TestBank_Economics Subject Test & answer

TestBank_Economics Subject Test & answer - Questions...

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2006 Economics Subject Test Part I. Multiple Choice (30 questions, 60 points total) Choose the letter of ONE best answer (each question is worth 2 points). 1. If the cross elasticity of demand between two goods is –0.56, then a fall in the price of one good leads to a ____ shift in the ____ of the other good. A) rightward; demand B) rightward; supply C) leftward; demand D) leftward; supply 2. Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick’s consumer surplus? A) $2 B) $9 C) $3 D) $10 3. Suppose, a firm has $1500 in variable costs and $500 in fixed costs when it produces 500 units of output and sells it for $50 per unit. If the price of the product drops to $4 each, should this firm continue operation during the short run? A) No, because P < ATC B) Yes, because P > ATC C) No, because P < AVC D) Yes, because P > AVC 4. Suppose there is an announcement that peanut butter is good for you. What is the most likely result? A) An increase in the price of grilled cheese sandwiches, a substitute. B) An increase in the price of jelly, a complement. C) A reduction in the consumption of peanut butter. D) An increase in the cost of making peanut butter. [GO ON TO THE NEXT PAGE] Page 1 of 11 Questions are printed on both sides of the paper.
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5. The water and diamonds paradox of value results from A) the concept of deadweight loss. B) the “law of demand.” C) diminishing marginal utility. D) the elasticity of demand. 6. A price taker confronts a demand curve that is A) vertical at the market price. B) upward sloping. C) downward sloping. D) horizontal at the market price. 7. For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is ____ per unit and the price is ____ per unit. A) $10; $30 B) $20; $20 C) $10; $20 D) $30; $20. 8. If demand is inelastic, an increase in the price will A) decrease total revenue. B) increase total revenue. C) not change total revenue. D) increase the quantity demanded. [GO ON TO THE NEXT PAGE] Page 2 of 11
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9. In the figure above, suppose that Mac and Izzie trade and reach point c . Then A) Mac and Izzie should both produce at point a . B) Mac should produce at point b and Izzie should produce at point d . C) Mac should produce at point d and Izzie should produce at point b . D) Mac and Izzie should both produce at point c . 10. Ricky's work-leisure choices are given in the above figure. As the wage rate increases from $5 to $10 per hour so that Ricky’s income-time budget line shifts from BL 0 to BL 1 , Ricky’s ____ effect is stronger. As the wage rate increases from $10 to $15 per hour, so that his budget line shifts from BL 1 to BL 2 , Ricky’s ____ effect is stronger. A) income; substitution B) income; income C) substitution; income D) substitution; substitution [GO ON TO THE NEXT PAGE] 11. Assume a person’s consumption of just the right amounts of pork and chicken is in Page 3 of 11
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equilibrium. We can conclude that the A) marginal utility of pork must equal the marginal utility of chicken B) price of pork must equal the price of chicken
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TestBank_Economics Subject Test & answer - Questions...

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