Assignment:
Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. The adage, "There is no such thing as a free lunch," means
a. even people on welfare have to pay for food.
b. the cost of living is always increasing.
c. people face tradeoffs.
d. all costs are included in the price of a product.
2. The principle that "people face tradeoffs" applies to
a. individuals.
b. families.
c. societies.
d. All of the above are correct.
3. A tradeoff exists between a clean environment and a higher level of income in that
a. studies show that individuals with higher levels of income pollute less than low-income individuals.
b. efforts to reduce pollution typically are not completely successful.
c. laws that reduce pollution raise costs of production and reduce incomes.
d. employing individuals to clean up pollution causes increases in employment and income.
4. Economists use the word equality to describe a situation in which
a. each member of society has the same income.
b. each member of society has access to abundant quantities of goods and services, regardless of his or her income.
c. society is getting the maximum benefits from its scarce resources.
d. society's resources are used efficiently.
5. Efficiency means that
a. society is conserving resources in order to save them for the future.
b. society's goods and services are distributed equally among society's members.
c. society's goods and services are distributed fairly, though not necessarily equally, among society's members.
d. society is getting the maximum benefits from its scarce resources.
6. Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth
a. is more efficient and more equal for society.
b. is more efficient but less equal for society.
c. is more equal but less efficient for society.
d. is less equal and less efficient for society.
7. Which of the following is not correct?
a. Economists use some familiar words in specialized ways.
b. Economics has its own language and its own way of thinking, but few other fields of study do.
c. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all terms that are part of the economist's language.
d. The value of the economist's language lies in its ability to provide you with a new and useful way of thinking about the world in which you live.
8. The scientific method is
a. the use of modern technology to understand the way the world works.
b. the use of controlled laboratory experiments to understand the way the world works.
c. the dispassionate development and testing of theories about how the world works.
d. the search for evidence to support preconceived theories about how the world works.
9. The scientific method is applicable to studying
a. natural sciences, but not social sciences.
b. social sciences, but not natural sciences.
c. both natural sciences and social sciences.
d. None of the above is correct.
10. The goal of an economist who formulates new theories is to
a. provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works.
b. provoke stimulating debate in scientific journals.
c. contribute to an understanding of how the world works.
d. demonstrate that economists, like other scientists, can formulate testable theories.
11. Which of the following statements applies to economics, as well as to other sciences such as physics?
a. Experiments are considered valid only when they are conducted in a laboratory.
b. Good theories do not need to be tested.
c. Real-world observations often lead to theories.
d. Economics, as well as other sciences, is concerned primarily with abstract concepts.
12. With respect to how economists study the economy, which of the following statements is most accurate?
a. Economists study the past, but they do not try to predict the future.
b. Economists use "rules of thumb" to predict the future.
c. Economists devise theories, collect data, and analyze the data to test the theories.
d. Economists use controlled experiments in much the same way that biologists and physicists do.
13. Economists make assumptions in order to
a. mimic the methodologies employed by other scientists.
b. minimize the number of experiments that yield no useful data.
c. minimize the likelihood that some aspect of the problem at hand is being overlooked.
d. focus their thinking on the essence of the problem at hand.
14. For an economist, the idea of making assumptions is regarded generally as a
a. bad idea, since doing so leads to the omission of important ideas and variables from economic models.
b. bad idea, since doing so invariably leads to data-collection problems.
c. good idea, since doing so helps to simplify the complex world and make it easier to understand.
d. good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand.
15. When can two countries gain from trading two goods?
a. when the first country can only produce the first good and the second country can only produce the second good
b. when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost
c. when the first country is better at producing both goods and the second country is worse at producing both goods
d. Two countries could gain from trading two goods under all of the above conditions.
16. Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could
a. benefit both Jayson and Regan.
b. benefit Jayson, but not Regan.
c. benefit Regan, but not Jayson.
d. benefit neither Jayson nor Regan.
Table 3-1
Assume that Sardi and Tinaka can switch between producing corn and producing pork at a constant rate.
|
|
Minutes Needed to Make 1
|
|
Bushel of Corn
|
Pound of Pork
|
|
Sardi
|
20
|
12
|
|
Tinaka
|
15
|
10
|
Refer to Table 3-1. Assume that Sardi and Tinaka each has 360 minutes available. If each person divides his time equally between the production of corn and pork, then total production is
a. 10.5 bushels of corn and 16.5 pounds of pork.
b. 21 bushels of corn and 33 pounds of pork.
c. 35 bushels of corn and 22 pounds of pork.
d. 42 bushels of corn and 66 pounds of pork.
18. Refer to Table 3-1. What is Sardi's opportunity cost of producing one bushel of corn?
a. 3/5 pound of pork
b. 6/5 pounds of pork
c. 4/3 pounds of pork
d. 5/3 pounds of pork
19. Refer to Table 3-1. What is Sardi's opportunity cost of producing one pound of pork?
a. 3/5 bushel of corn
b. 6/5 bushels of corn
c. 4/3 bushels of corn
d. 5/3 bushels of corn
20. Refer to Table 3-1. What is Tinaka's opportunity cost of producing one bushel of corn?
a. 2/3 pound of pork
b. 3/4 pound of pork
c. 5/6 pound of pork
d. 3/2 pounds of pork
21. Refer to Table 3-1. What is Tinaka's opportunity cost of producing one pound of pork?
a. 2/3 bushel of corn
b. 3/4 bushel of corn
c. 5/6 bushel of corn
d. 3/2 bushels of corn
22. Refer to Table 3-1. Sardi has an absolute advantage in the production of
a. corn and Tinaka has an absolute advantage in the production of pork.
b. pork and Tinaka has an absolute advantage in the production of corn.
c. both goods and Tinaka has an absolute advantage in the production of neither good.
d. neither good and Tinaka has an absolute advantage in the production of both goods.
23. Refer to Table 3-1. Sardi has a comparative advantage in the production of
a. corn and Tinaka has a comparative advantage in the production of pork.
b. pork and Tinaka has a comparative advantage in the production of corn.
c. both goods and Tinaka has a comparative advantage in the production of neither good.
d. neither good and Tinaka has a comparative advantage in the production of both goods.
24. Refer to Table 3-1. Sardi should specialize in the production of
a. corn and Tinaka should specialize in the production of pork.
b. pork and Tinaka should specialize in the production of corn.
c. both goods and Tinaka should specialize in the production of neither good.
d. neither good and Tinaka should specialize in the production of both goods.
25. Refer to Table 3-1. At which of the following prices would both Sardi and Tinaka gain from trade with each other?
a. 6 bushels of corn for 10.5 pounds of pork
b. 12 bushels of corn for 19 pounds of pork
c. 24 bushels of corn for 34 pounds of pork
d. Sardi and Tinaka could not both gain from trade with each other at any price.
26. In a market economy,
a. supply determines demand and demand, in turn, determines prices.
b. demand determines supply and supply, in turn, determines prices.
c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.
27. The law of demand states that, other things equal,
a. an increase in price causes quantity demanded to increase.
b. an increase in price causes quantity demanded to decrease.
c. an increase in quantity demanded causes price to increase.
d. an increase in quantity demanded causes price to decrease.
28. Which of these statements best represents the law of demand?
a. When buyers' tastes for a good increase, they purchase more of the good.
b. When income levels increase, buyers purchase more of most goods.
c. When the price of a good decreases, buyers purchase more of the good.
d. When buyers' demands for a good increase, the price of the good increases.
29. The following table contains a demand schedule for a good.
|
Price
|
Quantity Demanded
|
|
$10
|
100
|
|
$20
|
?
|
If the law of demand applies to this good, then "?" could be
a. 0.
b. 100.
c. 200.
d. 400.
30. To obtain the market demand curve for a product, sum the individual demand curves
a. vertically.
b. diagonally.
c. horizontally.
d. and then average them.
31. An increase in the price of a good will
a. increase demand.
b. decrease demand.
c. increase quantity demanded.
d. decrease quantity demanded.
32. The demand curve for hot dogs
a. shifts when the price of hot dogs changes because the price of hot dogs is measured on the vertical axis of the graph.
b. shifts when the price of hot dogs changes because the quantity demanded of hot dogs is measured on the horizontal axis of the graph.
c. does not shift when the price of hot dogs changes because the price of hot dogs is measured on the vertical axis of the graph.
d. does not shift when the price of hot dogs changes because the quantity demanded of hot dogs is measured on the horizontal axis of the graph.
33. Pizza is a normal good if
a. the demand for pizza rises when income rises.
b. the demand for pizza rises when the price of pizza falls.
c. the demand curve for pizza slopes downward.
d. the demand curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.
34. Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase hot dogs in January. For you, hot dogs are
a. a substitute good.
b. a normal good.
c. an inferior good.
d. a complementary good.
35. Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are
a. complementary goods.
b. normal goods.
c. inferior goods.
d. substitute goods.
36. A supply curve slopes upward because
a. as more is produced, total cost of production falls.
b. an increase in input prices increases supply.
c. the quantity supplied of most goods and services increases over time.
d. an increase in price gives producers an incentive to supply a larger quantity.
37. The following table contains a supply schedule for a good.
|
Price
|
Quantity Supplied
|
|
$10
|
100
|
|
$20
|
?
|
If the law of supply applies to this good, then "?" could be
a. 0.
b. 50.
c. 100.
d. 150.
Table 4-6
A country club usually only allows members to purchase tickets for its celebrity golf tournament, but the club is considering allowing non-members to purchase tickets this year. The demand and supply schedules are as follows:
|
Price
|
Quantity Demanded by Members
|
Quantity Demanded by Non-members
|
Quantity Supplied
|
|
$10
|
1000
|
500
|
600
|
|
$15
|
800
|
400
|
600
|
|
$20
|
600
|
300
|
600
|
|
$25
|
400
|
200
|
600
|
|
$30
|
200
|
100
|
600
|
Refer to Table 4-6. If only members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price?
a. $10
b. $15
c. $20
d. $25
39. Refer to Table 4-6. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price?
a. $10
b. $15
c. $20
d. $25
40. Refer to Table 4-6. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $30, then there will be
a. a shortage of 300 tickets.
b. a surplus of 300 tickets.
c. 600 tickets sold.
d. 600 tickets unsold.
41. Refer to Table 4-6. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $20, then there will be
a. a shortage of 300 tickets.
b. a surplus of 300 tickets.
c. 300 tickets sold.
d. 600 tickets unsold.
Figure 4-8
Refer to Figure 4-8. Equilibrium price and quantity are, respectively,
a. $15 and 200.
b. $25 and 600.
c. $25 and 400.
d. $35 and 200.
43. Refer to Figure 4-8. At a price of $35,
a. there would be a shortage of 400 units.
b. there would be a surplus of 200 units.
c. there would be a surplus of 400 units.
d. there would be a surplus of 600 units.
44. The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high-quality diamonds enters the market, then
a. the supply curve for diamond rings will shift right, which will create a shortage at the current price. That will increase price, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
b. the supply curve for diamond rings will shift right, which will create a surplus at the current price. That will decrease price, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
c. the demand curve for diamond rings will shift right, which will create a shortage at the current price. That will increase price, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
d. the demand curve for diamond rings will shift right, which will create a surplus at the current price. That will decrease price, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
45. What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
a. Price would fall and the effect on quantity would be ambiguous.
b. Price would rise and the effect on quantity would be ambiguous.
c. Quantity would fall and the effect on price would be ambiguous.
d. Quantity would rise and the effect on price would be ambiguous.
46. If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a
a. 0.0125 percent increase in the quantity demanded.
b. 4 percent increase in the quantity demanded.
c. 5 percent increase in the quantity demanded.
d. 80 percent increase in the quantity demanded.
47. Refer to Figure below. The demand curve representing the demand for a luxury good with several close substitutes is
a. A.
b. B.
c. C.
d. D.
Table 5-2
The following table shows a portion of the demand schedule for a particular good at various levels of income.
|
Price
|
Quantity Demanded (Income = $5,000)
|
Quantity Demanded (Income = $7,500)
|
Quantity Demanded (Income = $10,000)
|
|
$24
|
2
|
3
|
4
|
|
$20
|
4
|
6
|
8
|
|
$16
|
6
|
9
|
12
|
|
$12
|
8
|
12
|
16
|
|
$8
|
10
|
15
|
20
|
|
$4
|
12
|
18
|
24
|
48. Refer to Table 5-2. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?
a. 0.56
b. 0.75
c. 1.33
d. 1.80
49. Refer to Figure below. Which of the following statements is correct?
a. A price ceiling set at $4 will be binding and will result in a shortage of 3 units.
b. A price ceiling set at $4 will be binding and will result in a shortage of 6 units.
c. A price ceiling set at $7 will be binding and will result in a surplus of 6 units.
d. A price ceiling set at $7 will be binding and will result in a surplus of 12 units.
50. Refer to Figure below. Which of the following statements is correct?
a. A price floor set at $4 will be binding and will result in a shortage of 3 units.
b. A price floor set at $4 will be binding and will result in a shortage of 6 units.
c. A price floor set at $7 will be binding and will result in a surplus of 6 units.
d. A price floor set at $7 will be binding and will result in a surplus of 12 units