PRACTICE QUIZ - Attempt 1

Question
1
Marks: 1
The post hoc fallacy is the
Choose one answer.
a. conclusion that what is true for a part is necessarily true for the whole.
b. mistake of looking at the forest instead of the trees.
c. erroneous belief that if one event happens before another it must have caused the latter
d. device of holding everything else constant in order to assess the impact of a change in o
e. None of the above

Question
2
Marks: 1
The difference between positive economics and normative
economics is that
Choose one answer.
a. positive economics involves the collection of data and normative economics
b. positive economics states what is and normative economics states what sho
c. normative economics states what is and positive economics states what sho
d. positive economics is concerned with household behavior and normative ec
e. normative economics is concerned with household behavior and positive ec

Question
3
Marks: 1
A high school graduate must decide whether to go to college. The
income he would earn by taking a full-time job is an example of
Choose one answer.
a. sunk costs.
b. opportunity cost.
c. efficient markets.
d. marginalism.
e. positive economics.

Question
4
Marks: 1
Refer to Figure 1.1 below to answer the questions that
follow.
Figure 1.1

Refer to Figure 1.1. For every hour that Sarah works (X), she
makes exactly one circuit board (Y). This would be illustrated by the
graph in panel

Choose one answer.

a. A
b. B
c. C
d. D
e. None of the above

Question
5
Marks: 1
Refer to Figure 1.1 below to answer the questions that
follow.
Figure 1.1

Refer to Figure 1.1. The relationship between X and Y can be stated

as Y = 5 + 2x. This would be illustrated by the graph in panel

Choose one answer.

a. A
b. B
c. C
d. D
e. None of the above

Question
6
Marks: 1
Economic decisions have affected the
Choose one answer.
a. character of society.
b. nature and number of jobs.
c. level of material welfare.
 d. physical environment.
e. All of the above

Question
7
Marks: 1
Poverty is primarily a concern of
Choose one answer.
a. macroeconomics, but only from a global perspective.
b. macroeconomics.
c. neither microeconomics nor macroeconomics; it is a matter for normative e
d. both macroeconomics and microeconomics.
e. microeconomics.

Question
8
Marks: 1
Refer to Figure 1.1 below to answer the questions that
follow.
Figure 1.1

Refer to Figure 1.1. A farmer has a small amount of acreage planted

with tomatoes. The farmer is not sure how many workers to hire in
total. To try to solve this problem, the farmer hires one worker at a
time and measures the total output in terms of bushels of tomatoes
picked after each new worker is added. The farmer finds that as
more workers are hired (X) the output (Y) increases but by smaller
and smaller amounts. This would be illustrated by the graph in
panel

Choose one answer.

a. A
b. B
c. C
d. D
e. None of the above

Question
9
Marks: 1
I recently ordered stick-on return address labels from a printer. If I
ordered 500 it would cost $6.95. However, if I ordered 1000 it
would cost $9.95. One possible explanation of this pricing is that
Choose one answer.
a. the sunk costs increase as the quantity printed increases.
b. the average cost is the same for both quantities.
c. there are sunk costs in setting up the labels to be printed and marginal cost
d. the opportunity cost is less for the larger quantity.
e. the sunk costs decrease as the quantity printed increases.

Question
10
Marks: 1
The central institution through which a laissez-faire system answers
the basic economic questions is the
Choose one answer.
a. practice of consumer sovereignty.
b. government.
c. market.
d. central planning body.
e. tribal council.

Question
11
Marks: 1
The marginal rate of transformation is represented by the
Choose one answer.
a. rate at which output increases when moving from a point of unemployment
b. rate at which the production possibility frontier shifts over time.
c. slope of the production possibility frontier.
d. horizontal intercept of the production possibility frontier.
e. rate at which labor is transformed into one unit of output.

Question
12
Marks: 1
Refer to Figure 2.1 below to answer the questions that
follow.
Figure 2.1
Refer to Figure 2.1. Which of the following statements is TRUE?

Choose one answer.

a. The graph illustrates that in order to have more capital goods the society m
amount of consumer goods sacrificed will decrease as the desired amount of c
b. The graph illustrates that in order to have more consumer goods the societ
amount of capital goods sacrificed will decrease as the desired amount of cons
c. The graph illustrates that in order to have more capital goods the society m
amount of capital goods sacrificed will decrease as the desired amount of cons
d. The graph illustrates that in order to have more consumer goods the societ
amount of capital goods sacrificed will increase as the desired amount of cons
e. None of the above statements are true.

Question
13
Marks: 1
Which of the following statements is TRUE?
Choose one answer.
a. Leisure time has an opportunity cost only in the form of foregone capital inv
b. Leisure time is a free good.
c. Leisure time has an opportunity cost because you could have been doing so
d. Leisure time has an opportunity cost only for those who are employed.
e. Leisure time has an opportunity cost because you typically pay to be entert

Question
14
Marks: 1
Society answers the question "For whom?" when it chooses
Choose one answer.
a. its resources.
b. the mix of outputs.
c. the level of output.
d. the mix of inputs.
e. the distribution of output.

Question
15
Marks: 1
The term resources refers to
Choose one answer.
a. land and minerals only.
b. all usable inputs to the production process that are not manufactured.
c. all usable inputs to the production process owned by the private sector.
d. usable products.
e. all usable inputs to the production process.

Question
16
Marks: 1
The term producers refers to
Choose one answer.
a. those who transform resources into usable products.
b. private manufacturing firms only.
c. the public sector.
d. those who take resources and transform them into usable inputs.
e. None of the above

Question
17
Marks: 1
Refer to Scenario 1 below to answer the questions that
follow.
SCENARIO 1: Mary and Tom both volunteer at a food pantry that
serves the poor in their town. They both pack bags for distribution
and make sandwiches. The table below shows what they can each
do in one hour:

For Tom, the opportunity cost of a bag packed is

Choose one answer.

a. 16 sandwiches.
b. 2 sandwiches.
c. greater than it is for Mary.
d. the same as it is for Mary.
e. None of the above

Question
18
Marks: 1
Refer to Figure 2.2 below to answer the questions that
follow.
Figure 2.2

The law of increasing opportunity cost is illustrated by every panel

in Figure 2.2 EXCEPT:

Choose one answer.

a. b
b. a
c. f
d. e
e. c

Question
19
Marks: 1
A live play performed at the theater is an example of
Choose one answer.
a. a resource.
b. production.
c. a scarce resource.
d. None of the above because nothing is actually being produced
e. None of the above unless there is an audience

Question
20
Marks: 1
Sarah has 3 hours that she can choose to spend either studying for
a test or baby-sitting. If she spends all of her time studying, she
can score an 85 on the test. If she baby-sits for 1 hour, her test
grade falls 3 points. If she baby-sits for a second hour, her test
grade will fall by another 5 points. If she baby-sits for a third hour,
her test grade falls by another 7 points. Which of the following
points is NOT attainable?
Choose one answer.
a. 1 hour baby-sitting and a test score of 77
b. 0 hours baby-sitting and a test score of 82
c. 2 hours baby-sitting and a test score of 77
 d. 0 hours baby-sitting and a test score of 100
e. 3 hours baby-sitting and a test score of 70

Question
21
Marks: 1
Refer to the information provided below in Table 3.1 to
answer the following questions.
Table 3.1 provides data on the demand for and supply of eggs in
the United States.
Table 3.1

Refer to Table 3.1 A scare of salmonella in eggs would likely cause

the market price to

Choose one answer.

a. fall due to a decrease in demand.
b. remain unchanged.
c. fall due to an increase in supply.
d. rise due to a decrease in demand.
e. rise due to a decrease in supply.

Question
22
Marks: 1
The law of diminishing marginal utility
Choose one answer.
a. is the explanation of "ceteris paribus."
b. helps to explain why demand curves are very likely to slope downward.
c. was discovered by Alfred Marshall.
d. explains why consumers are better off when prices of goods decrease.
e. None of the above

Question
23
Marks: 1
A decrease in the equilibrium quantity of a normal good could be
the result of
Choose one answer.
a. an increase in the price of a substitute.
 b. a decrease in the price of a complement.
c. a decrease in income.
d. a growing population.
e. None of the above

Question
24
Marks: 1
Which of the following statements is FALSE?
Choose one answer.
a. Wealth is the same as savings.
b. Wealth affects household demand.
c. Wealth is the total value of what a household owns less what it owes.
d. Wealth is a stock measure.
e. All of the above are true.

Question
25
Marks: 1
Most economists do not treat __________ as a separate factor of
production because they implicitly assume that it is in plentiful
supply.
Choose one answer.
a. entrepreneurship
b. capital
c. land
d. labor
e. air

Question
26
Marks: 1
In response to higher profits in the oats market, many farmers
increase the acreage of oats planted. As a result, the equilibrium
price of oats would __________, and the equilibrium quantity of
oats would __________.
Choose one answer.
a. increase; decrease
b. increase; increase
 c. decrease; increase
d. decrease; decrease
e. decrease; not change

Question
27
Marks: 1
A household's decision about what quantity of a particular output,
or product, to demand depends on all of the following factors
EXCEPT the
Choose one answer.
a. household's expectations.
b. technologies available to produce the product.
c. price of the product itself.
d. tastes and preferences of the household.
e. income available to the household.

Question
28
Marks: 1
Households
Choose one answer.
a. are the consuming units of the economy.
b. in a diverse society such as ours have nothing in common.
c. depend on individual preferences with no constraints.
d. have no control of their incomes.
e. are defined as consisting of more than one person.

Question
29
Marks: 1
Demands for most goods are limited, if only by time, even at a zero
price. As a result demand curves typically
Choose one answer.
a. intersect the vertical axis.
b. intersect the horizontal axis.
c. do not intersect the price axis.
d. are straight lines.
 e. have a positive slope.

Question
30
Marks: 1
Refer to the information provided in Figure 4.2 below to
answer the questions that follow.
Figure 4.2

Refer to Figure 4.2. Which of the following areas represents

deadweight loss?

Choose one answer.

a. B
b. C
c. A
d. There is no deadweight loss in this market.

Question
31
Marks: 1
Refer to Figure 4.1 below to answer the questions that
follow.
Figure 4.1

Figure 4.1 shows the supply and demand curves for human kidneys.
Because the government does not allow a person to sell one of her
kidneys,

Choose one answer.

a. 0 kidneys are donated.
b. 50 kidneys are donated.
c. 20 kidneys are donated.
d. 30 kidneys are donated.
e. then kidney transplants are illegal.

Question
32
Marks: 1
Refer to the information provided below in Table 4.1 to
answer the following questions.
Table 4.1 (following) indicates the demand and supply schedules for
oil in the United States.
 Table 4.1

Suppose also that the world price of oil is $16 per barrel and that
the United States can buy all the oil it wants at that price.
Refer to Table 4.1. If the United States imposed a tax of $2 per
barrel on imported oil, the effect would be to
Choose one answer.
a. keep the price at $16.
b. raise the price to $20.
c. raise the price to $22.
d. raise the price to $18.
e. None of the above

Question
33
Marks: 1
Which of the following statements is TRUE?
Choose one answer.
a. "Willingness to pay" means that only the very rich will continue to buy som
b. To say that there is some price that will clear any market is to say that eve
c. One example in which the market does not work is the case of items with s
d. If a product is in fixed supply changes in its price will be determined solely
e. None of the above

Question
34
Marks: 1
Attempts to keep prices from rising to equilibrium are based on
perceptions
Choose one answer.
a. that some items are necessities and should be available to everyone at a re
b. of injustice.
c. that price gouging is bad.
d. that income is unfairly distributed.
e. All of the above

Question
35
Marks: 1
Refer to Figure 4.1 below to answer the questions that
follow.
Figure 4.1

Figure 4.1 shows the supply and demand curves for human kidneys.
If the government did allow a person to sell one of her kidneys in a
free market,

Choose one answer.

a. a kidney would sell for $2,500.
b. a kidney would sell for $5,000.
c. the demand for kidneys would shift to the left due to outrage.
d. both B and C
e. None of the above

Question
36
Marks: 1
Refer to the information provided below in Table 4.1 to
answer the following questions.
Table 4.1 (following) indicates the demand and supply schedules for
oil in the United States.
Table 4.1

Suppose also that the world price of oil is $16 per barrel and that
the United States can buy all the oil it wants at that price.
Refer to Table 4.1. Allowing for free trade, Americans would pay
__________ per barrel for their oil.
Choose one answer.
a. $22
b. $16
c. $18
d. $20
e. None of the above

Question
37
Marks: 1
Every year during the holidays one toy seems to become extremely
popular and hard to find. Parents have been known to attempt to
bribe toy store employees to call them as soon as a new shipment
arrives. This is an example of
Choose one answer.
a. favored customers.
b. queuing.
c. ration coupons.
d. a surplus.
e. the price rationing function at work.

Question
38
Marks: 1
Which of one of the following statements is TRUE?
Choose one answer.
a. The budget constraint illustrates a consumer's individual preferences and ta
b. The consumer's choice about what to buy and not buy is based only on the
and preferences.
c. The consumer's choice about what to buy and not buy is based only on tast
budget constraint.
d. A change in the price of a single good may change the entire allocation of in
e. None of the above statements are true.

Question
39
Marks: 1
Peter has $10 to spend on either ice cream cones or pretzels.
Pretzels cost $1 each and ice cream cones cost $2 each. The
opportunity cost of an ice cream cone is
Choose one answer.
a. 5 pretzels.
b. 1/2 pretzel.
c. 10 pretzels.
d. 2 pretzels.
e. None of the above

Question
40
Marks: 1
Refer to the information provided in Table 5.3 below to
answer the following questions.
Table 5.3
Refer to Table 5.3. Pete has $10 to spend. He buys two cookies and
two candies. Which of the following is true?

Choose one answer.

a. Pete could make himself better off by buying less candy and more cookies.
b. Pete is not spending the entire $10.
c. That is impossible, as that bundle costs more than $10.
d. Pete could make himself better off by buying less cookies and more candy.
e. Pete is maximizing his utility.

Question
41
Marks: 1
The graph of a budget constraint shows the quantities of two goods,
X on the horizontal axis and Y on the vertical axis, that a consumer
can purchase given the consumer's income and the prices of the
two goods. If the consumer's income increases, the slope of the
budget line will
Choose one answer.
a. become flatter or steeper depending on which good is more expensive.
b. become flatter.
c. not change, but the line shifts to the right.
d. not change, but the line shifts to the left.
e. become steeper.

Question
42
Marks: 1
The newspaper vending machine boxes at the train station near my
home work as follows: when someone deposits the correct amount
of change, the door of the box opens and the consumer can take a
paper from the stack in the box. There is nothing to prevent the
consumer from taking more than one paper. These machines are
designed that way because
Choose one answer.
a. for most people, the marginal utility of one more paper is zero.
b. the companies that produce and sell newspapers believe in people's honest
c. newspapers are so cheap.
 d. most people do not buy papers from these machines.
e. None of the above

Question
43
Marks: 1
The graph of a budget constraint shows the quantities of two goods,
X on the horizontal axis and Y on the vertical axis, that a consumer
can purchase given the consumer's income and the prices of the
two goods. If the price of the good Y increases, the budget line will
Choose one answer.
a. pivot outward and to the right along the X-axis indicating a greater quantity
b. pivot inward and to the left along the Y-axis indicating a smaller quantity of
c. shift inward and to the left.
d. shift outward and to the right.
e. None of the above

Question
44
Marks: 1
Refer to the information provided in Table 5.2 below to
answer the following questions.
Table 5.2
Refer to Table 5.2. If the price of books fell to $10, the consumer
would purchase

Choose one answer.

a. more books and fewer movies.
b. the same amounts of the two goods.
c. more books and more movies.
d. more books but the same amount of movies.
e. fewer books because of the income effect.

Question
45
Marks: 1
Sarah derives more utility from her first novel read in a week than
her second. From this information, we can conclude that Sarah's
Choose one answer.
a. total utility is diminishing.
 b. marginal utility is negative.
c. marginal utility is diminishing.
d. All of the above
e. None of the above

Question
46
Marks: 1
All of the following are forms of industry structure EXCEPT
Choose one answer.
a. corporations.
b. monopolistic competition.
c. monopoly.
d. perfect competition.
e. oligopoly.

Question
47
Marks: 1
Refer to Table 6.2 below to answer the following questions.
Table 6.2
Refer to Table 6.2. If three workers are hired, then

Choose one answer.

a. average product is maximized on the table.
b. marginal product equals five.
c. diminishing marginal returns have started.
d. All of the above
e. None of the above

Question
48
Marks: 1
Refer to the information provided in Table 6.4 below to
answer the following questions.
Table 6.4
Refer to Table 6.4. Suppose capital costs $100 per unit per day and
labor costs $80 per worker per day. For an output level of 100, the
cheapest technology is
Choose one answer.
a. 2.
b. 1.
c. 3.
d. None of the above; they all cost the same.
e. Cannot be determined from the information given.

Question
49
Marks: 1
Refer to Table 6.1 below to answer the following questions.
Table 6.1
Refer to Table 6.1. Suppose Mr. B withdrew $50,000 from his
account that earned 10% to invest into this business. He quit his
full-time job that paid $40,000 to manage this business. If Mr. B is
excited about his $45,000 profit, an economist would

Choose one answer.

a. tell him that he can ignore the maintenance expense.
b. celebrate with him.
c. tell him he made zero economic profit.
d. mention the $90,000 he has given up.
e. tell him his economic profit is indeed positive but not as big as $45,000.

Question
50
Marks: 1
Refer to Table 6.2 below to answer the following questions.
Table 6.2
Refer to Table 6.2. Negative returns to labor occur when the
number of workers is

Choose one answer.

a. 4.
b. 6.
c. 3.
d. 0
e. None of the above
Question
51
Marks: 1
The continued building of taller and taller buildings in cities is an
example of
Choose one answer.
a. an optimal method of production that is labor intensive.
b. the substitution of capital for labor.
c. the substitution of capital for land.
d. All of the above
e. None of the above

Question
52
Marks: 1
When looking at a graph of average fixed costs, the AFC curve is
Choose one answer.
a. negatively sloped then positively sloped.
b. horizontal.
c. negatively sloped and becoming increasingly negative.
d. upward sloping.
e. negatively sloped but becoming less negative as output increases.

Question
53
Marks: 1
If short-run marginal cost is rising, then
Choose one answer.
a. marginal product of labor is also rising.
b. marginal product is falling.
c. fixed costs are increasing.
d. average cost is rising.
e. None of the above

Question
54
Marks: 1
Refer to the information provided below in Table 7.1 to
answer the following questions.
 Table 7.1

Suppose that the producer operates with two machines, which it

leases for $100 per day. The firm can hire a worker for $50 per day.
Refer to Table 7.1. Average total cost is minimized at __________
units of output, (remember that the firm is using 2 machines and
the cost of each machine is $100).
Choose one answer.
a. 25
b. 45
c. 60
d. 70
e. 10

Question
55
Marks: 1
If average variable cost decreases as output increases, then
Choose one answer.
a. marginal cost is decreasing.
b. marginal cost is less than average cost.
c. marginal cost is negative.
d. All of the above
e. None of the above

Question
56
Marks: 1
Refer to the information provided below in Table 7.1 to
answer the following questions.
Table 7.1

Suppose that the producer operates with two machines, which it

leases for $100 per day. The firm can hire a worker for $50 per day.
Refer to Table 7.1. Diminishing returns to labor occur from units
__________ of labor.
Choose one answer.
a. 0
b. 6
 c. 5
d. 4
e. 3

Question
57
Marks: 1
The term overhead refers to
Choose one answer.
a. average variable cost.
b. total variable cost.
c. marginal cost.
d. total fixed cost.
e. average total cost.

Question
58
Marks: 1
The widget market is perfectly competitive and in long-run
equilibrium. A permanent decrease in demand for widgets will result
in
Choose one answer.
a. a long-run decrease in the number of firms.
b. a short-run decrease in profit .
c. a short-run decrease in price.
d. All of the above
e. None of the above

Question
59
Marks: 1
All firms must decide
Choose one answer.
a. how much of each input to demand.
b. how much output to supply.
c. how to produce their output.
d. All of the above
 e. None of the above

Question
60
Marks: 1
If a firm's production process exhibits constant returns to scale for
all levels of output, then the firm's long-run average cost curve will
be
Choose one answer.
a. horizontal.
b. positively sloped.
c. vertical.
d. negatively sloped.
e. U-shaped.

Question
61
Marks: 1
In short-run equilibrium, which of the following is always true for a
perfectly competitive firm?
Choose one answer.
a. P = MR
b. Profit = 0
c. AVC = ATC
d. AFC = 0
e. None of the above

Question
62
Marks: 1
Economies of scale can result from
Choose one answer.
a. increased specialization.
b. technology.
c. sheer size.
d. All of the above
e. None of the above

Question
63
Marks: 1
Which input(s) are supplied by households?
Choose one answer.
a. Land
b. Capital
c. Labor
d. All of the above
e. A and C only

Question
64
Marks: 1
Refer to the information provided in Table 9.1 below to
answer the following questions.
Table 9.1
The data above refer to a firm that produces in the short run with
only one variable input, which is labor.
Refer to Table 9.1. If the market price of the product is $2 and the
firm can hire as many workers as it wants at a wage of $30, the
firm should hire __________ workers.

Choose one answer.

a. 0
b. 2
c. 3
d. 4
e. 5

Question
65
Marks: 1
If a firm is maximizing profit, which of the following is TRUE?
Choose one answer.
a. MPL is maximized.
b. MPL = APL
c. MRPL = w
d. All of the above
e. None of the above
Question
66
Marks: 1
Which of the following statements is TRUE?
Choose one answer.
a. When a firm has a choice among alternative technologies, the choice it mak
input prices.
b. A new technology may increase the productivity of labor, raising its margin
revenue product.
c. The marginal productivity theory of income distribution states that if marke
factor ends up receiving rewards determined by its productivity as measured b
d. The productivity of, and thus the demand for, any one factor of production
other factors with which it works.
e. All of the above

Question
67
Marks: 1
The income received by owners of land is called
Choose one answer.
a. purity.
b. interest.
c. profit.
d. wage.
e. rent.

Question
68
Marks: 1
Refer to the information provided in Table 9.1 below to
answer the following questions.
Table 9.1
The data above refer to a firm that produces in the short run with
only one variable input, which is labor.
Refer to Table 9.1. Diminishing returns occur after the __________
worker.

Choose one answer.

a. third
b. fourth
 c. fifth
d. second
e. first

Question
69
Marks: 1
A monopoly by virtue of government directive is an example of the
type of barrier to entry called
Choose one answer.
a. government franchise.
b. ownership of a scarce factor of production.
c. patents.
d. economies of scale.
e. None of the above

Question
70
Marks: 1
Natural monopolies
Choose one answer.
a. are allowed to exist as monopolies, but the government regulates the price
b. have very high fixed costs and relatively low marginal costs.
c. are often public utilities.
d. All of the above
e. None of the above

Question
71
Marks: 1
Comparing long-run equilibrium in monopoly to that in a perfectly
competitive industry we find
Choose one answer.
a. output is greater in the perfectly competitive equilibrium.
b. the monopolist can earn positive profits.
c. the monopolist charges higher prices.
d. All of the above
 e. A and C only

Question
72
Marks: 1
In game theory, a strategy that is the best thing for a firm to do no
matter what the other firm does is termed a
Choose one answer.
a. maximin strategy.
b. dominant strategy.
c. rivalry.
d. Nash equilibrium.
e. cartel.

Question
73
Marks: 1
By touting the quality of its brand name product, a firm is
attempting to establish
Choose one answer.
a. collusion.
b. economies of scale.
c. product differentiation.
d. monopsony power.
e. patent protection.

Question
74
Marks: 1
Refer to the information provided in Figure 13.1 below to
answer the questions that follow.

Figure 13.1

Refer to Figure 13.1. For the monopolistically competitive firm

depicted in the graph, the profit-maximizing level of output is

Choose one answer.

a. 40.
 b. 30.
c. 20.
d. 45.
e. None of the above

Question
75
Marks: 1
Which of the following best explains why a monopolistically
competitive firm has monopoly power?
Choose one answer.
a. Product differentiation
b. Many buyers
c. Economies of scale
d. Barriers to entry
e. All of the above

Question
76
Marks: 1
A statement or set of related statements about cause and effect,
action and reaction is
Choose one answer.
a. an economic theory.
b. normative.
c. a model.
d. a variable.
e. ceteris paribus.

Question
77
Marks: 1
Normative economics
Choose one answer.
a. is an approach to economics that seeks to understand behavior.
b. is value-free economic analysis.
c. is often called policy economics.
 d. examines the outcomes of economic systems without making judgments ab
e. considers questions like "What would happen if we abolished the corporate

Question
78
Marks: 1
If we wish to observe the effect that an increase in X has on Y as
long as nothing else is changing, then we are making the
assumption of
Choose one answer.
a. composition.
b. opportunity cost.
c. false cause.
d. Ockham's razor.
e. ceteris paribus.

Question
79
Marks: 1
Refer to Figure 2.1 below to answer the questions that
follow.
Figure 2.1

Refer to Figure 2.1. If society currently produces 1,100 units of

consumer goods and 800 units of capital goods, the opportunity
cost of making 200 more units of consumer goods is

Choose one answer.

a. 550 units of capital goods.
b. 1300 units of consumer goods.
c. not possible to calculate from the information provided.
d. 800 units of capital goods.
e. 250 units of capital goods.

Question
80
Marks: 1
Refer to Figure 2.2 below to answer the questions that
follow.
Figure 2.2
Panel e in the Figure 2.2 illustrates

Choose one answer.

a. inefficient production of meat and fish.
b. the law of increasing opportunity costs.
c. technological advances in the production of meat and fish.
d. productive efficiency.
e. an impossible combination of meat and fish.

Question
81
Marks: 1
Economic growth is difficult for poor countries because
Choose one answer.
a. governments must fund capital production and research out of tax revenue
b. resources must be taken away from consumer goods to pay for capital good
c. resources must be taken away from consumer goods to pay for technology.
d. those wealthy enough to invest in domestic industries may choose to invest
e. All of the above

Question
82
Marks: 1
In output markets
Choose one answer.
a. households supply resources that firms demand.
b. households supply goods and services that businesses demand.
c. households supply inputs that firms demand.
d. firms supply products that households demand.
e. households demand inputs that firms supply.

Question
83
Marks: 1
Land, labor, and capital are three examples of
Choose one answer.
a. inputs.
b. resources.
 c. factors of production.
d. All of the above
e. None of the above

Question
84
Marks: 1
Which of the following would NOT cause the supply of a good or
service to increase?
Choose one answer.
a. There is an increase in the price of the product.
b. Prices of required inputs fall.
c. The technology available to produce the product improves.
d. The prices of related goods that the firm could produce instead decrease.
e. None of the above; All of the above would cause an increase in supply.

Question
85
Marks: 1
An increase in the equilibrium price of a good could be the result of
Choose one answer.
a. a decrease in supply.
b. a shortage
c. a decrease in demand.
d. an increase in supply.
e. None of the above

Question
86
Marks: 1
"Willingness to pay" means that
Choose one answer.
a. reduced supply causes the price of a good to rise.
b. only the very rich will be able to buy certain goods.
c. the distribution of available supply will depend on consumers' tastes and pr
d. everything has its price.
e. None of the above
Question
87
Marks: 1
In 1973 and 1974 OPEC imposed an embargo on shipments of
crude oil to the United States. This resulted in a drastic reduction in
the quantity of gasoline available, and in response Congress
Choose one answer.
a. imposed a price ceiling.
b. created ration coupons similar to those that were used during World War II
c. created a queuing system.
d. declared war.
e. allowed the price rationing function of the market to work.

Question
88
Marks: 1
Larry's savings goal is to have exactly $500,000 in his savings
account when he retires in 20 years. He budgets himself
accordingly. If interest rates rise, how will Larry react?
Choose one answer.
a. He will save less than he did before because of the income effect.
b. He will save less than he did before because of the substitution effect.
c. He will save more than he did before because of the substitution effect.
d. He will not change the amount he saves.
e. He will save more than he did before because of the income effect.

Question
89
Marks: 1
What impact do interest rates have on saving behavior?
Choose one answer.
a. It depends on the relative size of the income and substitution effects.
b. An increase in interest rates means that the consumer will earn more on sa
more due to the income effect.
c. An increase in interest rates means that current spending costs more in ter
a decrease in saving.
d. Higher interest rates always result in more saving because the income and
direction.
 e. None of the above

Question
90
Marks: 1
Refer to Table 6.2 below to answer the following questions.
Table 6.2
Refer to Table 6.2. Marginal product starts to diminish after the
__________ worker.

Choose one answer.

a. third
b. seventh
c. sixth
d. second
e. None of the above

Question
91
Marks: 1
In the short run
Choose one answer.
a. firms may curtail operations but they are still locked into some costs.
b. there is no entry into or exit from the industry.
c. a factor of production is fixed.
d. All of the above
e. None of the above

Question
92
Marks: 1
If marginal product equals average product, then
Choose one answer.
a. average product remains constant.
b. marginal product is rising.
c. marginal product is maximized.
d. average product is rising.
e. None of the above
Question
93
Marks: 1
Which of the following statements is TRUE?
Choose one answer.
a. The marginal cost curve of a perfectly competitive firm is the firm's short-ru
b. The profit-maximizing perfectly competitive firm will produce up to the poin
to short-run marginal cost.
c. There is some price below which the firm will shut down its operations and
if price is above marginal cost.
d. The profit-maximizing output level for all firms is the output level where ma
e. All of the above

Question
94
Marks: 1
Total variable cost
Choose one answer.
a. decreases as output increases.
b. includes only the cost of labor.
c. is lowest for labor-intensive technologies.
d. increases as output increases.
e. is constant as output increases.

Question
95
Marks: 1
The assumption that a factor of production is fixed in the short run
implies that as a firm tries to increase its output
Choose one answer.
a. marginal cost will eventually rise with output.
b. variable costs will stay constant.
c. fixed costs will increase.
d. diminishing returns will not set in.
e. marginal cost will immediately increase.

Question
96
Marks: 1
The long run differs from the short run in that in the long run
Choose one answer.
a. the firm can operate at a loss.
b. there are no fixed costs.
c. the firm can earn a profit.
d. the number of firms is fixed.
e. None of the above

Question
97
Marks: 1
As a result of diminishing returns, the
Choose one answer.
a. marginal product of variable inputs decreases as more of them are added to
b. marginal revenue product of the variable inputs will eventually decrease.
c. total product will increase at a decreasing rate.
d. All of the above
e. None of the above

Question
98
Marks: 1
In analyzing monopoly behavior we assume all the following
EXCEPT that
Choose one answer.
a. a monopolist faces a known demand curve.
b. many substitutes are available.
c. entry to the market is blocked.
d. firms act to maximize profit.
e. None of the above

Question
99
Marks: 1
Refer to Figure 12.3 below to answer the following
questions.
 Figure 12.3

Refer to Figure 12.3. The firm would produce the greatest level of
output if it is

Choose one answer.

a. regulated and the government sets the efficient price.
b. regulated and allowed to earn a normal rate of return on invested capital.
c. allowed to maximize profits.
d. Either B or C; they are the same.
e. None of the above

Question
100
Marks: 1
Refer to the information provided in Table 13.1 below to
answer the questions that follow.
Table 13.1

Table 13.1 shows the payoff matrix from setting price for the only
two firms in a market. How many Nash equilibria are there?

Choose one answer.

a. 0
b. 3
c. 4
d. 1
e. 2

Question
101
Marks: 1
Ceteris paribus means that
Choose one answer.
a. irrelevant detail should be cut away.
b. in weighing the costs and benefits of a decision it is important to weigh only
decision.
c. there's no such thing as a free lunch.
d. whenever someone makes a choice or decision they give something else up
e. everything else is held unchanged.
Question
102
Marks: 1
Refer to Scenario 1 below to answer the questions that
follow.
SCENARIO 1: Congress voted down a proposal that would have
raised the minimum wage one dollar above its present level of
$5.15, beginning with a 50 cent raise next January. Proponents of
the legislation contended that the increase was needed to improve
the living standards of low-wage workers. Opponents argued that
the increase would likely lead to greater unemployment, particularly
among teenagers.
Refer to Scenario 1. This is an example of economic policy.
Proponents of the legislation were arguing in its favor on the basis
of
Choose one answer.
a. efficiency.
b. growth.
c. stability.
d. equity.
e. None of the above

Question
103
Marks: 1
National defense is
Choose one answer.
a. an input of the public sector.
b. not an example of production because it is provided by the government.
c. an example of production.
d. not an example of production because nothing is actually produced.
e. None of the above

Question
104
Marks: 1
Which of the following statements about firms is TRUE?
Choose one answer.
a. A firm exists when a person or group of people decides to produce a produc
b. The Colorado Symphony Orchestra is an example of a firm.
 c. Firms can be large, small, or in between.
d. Some firms produce products whereas others produce services.
e. All of the above

Question
105
Marks: 1
In recent years one toy has seemed to become extremely popular
as a holiday gift and therefore hard to find. As a result, some people
have tried to "spot" which toy will be the "hot" item and buy some
of them ahead of time hoping to sell them closer to the holidays at
a much higher price. This is an example of
Choose one answer.
a. the price rationing function at work.
b. queuing.
c. ration coupons.
d. favored customers.
e. a black market.

Question
106
Marks: 1
Positive economic profits
Choose one answer.
a. attract new firms into an industry.
b. cause existing firms to expand.
c. result in a better-than-normal rate of return.
d. All of the above
e. None of the above

Question
107
Marks: 1
The vertical distance between the ATC curve and the AVC curve
equals
Choose one answer.
a. zero.
b. marginal cost.
c. average fixed cost.
 d. the level of output.
e. None of the above

Question
108
Marks: 1
When an increase in a firm's scale of production has no effect on
average costs it is referred to as
Choose one answer.
a. constant returns to scale.
b. diseconomies of scale.
c. decreasing returns to scale.
d. economies of scale.
e. spreading the overhead.

Question
109
Marks: 1
Capital and labor are inputs that can be
Choose one answer.
a. varied in the long run.
b. substitutes.
c. complements.
d. All of the above
e. None of the above

Question
110
Marks: 1
Which of the following is a characteristic of monopolistic
competition?
Choose one answer.
a. Firms compete both in price and quality.
b. Competitors have some price-setting power but it is limited because of the
c. Many firms compete for essentially the same customers, but each firm prod
d. Entry is relatively inexpensive.
e. All of the above
Question
111
Marks: 1
The concerns of microeconomics include all of the following EXCEPT
Choose one answer.
a. poverty.
b. employment by individual businesses and industries.
c. levels of consumer prices in the economy.
d. the distribution of income and wealth.
e. production/output in the individual industries and businesses of the econom

Question
112
Marks: 1
Refer to Figure 2.1 below to answer the questions that
follow.
Figure 2.1

Refer to Figure 2.1. If society moved from point E to point F, then

they would be

Choose one answer.

a. giving up some capital goods to have more consumer goods.
b. giving up some consumer goods to have more capital goods.
c. creating unemployment.
d. unable to do so because of scarce resources.
e. enjoying more of both capital goods and consumer goods.

Question
113
Marks: 1
Suppose that drought kills half of the nation's corn crop. As a result,
the equilibrium price of corn would __________, and the
equilibrium quantity of corn would __________.
Choose one answer.
a. decrease; not change
b. increase; decrease
c. decrease; decrease
d. decrease; increase
 e. increase; increase

Question
114
Marks: 1
On those occasions when both governments and private firms
decide to use some mechanism other than the market system to
ration an item, the rationale most often is
Choose one answer.
a. fairness.
b. willingness to pay.
c. price gouging.
d. queuing.
e. None of the above

Question
115
Marks: 1
Refer to the information provided in Table 5.2 below to
answer the following questions.
Table 5.2
Refer to Table 5.2. The effect of the law of diminishing marginal
utility is seen after

Choose one answer.

a. the point where the MU/P is equal for books and movies.
b. the first movie and the first book.
c. the eighth move and eighth book.
d. the fifth movie and the second book.
e. None of the above; this is a case where the law does not apply.

Question
116
Marks: 1
With capital on the vertical axis and labor on the horizontal axis, the
slope of the isocost line means
Choose one answer.
a. how much capital costs relative labor.
b. how much labor must be given up to buy one unit of capital without changi
c. how much costs increase when capital and labor increase by one unit each.
 d. how much capital must be given up to buy one unit of labor without changi
e. that capital and labor are hired in equal proportions.

Question
117
Marks: 1
In which type of industry structure must firms make the decisions of
how much output to supply given the market price?
Choose one answer.
a. Perfect competition
b. Oligopoly
c. Monopolistic Competition
d. Monopoly
e. All of the above

Question
118
Marks: 1
Any time that price is below the minimum point on the AVC curve
Choose one answer.
a. the firm will stop producing and bear losses equal to its fixed costs.
b. operating profit will be negative.
c. total revenue will be less than total variable cost.
d. All of the above
e. None of the above

Question
119
Marks: 1
Refer to the information provided in Table 9.1 below to
answer the following questions.
Table 9.1
The data above refer to a firm that produces in the short run with
only one variable input, which is labor.
Refer to Table 9.1. The firm would hire six workers if the market
price of the product were

Choose one answer.

a. low and the wage rate was high.
b. low and the wage rate was low.
 c. high and the wage rate was low.
d. high and the wage rate was high.
e. None of the above; in the example given the firm would never hire six work

Question
120
Marks: 1
Which of the following is NOT an assumption of the model of perfect
competition?
Choose one answer.
a. A large number of firms and households interact in each output market.
b. Firms in a given market produce differentiated products.
c. New firms are free to enter.
d. The market determines output price.
e. None of the above

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