A nation can produce two products: tanks and autos. The table below is the nation’s production possibilities schedule.

A nation can produce two products: tanks and autos. The table below is the nation’s production possibilities schedule.

Production Possibilities
ProductABCDEF
Tanks012345
Autos1,0009508506503500

The marginal opportunity cost of the fourth unit of tanks is

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Multiple Choice

  • 3 units of tanks.
  • 300 units of autos.
  • 350 units of autos.
  • 650 units of autos.

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Which of the following is not a typical characteristic of a market system?

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Multiple Choice

  • use of capital goods
  • limited government
  • freedom of enterprise
  • private property
  • quantitative production targets

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Assume that a consumer has a given budget or income of $10 and that she can buy only two goods, apples or bananas. The price of an apple is $1.00 and the price of a banana is $0.50. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?

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Multiple Choice

  • 12 apples or 4 bananas
  • 8 apples or 15 bananas
  • 5 apples or 10 bananas
  • 10 apples or 20 bananas

Bottom of Form

The following graph is the production possibilities curve of a nation.

A graph plots drill presses versus bread. The graph is a concave downward curve.

The marginal opportunity cost of the third unit of bread is

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Multiple Choice

  • 6 units of drill presses.
  • 4 units of drill presses.
  • 5 units of drill presses.
  • 3 units of drill presses.

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A graph plots capital goods versus consumer goods. 3 parallel concave downward curves are graphed.

Refer to the diagram. An improvement in technology will

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Multiple Choice

shift the production possibilities curve from PP1 to PP3.

shift the production possibilities curve from PP3 to PP1.

move the economy from C to B along PP1.

move the economy from AB, or C on PP1 to D.

Bottom of Form

Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina.

 North Cantina Production Possibilities
ABCDEF
Capital Goods543210
Consumer Goods01018242830
 South Cantina Production Possibilities
ABCDEF
Capital Goods543210
Consumer Goods0815212527

Refer to the tables. If North Cantina is producing at production alternative D, the opportunity cost of the twenty-fifth unit of consumer goods will be

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Multiple Choice

  • 1 unit of capital goods.
  • 2 units of capital goods.
  • 4 units of capital goods.
  • 1/4 of a unit of capital goods.

Bottom of Form

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown.

 Resource priceProduction Technique 1Production Technique 2Production Technique 3
Labor$ 2432
Capital$ 3223

Which technique is the most economically efficient?

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Multiple Choice

  • Technique 3 with total costs of $13
  • Technique 2 with total costs of $5
  • Technique 2 with total costs of $12
  • Technique 1 with total costs of $14

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Answer the question based on the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $3 and $1, respectively.

 Production Techniques
1234
Labor4325
Capital2351

Which technique is economically most efficient in producing A?

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Multiple Choice

  • 4
  • 2
  • 3
  • 1

Bottom of Form

A graph plots capital goods versus consumer goods. 3 parallel concave downward curves are graphed.

Refer to the diagram. The concept of opportunity cost is best represented by the

Top of Form

Multiple Choice

shift of the production possibilities curve from PP1 to PP2.

move from C on PP1 to E on PP2.

move from A on PP1 to C on PP1.

move from D inside PP1 to C on PP1.

Bottom of Form

A graph plots bicycles versus computers. The graph is a concave downward curve.

Refer to the diagram. If society is currently producing the combination of bicycles and computers shown by point E, the production of 5 more units of bicycles

Top of Form

Multiple Choice

  • cannot be achieved because resources are fully employed.
  • will cost 2 units of computers.
  • will cost 8 units of computers.
  • will cause some resources to become unemployed.

Bottom of Form

Answer the question on the basis of the following production possibilities table for two countries, North Cantina and South Cantina.

 North Cantina Production Possibilities
ABCDEF
Capital Goods543210
Consumer Goods01018242830
 South Cantina Production Possibilities
ABCDEF
Capital Goods543210
Consumer Goods0815212527

Refer to the table. If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods will be

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Multiple Choice

  • 3 units of consumer goods.
  • 4 units of consumer goods.
  • 5 units of consumer goods.
  • 6 units of consumer goods.

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Private property

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Multiple Choice

  • discourages cooperation because people don’t want to part with what they own.
  • does everything indicated in the other choices.
  • discourages innovation as people are often afraid to risk losing their own property.
  • encourages owners to maintain or improve their property to preserve or enhance value.

Bottom of Form

Answer the question based on the following information: Suppose 20 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.

 Production Techniques
1234
Labor4325
Capital2351

If the price of product A is $1.00, and the firm is producing efficiently the firm will realize

Top of Form

Multiple Choice

  • Economic profit of $20.
  • Economic profit of $25.
  • Economic profit of $7.
  • Economic loss of $13.
  • Economic loss of $7.

Bottom of Form

A nation can produce two products: tanks and autos. The table below is the nation’s production possibilities schedule.

Production Possibilities
ProductABCDEF
Tanks012345
Autos1,0009508506503500

In moving from combination D to C, the opportunity cost of producing 200 more autos is

Top of Form

Multiple Choice

  • 3 units of tanks.
  • 1 unit of tanks.
  • 650 units of autos.
  • 1,500 units of autos.

Bottom of Form

A graph plots bicycles versus computers. The graph is a concave downward curve.

Refer to the diagram. If society is currently producing 12 units of bicycles and 2 units of computers and it now decides to increase computer output to 4, the cost

Top of Form

Multiple Choice

  • will be 3 units of bicycles.
  • will be 2 units of bicycles.
  • will be zero because unemployed resources are available.
  • of doing so cannot be determined from the information given.

Bottom of Form

Assume that a consumer has a given budget or income of $10 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. For this consumer, the opportunity cost of buying one more apple is

Top of Form

Multiple Choice

  • 0.5 of a banana.
  • 0.1 of a banana.
  • 1 banana.
  • 2 bananas

Bottom of Form

The following graph is the production possibilities curve of a nation.

A graph plots drill presses versus bread. The graph is a concave downward curve.

Which of the following combinations would be unattainable?

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Multiple Choice

  • 4 drill presses and 3 bread
  • 9 drill presses and 0 bread
  • 9 drill presses and 3 bread
  • 8 drill presses and 1 bread

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Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. What is the slope of the budget line if the quantity of apples were measured on the horizontal axis and bananas on the vertical axis?

Top of Form

Multiple Choice

  • −0.5
  • −0.8
  • −1.6
  • −2

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A graph plots quantity of D versus quantity of C.

Refer to the budget line shown in the diagram. If the consumer’s money income is $100, the

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Multiple Choice

  • prices of C and D cannot be determined.
  • price of C is $5 and the price of D is $10.
  • consumer can obtain a combination of 5 units of both C and D.
  • price of C is $20 and the price of D is $10.

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Which of the following statements about self-interest in a market system is false?

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Multiple Choice

  • Self-interest applies only to businesses, not to consumers or the government.
  • Self-interest of entrepreneurs implies seeking maximum profits or minimum losses.
  • In a market system, self-interest motivates workers to get a job with the best wages, benefits, or most satisfaction.
  • Self-interest usually motivates an individual to deliver something of value to others.

Bottom of Form

A graph plots bread versus tractors. The graph is a concave downward curve.

Refer to the diagram. Which of the following is a normative statement?

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Multiple Choice

  • Point C is superior to point B because it is important to enhance the future of society.
  • If society is initially at point C, it must sacrifice 6 units of bread to obtain one more unit of tractors.
  • If society produces 2 units of tractors and 12 units of bread, it is not using its available resources with maximum efficiency.
  • Other things equal, the combination of outputs represented by point D will result in more rapid economic growth than will the combination represented by point C.

Bottom of Form

 Duckistan Production Possibilities
ABCDE
Civilian Goods20181480
Military Goods01234
 Herbania Production Possibilities
ABCDE
Civilian Goods403626140
Military Goods01234

Refer to the tables. Suppose that technology and the quality of resources are the same in both countries. We can conclude that

Top of Form

Multiple Choice

  • Duckistan has more resources than Herbania.
  • Herbania has more resources than Duckistan.
  • Duckistan has greater opportunity costs than Herbania.
  • prices are twice as high in Herbania as in Duckistan.
  •  

Bottom of Form

The purpose of the ceteris paribus assumption used in economic analysis is to

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Multiple Choice

  • avoid making normative statements.
  • distinguish macroeconomics from microeconomics.
  • make sure that all relevant factors are considered.
  • focus on the effect of a single factor on a certain variable.

Bottom of Form

Microeconomics is concerned with

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Multiple Choice

  • the aggregate or total levels of income, employment, and output.
  • a detailed examination of specific economic units that make up the economic system.
  • positive economics, but not normative economics.
  • establishing an overall view of the operation of the economic system.

Bottom of Form

In a market system, a firm’s employees are typically shielded from business risk by

Top of Form

Multiple Choice

  • profit-sharing agreements.
  • wage contracts.
  • the Social Security program.
  • paid vacation leaves.

Bottom of Form

The distinction between microeconomics and macroeconomics is

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Multiple Choice

  • that microeconomics examines the beach, while macroeconomics looks at the sand, individual rocks, and shells, so to speak.
  • so clear-cut that every topic can be readily labeled as either macro or micro.
  • that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole.
  • that microeconomics seeks to obtain an overview, while macroeconomics observes the details of individual components.

Bottom of Form

Businesses seeking higher profits and resource suppliers seeking higher incomes lead to changes in the allocation of resources among different firms and end up with

Top of Form

Multiple Choice

  • consumers at the losing end.
  • output that society wants.
  • unnecessary conflict and turmoil.
  • a need for government action.

Bottom of Form

The incentive problem under communist central planning refers to the idea that

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Multiple Choice

  • planners had to direct required inputs to each enterprise.
  • workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
  • the immediate effect of more investment was less consumption.
  • exports had to be equal to imports for a central plan to work.

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The scientific method is

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Multiple Choice

  • not applicable to economics because economics deals with human beings.
  • also known as the economic perspective.
  • employed to form hypotheses out of existing laws and theories.
  • used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

Bottom of Form

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of

Top of Form

Multiple Choice

  • scarcity and opportunity costs.
  • money and real capital.
  • complementary economic goals.
  • full production.

Bottom of Form

The graph plots price versus quantity.

Refer to the diagram. If actual production and consumption occur at Q1,

Top of Form

Multiple Choice

  • efficiency is achieved.
  • consumer surplus is maximized.
  • an efficiency loss (or deadweight loss) of b + d occurs.
  • an efficiency loss (or deadweight loss) of e + d occurs.

Bottom of Form

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

Top of Form

Multiple Choice

  • price of electric cars
  • price of gasoline cars
  • quantity of electric cars demanded by buyers
  • how much sellers are charging customers for electric cars

Bottom of Form

In response to the 2008 financial crisis, the government began to bail out banks deemed “too big to fail.” Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible in the future. This illustrates

Top of Form

Multiple Choice

  • the adverse selection problem.
  • the moral hazard problem.
  • the principal-agent problem.
  • logrolling.

Bottom of Form

The graph plots price versus quantity of product X.

Refer to the provided supply and demand graph of Product X. If there are positive externalities from the consumption of Product X, then the socially optimal demand curve would be

Top of Form

Multiple Choice

  • to the left of the D curve on the graph.
  • to the right of the D curve on the graph.
  • at the position of the D curve on the graph.
  • an upward-sloping line.

Bottom of Form

If a legal ceiling price is set above the equilibrium price,

Top of Form

Multiple Choice

  • a shortage of the product will occur.
  • a surplus of the product will occur.
  • a black market will evolve.
  • neither the equilibrium price nor the equilibrium quantity will be affected.

Bottom of Form

(1)
Qd
(2)
Qd
(3)
Price
(4)
Qs
(5)
Qs
5040$ 107080
605096070
806085060
907074050
1008063040

Refer to the table. In relation to column (3), a change from column (4) to column (5) would most likely be caused by

Top of Form

Multiple Choice

  • government placing an excise tax on the good.
  • an improvement in production technology.
  • an increase in consumer income.
  • an increase in input prices.

Bottom of Form

Four diagrams illustrate how equilibrium price and quantity respond to demand or supply curves shifts.

Which of the diagrams illustrate(s) the effect of a decrease in incomes on the market for second-hand clothing?

Top of Form

Multiple Choice

  • A and C
  • A only
  • B only
  • C only

Bottom of Form

The graph plots society’s M B and M C of pollution abatement versus amount of pollution abatement.

Refer to the diagram. With MB1 and MC1, society’s optimal amount of pollution abatement is

Top of Form

Multiple Choice

  • Q1.
  • Q2.
  • Q3.
  • Q4.

Bottom of Form

What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased?

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Multiple Choice

  • The increase in demand was greater than the decrease in supply.
  • The decrease in demand was greater than the decrease in supply.
  • The increase in supply was greater than the decrease in demand.
  • The decrease in supply was greater than the increase in demand.

Bottom of Form

If the market price of a product increases, then the total

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Multiple Choice

  • consumer surplus will decrease.
  • consumer surplus will increase.
  • revenues of sellers will definitely increase.
  • revenues of sellers will definitely decrease.

Bottom of Form

The graph plots price per gallon versus millions of gallons of milk per week.

Refer to the above diagram for the milk market. If the price were more than $1.50 per gallon, then there would be

Top of Form

Multiple Choice

  • equilibrium in the market.
  • a shortage in the market.
  • a surplus in the market.
  • no buyers in the market

Bottom of Form

Charlie is willing to pay $16 for a T-shirt that is priced at $12. If Charlie buys the T-shirt, then his consumer surplus is

Top of Form

Multiple Choice

  • $16.
  • $192.
  • $28.
  • more than $12.
  • $4.

Bottom of Form

Price Per UnitQuantity Demanded Per YearQuantity Supplied Per Year
$ 52,0000
101,800300
151,600600
201,400900
251,2001,200
301,0001,500

Refer to the above table. A shortage of 500 units will occur when the price is

Top of Form

Multiple Choice

  • $20.
  • $10.
  • $25.
  • $5.
  • $15.

Bottom of Form

The graph plots price per gallon versus millions of gallons of milk per week.

Refer to the above diagram for the milk market. There would be equilibrium whenever the price is

Top of Form

Multiple Choice

  • $1.50 per gallon.
  • less than $1.50 per gallon.
  • more than $2.00 per gallon.
  • less than $1.00 per gallon.

Bottom of Form

The graph plots price per bushel in the vertical axis versus bushels of corn in thousands per week in the horizontal axis.

Refer to the above diagram of the market for corn. If the price in this market is more than $3 per bushel, then there will be

Top of Form

Multiple Choice

  • a surplus in the market.
  • equilibrium in the market.
  • a shortage in the market.
  • no buyers in the market.

Bottom of Form

Which of the following statements is correct?

Top of Form

Multiple Choice

  • If supply increases and demand increases, equilibrium quantity will rise.
  • If supply increases and demand increases, equilibrium price will rise.
  • If supply increases and demand increases, equilibrium quantity will fall.
  • If supply increases and demand remains constant, equilibrium price will rise.
  • If supply decreases and demand remains constant, equilibrium price will fall.

Bottom of Form

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.

Removing the subsidy placed on product X years ago will

Top of Form

Multiple Choice

  • decrease S, increase P, and decrease Q.
  • increase S, increase P, and increase Q.
  • decrease S, increase P, and increase Q.
  • increase D, decrease P, and increase Q.

Bottom of Form

Answer the question based on the given supply and demand data for wheat.

Bushels Demanded Per MonthPrice Per BushelBushels Supplied Per Month
45$ 555
50450
56345
61240
67135

Equilibrium price in this market is

Top of Form

Multiple Choice

  • $4.
  • $5.
  • $3.
  • $2.

Bottom of Form

ProducerMinimum Acceptable PriceActual Price (Equilibrium Price)
A$ 6$ 14
B714
C914
D1114
E1314

Refer to the provided table. What is the total producer surplus in the market for all producers A, B, C, D, and E?

Top of Form

Multiple Choice

  • $27
  • $14
  • $24
  • $6
  • $8

Bottom of Form

Amanda buys a ruby for $200 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $190. Amanda experiences

Top of Form

Multiple Choice

  • a consumer surplus of $140, and Tony experiences a producer surplus of $10.
  • a producer surplus of $200, and Tony experiences a consumer surplus of $140.
  • a consumer surplus of $140, and Tony experiences a consumer surplus of $150.
  • a consumer surplus of $540, and Tony experiences a producer surplus of $200.
  • a producer surplus of $140, and Tony experiences a consumer surplus of $190.

Bottom of Form

The minimum acceptable price for a product that producer Sam is willing to receive is 10. The price he could get for the product in the market is 15. How much is Sam’s producer surplus?

Top of Form

Multiple Choice

  • 15
  • 5
  • 25
  • more than $10
  • 150

Bottom of Form

(1)
Qd
(2)
Qd
(3)
Price
(4)
Qs
(5)
Qs
 1040$ 107080
155096070
 206085060
 257074050
 308063040

Refer to the table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be

Top of Form

Multiple Choice

  • $6 and 30 units.
  • $8 and 20 units.
  • $6 and 20 units.
  • $7 and 10 units.
  • $7 and 20 units.

Bottom of Form

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.

Consumer expectations that the price of X will fall soon will

Top of Form

Multiple Choice

  • decrease D, decrease P, and decrease Q.
  • decrease D, increase P, and decrease Q.
  • decrease D, decrease P, and increase Q.
  • decrease S, decrease P, and increase Q.
  • shift D right with no change in P and Q.

Bottom of Form

Suppose product Y is an input in the production of product Z. Product Z in turn is a substitute for product X. An increase in the price of Y can be expected to

Top of Form

Multiple Choice

  • increase the demand for X.
  • decrease the demand for X.
  • have no effect on the demand for product X.
  • decrease the supply of X.
  • increase the supply of X.

Bottom of Form

In the market for a particular pair of shoes, Geri is willing to pay $50 for a pair, while Jane is willing to pay $45 for a pair. The actual price that each has to pay for a pair of these shoes is $40. What is the total amount of the two women’s combined consumer surplus?

Top of Form

Multiple Choice

  • $10
  • less than $5
  • $5
  • $15
  • $90

Bottom of Form