CDs, cassette tapes, and CD players are all substitutes.
(d) CDs and cassette tapes are substitutes, and CDs and CD players are complements. 24 of 100
What is true at prices above the equilibrium price for a product?
(a) A shortage results.
(b) A surplus results.
(c) The good is no longer scarce.
(d) The quantity demanded exceeds the quantity supplied. 25 of 100
Other things being equal, the relationship between price and quantity supplied is
(a) negative.
(b) positive.
(c) random.
(d) nonexistent. 26 of 100
The positive slope of the supply curve tells us that
(a) input prices have no effect on the supply of a good.
(b) firms respond to a higher price of their product by increasing the quantity supplied.
(c) firms disregard the law of demand.
(d) taxes do not affect the cost of producing a good. 27 of 100
Which of the following variables will change in response to a change in price?
(a) Supply
(b) Demand
(c) Consumer preferences
(d) Quantity demanded
28 of 100
Any improvement in overall production technology that permits more output to be produced with the same level of inputs causes
(a) an increase in demand.
(b) a rightward shift of the supply curve so that more is offered at each price.
(c) no movement of the supply curve, but a fall in price and a decrease in quantity supplied.
(d) a leftward shift of the supply curve so that less is offered for sale at each price.
If other things are held constant, an increase in wages earned by workers in the steel industry will cause
(a) the demand for steel to increase.
(b) the demand for steel to decrease.
(c) the supply of steel to increase.
(d) the supply of steel to decrease. 30 of 100
Which of the following is a determinant of demand?
(a) Cost of production
(b) Income
(c) Number of suppliers
(d) Technology of production 31 of 100
If two goods are substitutes, then
(a) an increase in the price of one causes a decrease in demand for the other.
(b) an increase in the price of one causes a decrease in supply of the other.
(c) a decrease in the price of one causes a decrease in demand for the other.
(d) a decrease in the supply of one increases demand for the other. 32 of 100
After a decrease in the price of CDs, Samia buys fewer cassette tapes and purchases a new CD player. For Samia,
(a) CD players and cassette tapes are complements.
(b) CDs, CD players, and cassette tapes are all complements.
(c) CDs, cassette tapes, and CD players are all substitutes.
(d) CDs and cassette tapes are substitutes, and CDs and CD players are complements. 33 of 100
What is true at prices above the equilibrium price for a product?
(a) A shortage results.
(b) A surplus results.
(c) The good is no longer scarce.
(d) The quantity demanded exceeds the quantity supplied. 34 of 100
Other things being equal, the relationship between price and quantity supplied is
(a) negative.
(b) positive.
(c) random.
(d) nonexistent. 35 of 100
The positive slope of the supply curve tells us that
(a) input prices have no effect on the supply of a good.
(b) firms respond to a higher price of their product by increasing the quantity supplied.
(c) firms disregard the law of demand.
(d) taxes do not affect the cost of producing a good. 36 of 100
Which of the following variables will change in response to a change in price?
(a) Supply
(b) Demand
(c) Consumer preferences
(d) Quantity demanded 37 of 100
If other things are held constant, an increase in wages earned by workers in the steel industry will cause
(a) the demand for steel to increase.
(b) the demand for steel to decrease.
(c) the supply of steel to increase.
(d) the supply of steel to decrease. 38 of 100
Any improvement in overall production technology that permits more output to be produced with the same level of inputs causes
(a) an increase in demand.
(b) a rightward shift of the supply curve so that more is offered at each price.
(c) no movement of the supply curve, but a fall in price and a decrease in quantity supplied.
(d) a leftward shift of the supply curve so that less is offered for sale at each price. 39 of 100
Table 3.1
Price per
Constant-Quality Unit
Quantity Demanded
of Constant-Quality
Units per Year
Quantity Supplied
of Constant-Quality
Units per Year
$1.00
1,000
200
2.00
800
400
3.00
600
600
4.00
400
800
5.00
200
1,000
According to Table 3.1, at a price of $2 per unit, which of the following would exist?
(a) A shortage of 400 units
(b) A surplus of 400 units
(c) A shortage of 800 units
(d) A shortage of 200 units 40 of 100
Table 3.1
Price per
Constant-Quality Unit
Quantity Demanded
of Constant-Quality
Units per Year
Quantity Supplied
of Constant-Quality
Units per Year
$1.00
1,000
200
2.00
800
400
3.00
600
600
4.00
400
800
5.00
200
1,000
In a free market economy, the market clearing (equilibrium) price in Table 3.1 would adjust to
(a) a price something above $5.
(b) $5.
(c) $4.
(d) $3. 41 of 100
What condition characterizes a surplus?
(a) Quantity supplied exceeds quantity demanded.
(b) Quantity demanded exceeds quantity supplied.
(c) Producers are unhappy with the price.
(d) Consumers are unhappy with the price. 42 of 100
Table 3.1
Price per
Constant-Quality Unit
Quantity Demanded
of Constant-Quality
Units per Year
Quantity Supplied
of Constant-Quality
Units per Year
$1.00
1,000
200
2.00
800
400
3.00
600
600
4.00
400
800
5.00
200
1,000
In looking at Table 3.1, what happens as the price rises further above the equilibrium price?
(a) The size of the shortage grows larger.
(b) The size of the surplus grows larger.
(c) The quantity demanded grows larger.
(d) The quantity supplied grows smaller. 43 of 100
Table 4.6
Price
Quantity Demanded
$20
90
$16
110
$12
130
$ 8
150
According to the data in Table 4.6, what is the elasticity of demand between a price of $20 and a price of $16?
(a) 1.25
(b) 0.90
(c) 0.75
(d) 0.60 44 of 100
Which one of the following is NOT a determinant of the price elasticity of demand?
(a) The number and availability of substitutes
(b) The relative importance of this item in the consumer
Explanation / Answer
1. (a) They all represent an efficient use of resources.
2. (c) Resources previously devoted to producing consumer electronics would be used to produce housewares.
3. (a) There would have to be economic growth.
4. (c) The output of housewares would fall by 900 units and the output of consumer electronics would increase by 1500 units.
5. (c) The forces underlying supply and demand interact to determine a market price.
6. (c) Because more scarce resources are needed to produce a sports car than to produce a mountain bike
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