1. The price of good Agoes up. As a result the demand for good B shifts to the l
ID: 1250728 • Letter: 1
Question
1. The price of good Agoes up. As a result the demand for good B shifts tothe left. From this we can infer that:
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 that price is belowthe
equilibrium price, the result will be:
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 be explained in termsof:
a. Supply.
b. Complementary goods.
c. The rationing function of prices.
d. Diminishing marginal utility.
5. Which of the following is a positive statement?
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 ratesrise and private
investment is reduced.
d. All of the given options.
6. Economists use the term marginal utility to mean:
a. Additional satisfaction gained divided by additional costof the last unit.
b. Total satisfaction gained when consuming a given number ofunits.
c. Additional satisfaction gained by the consumption of onemore unit of a good. d. The process ofcomparing marginal units of all goods which could be
purchased. 7. Theincome-consumption curve:
a. Illustrates the combinations of incomes needed withvarious levels 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 onepercent increase in quantity
demanded. 9. The slope of anindifference curve reveals:
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 afunction of the level of
labor input.
11. The demand curve and its inverse relationship between priceand
quantity demanded are based on the assumption of:
a. Other things equal.
b. Changing expectations.
c. Complementary goods. d. Increasingmarginal utility. 12. Economics is aboutthe allocation of scarce resources. Which of the
following is NOT an example of economic scarcity?
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 new titles.
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 fundsfrom the federal
government to run campaigns.
c. The sea otter should not be allowed to spread intoSouthern California coastal
waters, because it will reduce the value of fisheries.
d. All of the given options.
14. The substitution effect of a wage increase will lead a personto:
a. Work more
b. Take more leisure
c. Not change anything
d. None of the given option
15. Which of the following statements about indifference curves isNOT
correct?
a. Indifference curves are generally negativelysloped.
b. Without utility being quantifiable we can say that oneindifference curve is
higher than (or preferred to) another but we cannot say by howmuch.
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 money identifyingclients
and advertising her services. These activities are an exampleof:
a. External costs
b. Transaction costs
c. Fixed inputs d. Marginalreturns 17. Assume that a firmis a price taker in its input markets. If the firm's
technology is characterized by diminishing marginal physicalproduct 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 asoutput rises.
18. Which of the following statements describes the presence of
diminishing returns?
a. The marginal product of a factor is positive andrising.
b. The marginal product of a factor is positive butfalling.
c. The marginal product of a factor is falling andnegative.
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 produce with agiven
combination of inputs is determined by the:
a. Marginal product of labor
b. Gains from specialization
c. Cost function
d. Production function 1. The price of good Agoes up. As a result the demand for good B shifts to
the left. From this we can infer that:
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 that price is belowthe
equilibrium price, the result will be:
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 be explained in termsof:
a. Supply.
b. Complementary goods.
c. The rationing function of prices.
d. Diminishing marginal utility.
5. Which of the following is a positive statement?
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 ratesrise and private
investment is reduced.
d. All of the given options.
6. Economists use the term marginal utility to mean:
a. Additional satisfaction gained divided by additional costof the last unit.
b. Total satisfaction gained when consuming a given number ofunits.
c. Additional satisfaction gained by the consumption of onemore unit of a good. d. The process ofcomparing marginal units of all goods which could be
purchased. 7. Theincome-consumption curve:
a. Illustrates the combinations of incomes needed withvarious levels 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 onepercent increase in quantity
demanded. 9. The slope of anindifference curve reveals:
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 afunction of the level of
labor input.
11. The demand curve and its inverse relationship between priceand
quantity demanded are based on the assumption of:
a. Other things equal.
b. Changing expectations.
c. Complementary goods. d. Increasingmarginal utility. 12. Economics is aboutthe allocation of scarce resources. Which of the
following is NOT an example of economic scarcity?
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 new titles.
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 fundsfrom the federal
government to run campaigns.
c. The sea otter should not be allowed to spread intoSouthern California coastal
waters, because it will reduce the value of fisheries.
d. All of the given options.
14. The substitution effect of a wage increase will lead a personto:
a. Work more
b. Take more leisure
c. Not change anything
d. None of the given option
15. Which of the following statements about indifference curves isNOT
correct?
a. Indifference curves are generally negativelysloped.
b. Without utility being quantifiable we can say that oneindifference curve is
higher than (or preferred to) another but we cannot say by howmuch.
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 money identifyingclients
and advertising her services. These activities are an exampleof:
a. External costs
b. Transaction costs
c. Fixed inputs d. Marginalreturns 17. Assume that a firmis a price taker in its input markets. If the firm's
technology is characterized by diminishing marginal physicalproduct 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 asoutput rises.
18. Which of the following statements describes the presence of
diminishing returns?
a. The marginal product of a factor is positive andrising.
b. The marginal product of a factor is positive butfalling.
c. The marginal product of a factor is falling andnegative.
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 produce with agiven
combination of inputs is determined by the:
a. Marginal product of labor
b. Gains from specialization
c. Cost function
d. Production function d. Marginalreturns 17. Assume that a firmis a price taker in its input markets. If the firm's
technology is characterized by diminishing marginal physicalproduct 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 asoutput rises.
18. Which of the following statements describes the presence of
diminishing returns?
a. The marginal product of a factor is positive andrising.
b. The marginal product of a factor is positive butfalling.
c. The marginal product of a factor is falling andnegative.
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 produce with agiven
combination of inputs is determined by the:
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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