MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economics is the study of 1)A)how to distribute income as equally as possible. B)how to plan an economy. C)why resources are scarce. D)how to best help the poor. E)the allocation of scarce resources among alternative uses. 2) Scarcity is likely to be 2)A)unique to the twentieth century. B)a problem that will always exist. C)a result of the work ethic. D)eliminated with a better understanding of economics. E)a problem that will be solved by the proper use of available resources. 3) Because resources are scarce, individuals are required to 3)A)make choices among alternatives. B)improve production but not distribution. C)use resources inefficiently. D)improve distribution but not production. E)sacrifice production but not consumption. 4) The opportunity cost of producing good A is defined to be 4)A)the cheapest method of producing good A. B)what must be sacrificed of other goods to get an additional unit of good A. C)the cost of having to get by using something else in place of good A. D)the retail price of good A. E)the money cost of the factors of production used in good A. 5) The production possibilities boundary demonstrates that 5)A)
when a society combines its resources inefficiently, it cannot produce more of one good
without producing less of the other good. B)the demand for goods always exceeds the supply. C)all points inside the boundary are preferred to all points on the boundary. D)
when a society combines its resources efficiently, it cannot produce more of one good without
producing less of the other good. E)some resources are always idle in a democratic society. 6) Economists usually assume that households and firms, respectively, maximize 6)A)utility and profits. B)wages and revenues. C)savings and profits. D)income and sales. E)expenditures and profits.
7) Most modern economies in the world today 7)A)have a mix of traditional, command and market elements. B)have pure market exchange. C)are similar to feudal systems. D)are mostly run by government decree. E)are complex systems that defy description and analysis. 8) A positive statement is one that states 8)A)what should be but is not. B)what is, was, or will be. C)what is and what should be. D)non - negative numbers. E)what is desirable. 9) A normative statement 9)A)concerns what is provable. B)can be derived logically from facts. C)is one that involves a value judgment. D)is a statement that is empirically testable. E)has no place in the study and practice of economics. 10) A theory10)A)will be useful as long as it is logically consistent. B)will predict more accurately if it contains a greater number of mathematical equations. C)is only useful if its underlying assumptions are realistic. D)will be useful only if all human behavior is rational. E)must be judged on its ability to explain and predict real - world phenomena. 11) Quantity demanded is the 11)A)
total amount of a good that purchasers wish to purchase at a given price during a given
period of time. B)product of advertising, and is unrelated to price. C)entire relationship between desired purchases and possible prices. D)total amount of a good that is actually purchased during a given period of time. E)total amount of a good that people wish to buy, regardless of price. 12) Ceteris paribus means 12)A)among other things. B)other things being equal. C)in a historical context. D)and so forth. E)knowledge gained before the study of evidence is made. 13) The "law of demand" hypothesizes that, other things being equal, 13)A)price and demand vary inversely. B)price and quantity demanded are positively related. C)the higher the income, the higher the quantity demanded. D)the higher the price, the lower the quantity demanded. E)the lower the price, the greater the demand.
14) Which of the following pairs of goods are likely to be substitutes for a large group of consumers? 14)A)pancakes and syrup B)coffee and cream C)green beans and peas D)wieners and buns E)eggs and toast 15) Automobiles and gasoline are likely to be 15)A)luxury goods. B)independent goods. C)inferior goods. D)substitute goods. E)complementary goods. 16) The positive slope of the supply curve indicates that 16)A)as price goes up, quantity supplied will increase. B)as price goes up, quantity supplied will remain constant. C)consumers will want to buy less at higher prices. D)as price goes up, quantity supplied will decrease. E)if the costs of production increase, the quantity supplied will have to increase also. 17) An equilibrium price is the 17)A)price that producers want to charge. B)price that always prevails. C) price in the middle of supply and demand. D)price at which quantity demanded of the commodity is equal to the quantity supplied. E)price that consumers are willing to pay. 18) The price elasticity of demand measures the responsiveness of 18)A)quantity demanded to changes in the price. B)supply to demand changes. C)demand to supply changes. D)equilibrium changes E)the price to changes in quantity demanded. 19)
The formula for the own - price elasticity of demand for a commodity can be written as which of the
following? 19)A)
change in price
change in quantity demanded
B)
percentage change in quantity demanded
percentage change in price
C)
percentage change in one price
percentage change in the other price
D)
percentage change in price
percentage change in quantity demanded
E)
change in quantity demanded
change in price
20) The elasticity of supply for a given commodity is calculated as 20)A)
percent change in product price
percentage change in quantity supplied
B)
percentage change in quantity supplied
percentage change in average household income
C)
percentage change in quantity supplied
percentage change in input prices
D)
percentage change in quantity supplied
percentage change in product price
E)
percentage change in quantity supplied of one good
percentage change in average price of a different good
21) Normal goods 21)A)have negative income elasticity of demand. B)are sometimes also inferior goods. C)have positive income elasticity of demand. D)have negative elasticity of supply. E)do not have elasticity of demand. 22) An inferior good has 22)A)a negative income elasticity of demand. B)an income elasticity of demand greater than zero but less than 1. C)a negative price elasticity of demand. D)a positive income elasticity of demand and a price elasticity of demand greater than 1. E)a positive income elasticity of demand. 23) Cross - price elasticity of demand may be defined as 23)A)
percentage change in quantity demanded of good X
percentage change in price of good X
B)
percentage change in price of good Y
percentage change in quantity demanded of good X
C)
percentage change in quantity demanded of good X
percentage change in price of good Y
D)
percentage change in price of good X
percentage change in price of good Y
E)
percentage change in quantity demanded of good X
percentage change in income
24) A binding price floor is a 24)A)maximum price, above equilibrium, which price is not allowed to exceed. B)any minimum price which price is not allowed to fall below. C)maximum price, below equilibrium, which price is not allowed to exceed . D)minimum price, above equilibrium, which price is not allowed to fall below. E)minimum price, below equilibrium, which price is not allowed to fall below
25) A legal price ceiling, if it is binding, is a 25)A)minimum price, below equilibrium, which price is not allowed to fall below. B)minimum price, above equilibrium, which price is not allowed to fall below. C)any maximum price which price is not allowed to exceed. D)maximum price, above equilibrium, which price is not allowed to exceed. E)maximum price, below equilibrium, which a price is not allowed to exceed. 26)
Suppose that in June, 2006, 100,000 cell phones were sold at a price of $30 each. And in June, 2007,
200,000 cell phones were sold at a price of $50 each. One possible explanation for this is that from
2006 to 2007 the ________ curve shifted to the ________. 26)A)supply; right B)supply; left C)supply or demand; right D)demand; left E)demand; right 27)
Suppose that the demand and supply curves in the market for carrots have the following functional
forms: Q
d = 250 - 4p and Q
s = 10 + p. The equilibrium quantity and price would then be
27)A)Q = 68, p = 98. B)Q = 48, p = 58. C)Q = 92, p = 48. D)Q = 68, p = 108. E)Q = 58, p = 48. 28) If two goods, X and Y, have a negative cross - elasticity of demand, then we know that they 28)A)are substitutes. B)are both normal goods. C)are both inferior goods. D)each have a price elasticity greater than one. E)are complements. 29) If two goods, X and Y, have a positive cross - elasticity of demand, then we know that they 29)A)are both normal goods. B)are substitutes. C)are complements. D)are both inferior goods. E)each have a price elasticity greater than one. 30)
Suppose a binding output quota is imposed in a previously competitive market with free - market
equilibrium price and quantity. The result is 30)A)lower price and lower quantity exchanged. B)no change in price or quantity exchanged. C)lower price and higher quantity exchanged. D)higher price and lower quantity exchanged. E)higher price and higher quantity exchanged