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Some farmland can be used to produce either rice or corn (i. two products share the same input). If price of rice decreases, then the a)the supply of...
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1.Some farmland can be used to produce either rice or corn (i.e. two

products share the same input). If price of rice decreases, then the
a)the supply of rice should increase.
b)the supply of corn should increase.
c)the demand of corn should increase.
d)the quantity demanded of rice should decrease.


2.Assume that Bart and Lisa live on a desert island. With a day's labor, Lisa can produce either 5 fish or 4 coconuts; Bart can produce either 6 fish or 3 coconuts. Based on the law of comparative advantage in trade theory,
a)Lisa should produce coconuts.
b)Bart has a greater disadvantage in fish production.
c)Bart should produce coconuts.
d)Lisa has a greater disadvantage in coconut production.


3.Opportunity cost of good or activity is defined as the:
a)Value of the next best alternative.
b)Dollar price paid for the good.
c)Dollar cost of producing the good.
d)All of the above


4.If consumers foresee the price of electric car will drop significantly in the near future, then the current market _______ of electric car will _______.
a)demand; increase
b)demand; decrease
c)supply; decrease
d)price; increase


5.In the long-run equilibrium, the existing perfectly competitive firms
a)always earn a positive economic profit.
b)never earn a normal profit.
c)sell products at the market price which equals their minimum average total cost .
d)still operate with negative economic profits.


6.Mr. Smart still has money in pocket to spend. If only two products are available to him, apple (A) and beef (B); the current marginal utility (MU) and unit price (P) are as the following: MUA=5, MUB=10, PA=$1, PB=$4. In order to maximize his total utility, Mr. Smart should
a)purchase more beef because its marginal utility is greater than apple's.
b)purchase more apples because the marginal utility per dollar is greater than beef's.
c)purchase more beef because he likes it.
d)purchase more apples because the price is very low.


7.Which of the following is a perfectly competitive firm's supply curve?
a)Competitive firms have no supply curve.
b)Its marginal cost curve.
c)The market price.
d)Its average total cost curve.


8.In economics, which of the following is the best example of "capital"?
a)The Microsoft stocks traded on NYSE.
b)A shoe manufacturing plant.
c)U.S. government bonds.
d)Money held in your bank account.


9.Which of the following is NOT included in the U.S. GDP?
a)The construction of a highway in Texas.
b)The unemployment benefits paid to an unemployed worker in Texas.
c)The purchase of West Virginia coal by a Japanese factory.
d)The production of Ohio automobiles by a Germany company.


10.Diamonds are more expensive than water because
a)they yield higher total utility.
b)they yield higher marginal utility.
c)they are rare.
d)market does not reflect water's value.

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