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midterm1

# midterm1 - 1 Multiple Choice(40 points Write down on your...

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1 Multiple Choice (40 points) Write down on your answer sheet your answer for each question. There is only one correct answer for each question. Each question is worth two points. 1. The production possibilities curve shows: A. the relationship between inputs and output B. the minimum amount of one good that can be produced for every possible production level of the other good. C. a positive relationship D. the maximum production of one good for every possible production level of the other good. E. how increasing the production of one good allows pro- duction of the other good to also increase. 2. If P is the price of a good and Q is the quantity demanded of a good at that price, then the correct mathematical statement of the price elasticity of demand is: A. Δ P P Δ Q Q B. Δ Q Q Δ P P C. Δ P Δ Q D. Δ Q Δ P E. Δ P P Δ Q 1

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3. If the price of shoes decreases and, as a result, the demand for shirts increases, then: A. shoes and shirts are complements. B. shoes are a normal good, shirts are inferior. C. shoes and shirts are substitutes. D. shirts are a normal good, shoes are inferior. E. both are normal goods. 4. To say that an individual possesses an absolute advantage in the pro- duction of software means that: A. he has a lower opportunity cost of producing software. B. he can produce more, and/or higher quality, software in a given amount of time. C. he was the ﬁrst to create the software. D. he charges the lowest price for software. E. he has the most capital. 2
5. The short-run price elasticity of demand for electricity is likely to be (blank) the long-run price elasticity of demand because (blank). A. more elastic than; in the long run the price goes back to normal. B. just as elastic; it’s still the same product. C.

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midterm1 - 1 Multiple Choice(40 points Write down on your...

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