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ex1Spring 08A - MULTIPLE CHOICE QUESTIONS Use the following...

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Unformatted text preview: MULTIPLE CHOICE QUESTIONS Use the following to answer questions 1-3: Y Y Y Y I k U— Xoi:xo x0 .x 1 2 3 4 1. Answer on the basis of the relationships shown in the above four figures. The amount of Y is directly related to the amount of X in: a. both 1 and 3 b. both 1 and 2 c. 2 only C. 1 only 2. Answer on the basis of the relationships shown in the above four figures. The amount of Y is inversely related to the amount of X in: a. 2 only b. both 1 and 3 c 3 only (1. 1 only 3. Mswmmmmmmmve four figures. The amount of Y is unrelated to the amount of X in: Q 2 only b. 3 only 0. both 2 and 4 d. 1 Use the following to answer questions 4-6: Tractors 4. Refer to the above diagram. This production possibilities curve is constructed so that: a resources are presmned to be perfectly shifiable between bread and tractors the opportunity cost of bread diminishes as more bread is produced the opportunity cost of tractors diminishes as more bread is produced the opportunity cost of both bread and tractors increases as more of each is produced b. c. O 5. Refer to the above diagram. Starting at point A, the opportunity cost of producing each successive unit of tractors is: a. a constant 2 units of bread I. 2, 4, 6 and 8 units of bread c. 8, 6, 4 and 2 units of bread d. the reciprocal of the output of tractors 6. Refer to the above diagram. Starting at point E, the production of successive units of bread will cost: a. a constant 8 units of tractors b. a constant 6 units of tractors » 0 1/8, 1/6, V4, and ‘/2 units of tractors (1. V2, ‘A, 1/6, and 1/8 units of tractors Use the following to answer questions 7—8: War goods (“guns”) Civilian goods (“butter”) 7. Refer to the above production possibilities curve. At the onset of the Second World War the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point: 0 a to point b b to point c c to point b c to point (1 999‘ 8. Refer to the above production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point: a. b to point c . c to point b c. a to point b d. c to point d Use the following to answer questions 9-13: 10. 11. 12. 13. Capital goods 0 Consumer goods Refer to the above diagram. The concave shape of each production possibilities curve indicates that: a. resources are perfectly substitutable b. wants are virtually unlimited c. prices are constant 0. resources are not equally suited for alternative uses Refer to the above diagram. The concept of opportunig cost is best represented by the: shift the production possibilities’ curve from PP; to PP1 shift of the production possibilities curve from PP1 to PP2 move from B on PP1 to C on PP1 move from D inside PP1 to B on PP1 9“?!” Refer to the above diagram. Which of the following positions relative to PPl would be the most likely to result in a future production possibilities curve of PP3, rather than PP;? 999‘. UOCU> Refer to the above diagram. An improvement in technology will: a. shift the production possibilities curve from PPz to PP1 Q shifi the production possibilities curve from PP1 to PP2 c. move the economy from A to C along PP1 (1. move the economy from A, B, or C on PP1 to D Refer to the above diagram. Which one of the following would shift the production possibilities curve from PP1 to PPz? Q immigration of skilled workers into the economy b. worsening of the AIDS epidemic c. an increase in consumer prices (1. a reduction in hourly wages 14. 15. 16. 17. 18. 19. 20. A nation’s production possibilities curve might shift to the 1911 (inward) as a result of: a. technological advance increases in the size of the labor force b. 0 the depletion of its soil fertility due to overplanting and overgrazing d. investing in more capital goods Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will: a. decrease, quantity demanded will decrease, and quantity supplied will increase b. decrease, and quantity demanded and quantity supplied will both decrease c. decrease, quantity demand will increase, and quantity supplied will decrease Q increase, quantity demanded will decrease, and quantity supplied will increase Other things equal, an excise tax on a product will: a. increase its supply Q increase its price c. increase the quantity sold d. increase its demand Suppose in each of four successiVe years producers sell more of their product and at lower prices. This could be explained: a. by small annual increases in supply accompanied by large annual increases in demand b. . in terms of a stable supply curve and increasing demand 0 in terms of a stable demand curve and increasing supply (1. as an exception to the law of supply Other things equal, the provision of a m u_n_it subsidy for a product will: . increase its supply b. increase its price c. decrease the quantity sold d. decrease its demand In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand? 0 demand rises and supply rises supply falls and demand remains constant b. c. demand rises and supply falls (1. supply rises and demand falls An unusually large crop of coffee beans might: . increase the supply of coffee b. increase the price of coffee c. decrease the quantity of coffee consumed d. increase the price of tea Use the following to answer questions 21-24: 21. 22. 23. 24. Price Quantity Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and 82 and D2, the new curves. In this market: a. supply has decreased and equilibrium price has increased b. demand has increased and equilibrium price has increased c. demand has decreased and equilibrium price has decreased 0. demand has increased and equilibrium price has decreased Refer to the above diagram, in which 81 and D1 represent the original supply and demand curves and 82 and D2, the new curves. In this market: a. the equilibrium position has shifted from M to K D. an increase in demand has been more than offset by an increase in supply c. the new equilibrium price and quantity are both greater than originally d point M shows the new equilibrium position Refer to the above diagram, in which 81 and D1 represent the original supply and demand curves and 82 and D2, the new curves. In this market the indicated shift in supply may have been caused by: Q the development of more efficient machinery for producing this commodity b. an increase in the wages paid to workers producing this good c. this product becoming less fashionable d. an increase in consumer incomes Refer to the above diagram, in which 81 and D1 represent the original supply and demand curves and $2 and D2, the new curves. In this market the indicated shift in demand may have been caused by: a. a decline in the number of buyers in the market b. a decline in the price of a substitute good . an increase in incomes if the product is a normal good (I. an increase in incomes if the product is an inferior good 25. 26. 27. 28. 29. 30. 31. Suppose that the price of Red Stripe Energy Drink decreases from $4.50 to $4.20 per six pack. The law of demand states that if other things are held constant: a. b. C d. In a. b. c. O In a. C c. d. quantity supplied will increase quantity demanded will decrease quantity demanded will increase quantity supplied will decrease a market economy, prices: inform motivate ration all of the above a market economy, consumers are assumed to: pursue profits pursue their self-interest pursue revenues pursue what is best for society Suppose the equilibrium price of movie theater tickets is $8.50 per ticket. The campus theater currently has its tickets priced at $6.00 per ticket. We would expect to find: a. b. c. excess supply and the price of tickets falling excess supply and the price of tickets rising excess demand and the price of tickets falling excess demand and the price of tickets rising Suppose the equilibrium price of tickets to a Shania Twain concert is $40 per ticket. Currently tickets are priced at $55 per ticket. We would expect to find: 999‘ excess supply and the price of tickets falling excess supply and the price of tickets rising excess demand and the price of tickets falling excess demand and the price of tickets rising Suppose there is a decrease in the demand for VCRs. We would expect: a. C. (1. both the equilibrium price and quantity of VCRs to increase both the equilibrium price and quantity of VCRs to decrease the equilibrium price of VCRs to decrease and the equilibrium quantity of VCRs to increase the equilibrium price of VCRs to increase and the equilibrium quantity of VCRs to decrease Suppose there is a decrease in Sean’s income. If steak is a normal good: a. b. 0 d. there will be an increase in Sean’s demand for steak there will be an increase in the quantity of steak demand by Sean Sean’s demand curve for steak will shift to the left there will be an increase in the supply of milk 32. 33. 34. 35. 36. 37. 38. Suppose spaghetti is an inferior go_o(_1. An increase in income will cause: a. a ti tward shifi of the demand curve for spaghetti Q a leftward shift of the demand curve for spaghetti c a movement upward along the demand curves for spaghetti d a movement downward along the demand curve for spaghetti Suppose cookies and milk are complements. A decrease in the price of milk will lead to: C an increase in the demand for cookies b. a decrease in the quantity of cookies demanded c. a decrease in the demand for cookies (1 a decrease in the demand for milk An increase in the supply of eggs would most likely be caused by: a. a decrease in the price of eggs b. an increase in the price of eggs c. an increase in the price of chicken feed C a decrease in the price of chicken feed The decline in fig population has been caused by: O technological advances increasing the supply of farm output b. decreasing opportunity costs in the nonagricultural economy c. government regulations prohibiting entry into agriculture d. the rapid decrease in output per farmer due to technological advances Jack lobbies his Congress person in an attempt to keep a price support program for bee- keepers in tact. This is an example of: a. economic rent seeking b. self—interested rent seeking . political rent seeking d. legislative rent seeking A deficiency payment is: a. the difference between a price support and the market price multiplied by the quantity of output sold Q the difference between a target price and the market price multiplied by the quantity of output sold c. the difference between a price ceiling and the market price multiplied by the quantity of output sold (1. the difference between a maximum legal price and the market price multiplied by the quantity of output sold The major difference between a price support proggam and a target price proggam is that: a. price supports do not produce an excess supply b. target prices produce an excess demand c. target prices subsidize foreign buyers while price supports subsidize domestic buyers ‘ target prices subsidize domestic and foreign buyers 39. 40. 41. 42. 43. 44. 45. Suppose there is an improvement in the technology associated with the production of milk. This will result in: ' an increase in the supply of milk b. a decrease in the supply of milk c. a decrease in the demand for milk d. an increase in the demand for milk Suppose the supply of soy beans increases while the demand for soy beans decreases. This will cause: a. an increase in the equilibrium price, but the effect on quantity exchanged cannot be determined b. a decrease in equilibrium quantity exchanged, but the effect on price cannot be determined C a decrease in equilibrium price, but the effect on quantity exchanged cannot be determined d. an increase in equilibrium quantity exchanged, but the effect on price cannot be determined Which of the following is mt a characteristic of the market system? a. private property b. freedom of enterprise c. competition in product and resource markets Q government ownership of the major industries Which of the following i_s a fundamental characteristic of the market system? 0 property rights b. central planning by government 0. unselfish behavior d. government—set wages and prices The pursuit of self-interest: a. is highly detrimental to the market system b. means exactly the same as “selfishness” and “greed” c. is reflected in the behavior of firms, but not in the behavior of consumers 0. gives direction to the market system The regplatog mechanism of the market system is: a. self-interest b. private property 0 competition (1. specialization The market system’s answer to the fundamental question “What will be produced?” is essentially: 0 “Goods and services that are profitable.” b. “Low cost goods and services.” c. “Goods and service that can be produced using round—about production.” d. “Goods and services that possess lasting value.” 46. 47. 48. 49. 50. The market system’s answer to the fundamental question “How will the goods and services be produced?” is essentially: a. “With as much machinery as possible.” b. “Using the latest technology.” c. “By exploiting labor.” C “At least—cost production” The market system’s answer to the fundamental question “Who will get the goods and services?” is essentially: Q “Those willing and able to pay for them.” b. “Those who physically produced them.” e. “Those who most need them.” (1. “Those who get utility from them.” The invisible hand refers to the: a. fact that the US. tax system redistributes income from rich to poor . notion that, under competition, decisions motivated by self-interest promote the social interest tendency of monopolistic sellers to raise prices above competitive levels 6. d. fact that government controls the functioning of the market system Two major virtues of the market system are that it: Q allocates recourses efficiently and allows economic freedom b. results in an equitable personal distribution of income and always maintains filll employment _ 0. results in price level stability and a fair personal distribution of income (1. eliminates discrimination and minimizes environmental pollution In 1975 McDonald’s introduced its Egg McMuffm breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of: opportunity cost upsloping supply consumer sovereignty specialization 909‘?” ...
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