Question 1. Which of the following provides the best evidence that economies of scale exist?
a. The per-unit costs on Excel Publishing Company's manuals fell following a large order from the government.
b. Alpha-Beta Inc. raised its price 10% following a 5% increase in production costs.
c. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant.
d. The XYZ Co. increased production 25% following a 30% increase in all inputs.
Question 2. The substitution effect refers to the decision to :
a. work fewer hours when the wage rate goes down.
b. work fewer hours when the wage rate goes up.
c. look for a better job when the wage rate goes up.
d. look for a better job when the wage rate goes down.
Question 3. The income effect refers to the decision to:
a. work more hours when the wage rate goes up.
b. work more hours when the wage rate goes down.
c. look for a better job when the wage rate goes up.
d. look for a better job when the wage rate goes down.
Question 4. If the government chooses a stabilization price which is above a price trend line, the quantity supplied of agricultural goods will tend to be:
a. below the quantity demanded.
b. above the quantity demanded.
c. equal to the quantity demanded.
d. sometimes above and sometimes below the quantity demanded.
Question 5. Economic models:
a. focus on every important aspect of economic reality.
b. focus only on some aspects of a problem.
c. do not involve value judgments because they are purely mathematical.
d. are close representations of real-world economic reality.