1. The price of good A goes up. As a result the demandfor good B shifts to the l
ID: 1250541 • Letter: 1
Question
1. The price of good A goes up. As a result the demandfor good B shifts to the left. From this we can inferthat:
a. Good A is used to produce good B.
b. Good B is used to produce good A.
c. Goods A and B are substitutes.
d. Goods A and B are complements.
2. A rational person does not act unless:
a. The action is ethical.
b. The action produces marginal costs that exceed marginalbenefits.
c. The action produces marginal benefits that exceed marginalcosts.
d. The action makes money for the person.
3. When government sets the price of a good and thatprice is below the equilibrium price, the result willbe:
a. A surplus of the good.
b. A shortage of the good.
c. An increase in the demand for the good.
d. A decrease in the supply of the good.
4. The reason for the law of demand can best beexplained in terms of:
a. Supply.
b. Complementary goods.
c. The rationing function of prices.
d. Diminishing marginal utility.
5. Which of the following is a positivestatement?
a. When the price of a good goes up, consumers buy less ofit.
b. When the price of a good goes up, firms produce more ofit.
c. When the Federal government sells bonds, interest rates riseand private investment is reduced.
d. All of the given options.
6. Economists use the term marginal utility tomean:
a. Additional satisfaction gained divided by additional cost ofthe last unit.
b. Total satisfaction gained when consuming a given number ofunits.
c. Additional satisfaction gained by the consumption of one moreunit of a good.
d. The process of comparing marginal units of all goods whichcould be purchased.
7. The income-consumption curve:
a. Illustrates the combinations of incomes needed with variouslevels of consumption of a good.
b. Is another name for income-demand curve.
c. Illustrates the utility-maximizing combinations of goodsassociated with every income level.
d. Shows the utility-maximizing quantity of some good (on thehorizontal axis) as
a function of income (on the vertical axis).
8. The income elasticity of demand is the:
a. Absolute change in quantity demanded resulting from aone-unit increase in income.
b. Percent change in quantity demanded resulting from theabsolute increase in income.
c. Percent change in quantity demanded resulting from a onepercent increase in income.
d. Percent change in income resulting from a one percentincrease in quantity demanded.
9. The slope of an indifference curvereveals:
a. That preferences are complete.
b. The marginal rate of substitution of one good for anothergood.
c. The ratio of market prices.
d. That preferences are transitive.
10. An isoquant:
a. Must be linear.
b. Cannot have a negative slope.
c. Is a curve that shows all the combinations of inputs thatyield the same total output.
d. Is a curve that shows the maximum total output as a functionof the level of labor input.
11. The demand curve and its inverse relationshipbetween price and quantity demanded are based on the assumptionof:
a. Other things equal.
b. Changing expectations.
c. Complementary goods.
d. Increasing marginal utility.
12. Economics is about the allocation of scarceresources. Which of the following is NOT an example of economicscarcity?
a. If Ahmad goes to see the movie Master and Commander onSaturday, he will not be able to afford buying ice cream.
b. If Jenny studies for her economics quiz this evening, shewill not have time to walk her dog.
c. If General Motors increases its production of SUV’sthis year, it will have to spend more on advertising.
d. If Borders Books increases the number of titles it carries,it will have to reallocate shelf space to accommodate the newtitles.
13. Which of the following is a normativestatement?
a. The taxes paid by the poor should be reduced in order toimprove the income distribution in the U.S.
b. Presidential candidates should not be given funds from thefederal government to run campaigns.
c. The sea otter should not be allowed to spread into SouthernCalifornia coastal waters, because it will reduce the value offisheries.
d. All of the given options.
14. The substitution effect of a wage increase will leada person to:
a. Work more
b. Take more leisure
c. Not change anything
d. None of the given option
15. Which of the following statements about indifferencecurves is NOT correct?
a. Indifference curves are generally negatively sloped.
b. Without utility being quantifiable we can say that oneindifference curve is higher than (or preferred to) another but wecannot say by how much.
c. Two indifference curves cannot intersect unless they areidentical throughout.
d. Two different indifference curves can intersect but onlyonce.
16. A self-employed accountant spends a lot of moneyidentifying clients and advertising her services. These activitiesare an example of:
a. External costs
b. Transaction costs
c. Fixed inputs
d. Marginal returns
17. Assume that a firm is a price taker in its inputmarkets. If the firm's technology is characterized by diminishingmarginal physical product of its variable input in the short run,the firm's short run:
a. Marginal cost curve rises as output rises.
b. Average cost curve rises as output rises.
c. Marginal cost curve falls as output rises.
d. Marginal cost curves and average cost curves rises as outputrises.
18. Which of the following statements describes thepresence of diminishing returns?
a. The marginal product of a factor is positive and rising.
b. The marginal product of a factor is positive but falling.
c. The marginal product of a factor is falling and negative.
d. The marginal product of a factor is constant.
19. Diminishing marginal returns implies:
a. Decreasing marginal costs.
b. Increasing marginal costs.
c. Decreasing average variable costs.
d. Decreasing average fixed costs.
20. The largest amount of output that a firm can producewith a given combination of inputs is determined bythe:
a. Marginal product of labor
b. Gains from specialization
c. Cost function
d. Production function
Explanation / Answer
1 d 2 c 3 b 4 d 5 d 6 c 7 a 8 c 9 b 10 c 11 a 12 c 13 d 14 a 15 d 16 d 17 d 18 b 19 b 20 dRelated Questions
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