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Problem Set I

# Problem Set I - Problem Set I 1 Which of the following must...

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1 Problem Set I 1. Which of the following must always be true as the quantity of output increases? a) Marginal cost must rise. b) Average total cost must rise. c) Average variable cost must rise. d) Average fixed cost must fall. 2. The difference between production possibilities frontiers that are bowed out and those that are straight lines is that a) bowed-out production possibilities frontiers apply to economies that face tradeoffs, whereas straight-line production possibilities frontiers apply to economies that do not face tradeoffs. b) bowed-out production possibilities frontiers apply to economies in which resources are not specialized, whereas straight-line production possibilities frontiers apply to economies in which resources are specialized. c) bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost. d) straight-line production possibilities frontiers illustrate real-world conditions, whereas bowed-out production possibilities frontiers illustrate more simplistic assumptions. 3. During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production? a) Beef producers, concerned about the health of their customers, decided to produce relatively less beef. b) Government officials, concerned about consumer health, ordered beef producers to produce relatively less beef. c) Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the relative price of beef, making it less attractive to produce. d) Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet in the marketplace. 4.Two goods are substitutes if a decrease in the price of one good a) decreases the demand for the other good. b) decreases the quantity demanded of the other good. c) increases the demand for the other good. d) increases the quantity demanded of the other good.

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2 5. When we move along a given demand curve, a) only price is held constant. b)
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Problem Set I - Problem Set I 1 Which of the following must...

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