1) An incentive

A)is the opposite of a tradeoff.

B)could be a reward but could not be a penalty.

C) could be either a reward or a penalty.

D)could be a penalty but could not be a reward.

2) The most fundamental economic problem is

A)security

B)the fact the United States buys more goods from foreigners than we sell to foreigners.

C) health.

D)scarcity.

3) Economics is best defined as the study of how people, businesses, governments, and societies

A)make choices to cope with scarcity.

B)attain wealth.

C) choose abundance over scarcity.

D)use their infinite resources.

4) Economists point out that scarcity confronts

A)the rich but not the poor.

B)the poor but not the rich.

C) both the poor and the rich.

D)neither the poor nor the rich.

5) Scarcity requires that people must

A)trade

B)compete

C) cooperate

D)make choices.

6) As an economic concept, scarcity applies to

A)neither time nor money

B) both money and time

C) time but not money

D)money but not time.

7) Which is the most accurate definition of the study of economics? Economics is the study of

A)the distribution of surplus goods to those in need

B)affluence in a morally bankrupt world

C) ways to reduce wants to eliminate the problem of scarcity

D)the choices we make because of scarcity.

8) Which of the following is a macroeconomic topic?

A)why plumbers earn more than janitors

B)the reasons for the rise in average prices

C) whether the army should buy more tanks or more rockets

D)the reasons for a rise in the price of orange juice

9) Which of the following is a microeconomic topic?

A)the reasons for a decline in average prices

B)the reasons why Kathy buys less orange juice

C) the cause of why total employment may decrease

D)the effect of the government budget deficit on inflation

10) Microeconomics focuses on all of the following EXCEPT

A)the effect of increasing the money supply on inflation.

B)the purchasing decisions that an individual consumer makes.

C) the effect of an increase in the tax on cigarettes on cigarette sales.

D)the hiring decisions that a business makes.

11) In broad terms the difference between microeconomics and macroeconomics is that

A)microeconomics studies the effects of government taxes on the national unemployment rate

B)macroeconomics studies the effects of government regulation and taxes on the price of
individual goods and services whereas microeconomics does not

C) they use different sets of tools and ideas

D)microeconomics studies decisions of individual people and firms and macroeconomics

studies the entire national economy.

12) Studying the determination of prices in individual markets is primarily a concern of

A)negative economics

B)microeconomics

C) positive economics

D)macroeconomics.

13) The analysis of the behavior of individual decision-making units is the definition of

A)microeconomics
B)macroeconomics

C) positive economics

D)normative economics.

14) Which of the following topics would be studied in a microeconomics course?

A)how a tax rate increase will impact total production

B)comparing inflation rates across countries

C) how a trade agreement between the United States and Mexico affects both nations'
unemployment rates

D)how rent ceilings impact the supply of apartments

15) Which of the following is a macroeconomic issue?

A) how federal government budget deficits affect interest rates

B) the cause of a decline in the price of peanut butter

C) what determines the amount a firm will produce

D) how a rise in the price of sugar affects the market for sodas

16) Which of the following is an issue in macroeconomics?

A)the purchasing decisions that an individual consumer makes

B)the effect of an increase in the tax on cigarettes on cigarette sales

C) the hiring decisions that a business makes

D)the effect of increasing the money supply on inflation

17) Macroeconomic topics include

A)the impact of government regulation of markets.

B)total, nationwide employment.

C) studying what factors influence the price and quantity of automobiles.

D)studying the determination of wages and production costs in the software industry.

18) Macroeconomics is the branch of economics that studies

A)prices of individual goods

B)important, as opposed to trivial, issues

C) the way individual markets work

D)the economy as a whole.

19) When an economy produces more houses and fewer typewriters, it is answering the
________ question.

A)"where"

B)"for whom"

C) "how"

D)"what"

20) When firms in an economy start producing more computers and fewer televisions, they are
answering the ________ question.

A)"where"

B)"when"

C) "what"

D)"for whom"

21) U.S. producers decide to produce more compact cars and fewer SUVs as the price of gasoline
rises. Producers are answering the ________ question.

A)"what"

B)"when"
C) "how"

D)"how many"

22) The question "Should movies or compact discs be produced?" is an example of the

A)"how" question.

B)"who" question.

C) "where" question.

D)"what" question.

23) Which of the following statements is correct?

A)The percentage of people producing goods in the United States has steadily increased over the
last 60 years.

B)The United States produces an equal amount of goods and services.

C) The United States produces more goods than services.

D)The United States produces more services than goods.

24) Which of the following is correct concerning production in the United States?

A)The percentage of people employed in manufacturing has increased over the last 60 years.

B)The percentage of people employed in farming has decreased over the last 60 years.

C) The percentage of people employed in services has decreased over the last 60 years.

D)The percentage of people employed in construction has increased over the last 60 years.

25) When China builds a dam using few machines and a great deal of labor, it is answering the
________ question.

A)"how"

B)"what"
C) "where"

D)"for whom"

26) When a textile company keeps track of its inventory using a computer and its competitor
uses a spreadsheet and pencil, they are both answering the ________ question.

A)"where"

B)"what"

C) "for whom"

D)"how"

27) Human capital is

A)machinery that meets or exceeds federal safety standards for use by humans.

B)all capital owned by individuals or corporations, but not by governments.

C) the skill and knowledge of workers.

D)all capital owned by individuals, but not by corporations or governments.

28) Entrepreneurs do all of the following EXCEPT

A)bear risk from business decisions.

B)own all the other resources.

C) come up with new ideas about what, how, when and where to produce.

D)organize labor, land, and capital.

29) To answer the "for whom" question, we study

A)business cycles

B)technological change

C) the global economy

D)income differences.

30) The fact that people with higher incomes get to consume more goods and services addresses
the ________ question.

A)"how"

B)"where"

C) "for whom"

D)"when"

31) Which of the following is NOT a factor of production?

A)the water used to cool a nuclear power plant

B)the wages paid to workers.

C) the effort of farmers raising cattle

D)the management skill of a small business owner.

32) Which of the following is NOT a factor of production?

A) a share of stock issued by a firm.

B) a new computer used by a small business owner.

C) a tractor used by a wheat farmer.

D) the time worked by elementary school teachers.

33) An autoworker is considered ________ and earns ________.

A)labor; wages

B)labor; rent

C) capital; rent

D)entrepreneurship; wages
34) Overtime worked by a JCPenney associate is considered ________ and earns ________.

A)entrepreneurship; profit

B)labor; profit

C) human capital; interest

D)labor; wages

35) When a university decides to add to the football stadium instead of adding to the baseball
stadium, it faces the

A)"what" tradeoff.

B)"how" tradeoff.

C) macroeconomic question.

D)"for whom" tradeoff.

36) When a farmer decides to increase the amount of acreage devoted to wheat and grow fewer
acres of soybeans, the farmer is facing the

A)"how" tradeoff

B)microeconomic question

C) "what" tradeoff

D)"for whom" tradeoff.

37) When a photographer decides to use a digital camera to take shots versus using film, the
photographer is facing the

A)"what" tradeoff

B)microeconomic question

C) "for whom" tradeoff

D)"how" tradeoff.
38) The "how" tradeoff occurs when

A)a firm decides to produce refrigerators instead of dishwashers.

B)we answer the macroeconomic question.

C) the government increases income taxes paid by the rich.

D)a farm uses machinery to pick oranges instead of employing migrant workers.

39) When the government decides to provide tax relief for small businesses while placing higher
taxes on large corporations, it is facing the

A)"for whom" tradeoff.

B)"what" tradeoff.

C) "how" tradeoff.

D)macroeconomic question.

40) Because we face scarcity, every choice involves

A)the question "what."

B)money

C) giving up something for nothing.

D)an opportunity cost

41) The term used to emphasize that making choices in the face of scarcity involves a cost is

A)utility cost

B)opportunity cost

C) accounting cost

D)substitution cost.
42) The loss of the highest-valued alternative defines the concept of

A)entrepreneurship

B)scarcity

C) marginal benefit.

D)opportunity cost.

43) Opportunity cost means

A)the accounting cost minus the marginal benefit.

B)the highest-valued alternative forgone.

C) the monetary costs of an activity.

D)the accounting cost minus the marginal cost.

44) The opportunity cost of any action is

A)the time required but not the monetary cost.

B)all the possible alternatives forgone.

C) the highest-valued alternative forgone.

D)the monetary cost but not the time required.

45) The opportunity cost of something you decide to get is

A)the amount of money you pay to get it.

B)the highest valued alternative you give up to get it.

C) the lowest valued alternative you give up to get it.

D)all possible alternatives that you give up to get it.

46) The ultimate cost of any choice is

A)the dollars expended.

B)what someone else would be willing to pay.

C) the after-tax cost.

D)the highest-valued alternative forgone.

47) During the summer you have made the decision to attend summer school, which precludes
you from working at your usual summer job in which you normally earn $6,000 for the summer.
Your tuition cost is $3,000, books and supplies cost $300, and room and board cost $1,000. The
opportunity cost of attending summer school is

A)$3,300.

B)$4,300.

C) $6,000.

D)$10,300.

48) On Saturday morning, you rank your choices for activities in the following order: go to the
library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to
go to the library. Your opportunity cost is

A)working out at the gym, having breakfast with friends, and sleeping late.

B)zero because you do not have to pay money to use the library.

C) working out at the gym.

D)not clear because not enough information is given.

49) You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you
do not report to work where you could have earned $750. The opportunity cost of the vacation
is

A)$2,750.

B)$2,000.

C) $750.
D)$1,250

50) When an action is chosen, the highest-valued alternative NOT chosen is called the

A)accounting cost

B)opportunity cost

C) implicit cost

D)explicit cost.

51) The term "opportunity cost" points out that

A)there may be such a thing as a free lunch

B)executives do not always recognize opportunities for profit as quickly as they should.

C) any decision regarding the use of a resource involves a costly choice.

D)not all individuals will make the most of life's opportunities because some will fail to achieve
their goals.

52) During the next hour John can play basketball, watch television, or read a book. The
opportunity cost of reading a book

A)equals how much John enjoys the book.

B)is the value of playing basketball andthe value of watching television.

C) is the value of playing basketball if John prefers that to watching television.

D)is how much the book cost when it was purchased.

53) Misty has the option of purchasing one of three products: Brand A, Brand B, or Brand C. Each
costs ten dollars. If she decides that Brand A meets her needs best, then the opportunity cost of
this decision is

A)twenty dollars.

B)Brand A.
C) Brand B plus Brand C.

D)Brand B or Brand C, depending on which is considered the highest-value alternative forgone.

54) Which of the following is NOT an example of an opportunity cost?

A)Because David used all of his vacation time to paint his house, he was unable to visit the
Caribbean last year.

B)By choosing to attend college, Jean was not able to continue working as an electrician; as a
result, she gave up more than $85,000 in earnings while she was in college.

C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though
she is moving into a bigger apartment.

D)By spending Thursday night studying for an economics exam, a student was unable to
complete a homework assignment for calculus class.

55) From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or the
symphony. Suppose that Sam decides to attend the hockey match and thinks to herself that if
she did not go to the match she would go to the symphony. Then the opportunity cost of
attending the hockey match is

A)going to the basketball game.

B)going to the symphony and the basketball game.

C) three hours of time.

D)going to the symphony.

56) When the government chooses to use resources to build a dam, these sources are no longer
available to build a highway. This choice illustrates the concept of

A)a market mechanism.

B)a fallacy of composition.

C) opportunity cost.

D)macroeconomics.
57) Marginal benefit is the benefit

A)that arises from the secondary effects of an activity.

B)of an activity that exceeds its cost.

C) that arises from an increase in an activity.

D)that your activity provides to someone else.

58) The benefit that arises from an increase in an activity is called

A)an incentive.

B)the marginal cost.

C) the marginal benefit.

D)opportunity cost.

59) Marginal cost is the cost

A)of an activity that exceeds its benefit.

B)that arises from an increase in an activity.

C) that your activity imposes on someone else.

D)that arises from the secondary effects of an activity.

60) Laura is a manager for HP. When Laura must decide whether to produce a few additional
printers, she is choosing at the margin when she compares

A)the total revenue from sales of printers to the total cost of producing all the printers.

B)the extra revenue from selling a few additional printers to the extra costs of producing the
printers.

C) HP's printers to printers from competing companies, such as Lexmark.

D)the extra revenue from selling a few additional printers to the average cost of producing the
additional printers.
61) In economics, positive statements are about

A)macroeconomics, not microeconomics.

B)the way things are.

C) the way things ought to be.

D)microeconomics, not macroeconomics.

62) A positive statement is

A)valid only in the context of a model with simple assumptions.

B)the result of a model's normative assumptions.

C) about what ought to be.

D)about what is.

63) A positive statement is

A)always true.

B)one that does not use the ceteris paribusclause.

C) about what is.

D)about what ought to be.

64) A positive statement

A)is an affirming statement that is strongly worded.

B)cannot be tested by checking it against the facts.

C) is a statement of what is.

D)is a statement of what ought to be.

65) Which of the following are true regarding "positive" statements? I. They describe what
"ought to be." II. They describe what is believed about how the world appears. III. They can be
tested as to their truthfulness.

A)II and III

B)I and II

C) I and III

D)I, II and III

66) Positive and normative statements differ in that

A)normative statements depict "what is" and positive statements depict "what ought to be."

B)positive statements can be graphed, whereas normative statements cannot.

C) normative statements can be tested, whereas positive statements cannot.

D)positive statements can be tested, whereas normative statements cannot.

67) Which of the following is an example of a positive statement?

A)Business firms ought to contribute more to charities.

B)Government should not redistribute income.

C) The foreign sector should be more tightly controlled.

D)Households are the primary source of saving.

68) Which of the following is an example of a positive statement?

A)The Federal Reserve ought to cut the interest rate.

B)Increasing the minimum wage results in more unemployment.

C) We should cut back on our use of carbon-based fuels such as coal and oil.

D)Every American should have equal access to health care.

69) Which of the following is a positive statement?

A)A 10 percent increase in income leads to a 4 percent increase in the consumption of beef.

B)My economics class should last for two terms because it is my favorite class.

C) Given their negative impact on productivity, the government should eliminate labor unions.

D)Taxes should be lower because then people get to keep more of what they earn, so they will
work more.

70) When Al makes the statement, "The cost of living has increased 10 percent over the past 10
years," he is

A)making a normative statement.

B)facing the standard of living tradeoff.

C) testing an economic model.

D)making a positive statement.

71) Which of the following is a positive statement?

A)State lotteries are good methods to use for raising revenues.

B)Increased prison sentences are the best way to reduce the crime rate.

C) Inflation is a more serious problem than is deflation.

D)An increase in gas prices leads people to carpool more.

72) The statement "Managers with a college education earn $18 an hour while ski instructors
who did not complete college earn $10" is

A)an ethical statement.

B)a political statement.

C) a normative statement.

D)a positive statement.

73) The statement "An increase in the price of gasoline will lead to a decrease in the amount
purchased" is

A)a political statement.

B)a positive statement.

C) a scientific statement.

D)a normative statement.

74) Which of the following is a positive statement?

A)My economics class should last for two terms because it is my favorite class.

B)The government must lower the price of a pizza so that more students can afford to buy it.

C) The best level of taxation is zero percent because then people get to keep everything they
earn.

D)An increase in tuition will cause fewer students to apply to college.

75) Which of the following is a positive statement?

A)Low rents will restrict the supply of housing.

B)Housing costs too much.

C) Low rents are good because they make apartments more affordable.

D)Owners of apartment buildings ought to be free to charge whatever rent they want.

76) The statement "The unemployment rate for teens is higher than that for adults" is

A)a normative statement.

B)a political statement.

C) an ethical statement.

D)a positive statement.

77) The statement "Prices rise more in countries with rapid growth in the money supply" is
A)an ethical statement.

B)a normative statement.

C) a political statement.

D)a positive statement.

78) Statements about what ought to be are called

A)normative statements.

B)implications.

C) assumptions.

D)positive statements.

79) Normative statements are statements about

A)what ought to be.

B)quantities.

C) what is.

D)prices.

80) A normative statement is

A)one that does not use the ceteris paribusclause.

B)about what ought to be.

C) always true.

D)about what is.

81) In economics, normative statements are about

A)the way things ought to be.

B)the way things are.

C) marginal costs, not marginal benefits.

D)marginal benefits, not marginal costs.

82) Which of the following is a normative statement?

A)The price of candy bars is $1.25 each.

B)Popcorn and candy are sold in movie theaters.

C) Candy bars are more expensive than newspapers.

D)You should eat less candy.

83) Which of the following is a normative statement?

A)Forty percent of the public believes that the unemployment rate is too high.

B)The unemployment rate rose last month.

C) The unemployment rate is too high.

D)all of the above

84) "Government should act to reduce poverty levels."

A)This statement is an example of the fallacy of composition.

B)This statement is an example of the posthoc fallacy.

C) This statement is a normative statement.

D)This statement is a positive statement.

85) When Susan makes the statement, "The government should spend less money to take care
of national parks," she is

A)facing the standard of living tradeoff.

B)testing an economic model.

C) making a positive statement.

D)making a normative statement.

86) "All children should have health insurance" is a

A)post hoc fallacy.

B)normative statement.

C) fallacy of composition.

D)positive statement.

87) "The rich should pay higher income tax rates than the poor" is an example of a

A)normative statement.

B)theoretical statement.

C) positive statement.

D)descriptive statement.

88) Which of the following is a normative statement?

A)Taking extra vitamin C prevents catching a cold.

B)States should require all motorcycle riders to wear helmets to reduce the number of riders
killed.

C) Studying more hours leads to an increase in your GPA.

D)An increase in tax rates means people work fewer hours.

89) Which of the following is a normative statement?

A)Low rents are good because they make apartments more affordable.

B)Low rents will restrict the supply of housing.

C) Owners of apartment buildings are free to charge whatever rent they want.
D)Housing costs are rising.

90) Which of the following is an example of a normative statement?

A)Government spending rose in the 1990s.

B)Household consumption is the largest component of spending.

C) Households should save more.

D)The business sector is the primary source of jobs.

91) Which of the following is a normative statement?

A)The current butter surplus is the result of federal policies.

B)Next year's inflation rate will be under 4 percent.

C) The government's cuts in welfare spending impose an unfair hardship on the poor.

D)Consumers will buy more gasoline over the Christmas holiday even if the price of gas is 10
cents higher than it was during the Thanksgiving holiday.

92) Suppose that an economist tells you that people in the United States do not save enough out
of their incomes. This is an example of ________ statement.

A)a ceteris paribus

B)a positive

C) a normative

D)an autonomous

93) The task of economic science is to discover ________ that are consistent with ________.

A)positive statements; normative statements

B)positive statements; what we observe

C) normative statements; positive statements

D)ways to make money; the law

94) Economic models

A)are essentially different from those used in other sciences.

B)include all relevant facts.

C) always use graphs.

D)simplify reality.

95) Economic models

A)are better if they include most of the detail of the real economy.

B)rely on simplification.

C) do not address questions about the economy.

D)make no assumptions that have not been proved.

96) An economic theory is

A)a generalization that summarizes what we understand about economic choices.

B)a positive statement that cannot use the ceteris paribusclause.

C) usually more complex than the real world.

D)always a mathematical, or nonverbal, model.

97) Three steps that economists take to discover how the economic world works are

A)model building; speculation; and, revision.

B)observation and measurement; model building; and, testing models.

C) data mining; data testing; and, drawing conclusions.

D)speculation; observation and measurement; and, drawing conclusions.

98) The birth of economics as an intellectual discipline can be dated fairly precisely in the
eighteenth century with

A)the publication of the book, The WealthofNations.

B)the opening of the London stock exchange.

C) the development of the factory system.

D)the introduction of paper currency.

99) Who wrote The Wealth of Nations?

A)Adam Smith

B)Michael Parkin

C) Thomas Jefferson

D)Karl Marx

100) Adam Smith wrote the book

A)Poverty and Progress.

B) The Dismal Science.

C) First Principles of Economics.

D) The Wealth of Nations.

101) The author of the book The Wealth of Nations is

A)James Madison.

B)Thomas Carlyle.

C) Adam Smith.

D)John Pierpont Morgan.

102) Allowing only one factor to vary at any given time, keeping all other factors constant, is
using the technique of

A)post hoc.

B)compensation.

C) ceteris paribus.

D)composition.

103) Holding all variables except one constant and assessing the impact of the one variable
which has changed is an example of using

A)the ceteris paribus assumption.

B)a flawed economic model.

C) an untestable proposition.

D)normative economic analysis.

104) Ceteris paribus is the Latin expression for

A)a statement about the way the economic world ought to be.

B)an expression that means "other things being equal."

C) the (false) statement that what is true of the parts is true of the whole or what is true of the
whole is true of the parts.

D)the error of reasoning that a first event causes a second event because the first event occurred
before the second event.

105) The expression that means "other things being equal" is

A)the post hoc fallacy.

B)The fallacy of composition.

C) normative economics.

D)ceteris paribus.
106) The Latin term "ceteris paribus" means

A)"what is true of the whole is not necessarily true of the parts."

B)"false unless proven true."

C) "after this, therefore because of this."

D)"other things being equal."

107) "Ceteris paribus" means

A)what is.

B)that which will be.

C) other things being equal.

D)what ought to be.

108) The term "ceteris paribus" means

A)using market mechanisms.

B)the study of scarcity and choice.

C) all other things remaining constant or equal.

D)value free and testable.

109) "Ceteris paribus" means

A)let the buyer beware.

B)for certain parameters.

C) making all the necessary changes.

D)other things being equal.

110) When economists study the effects of unemployment insurance on the unemployment rate
by comparing the United States with Canada, they assume that other conditions in the two
economies do not differ significantly. This procedure is an example of

A)the post hoc fallacy.

B)the fallacy of composition.

C) applying the ceteris paribus principle.

D)falling prey to the post composition fallacy.

111) The fallacy of composition is evident in which of the following statements?

A)"What is bad for the Joneses is bad for the Smiths."

B)"X and Y go together, therefore X has caused Y."

C) "If each farmer works harder, all farmers will be richer."

D)"Technological progress helps everybody."

112) The fallacy of composition is the false belief that

A)what is true for the parts is also true for the whole.

B)the ceteris paribus condition does not apply.

C) because event A occurred before event B, event A caused event B.

D)because event A occurred after event B, event A caused event B.

113) The fallacy of composition is the (false) statement that

A)models can be positive without being normative.

B)theories bridge models and the real world.

C) what is true of the parts is true of the whole.

D)experiments can be designed to analyze human behavior.

114) The fallacy of composition is the

A)use of ceteris paribus in order to study the impact of one factor.

B)claim that the timing of two events has nothing to do with which event caused the other.

C) claim that one event caused another because the first event came first.

D)assertion that what is true for the parts of the whole must be true for the whole.

115) A farmer grazes two cows on one acre of land. To increase total milk yield, he purchases
two more cows and allows all four cows to graze on his land. Unfortunately the cows overgraze
on his land and the food supply to the cows is reduced, which causes the total milk yield of the
four cows to fall below that achieved when only two cows were grazed. The farmer has fallen
prey to

A)the post hoc fallacy.

B)the ceteris paribus normative fallacy.

C) the marginal benefit/marginal cost fallacy.

D)the fallacy of composition.

116) Because total income in the United States has increased over time, everyone's total income
has increased as well. This incorrect argument is an example of

A)opportunity cost.

B)voluntary exchange.

C) the post hoc fallacy.

D)the fallacy of composition.

117) The fallacy of composition is

A)an expression that means "other things being equal."

B)the (false) statement that what is true of the parts is true of the whole or what is true of the
whole is true of the parts.

C) the error of reasoning that a first event causes a second event because the first event
occurred before the second event.

D)a statement about the way the economic world ought to be.

118) "Hunting limits on deer help ensure a constant population. Therefore, if I only hunt to my
limit, there will be sufficient deer for all." This statement is an example of a possible

A)ceteris paribus fallacy.

B) posthoc fallacy.

C) fallacy of composition.

D)normative statement.

119) To better see a football game, one spectator stands. Assuming that everyone trying to get a
good view of the game can also stand represents an example of the

A)opportunity cost fallacy.

B)fallacy of truth.

C) post hoc fallacy.

D)fallacy of composition.

120) The post hoc fallacy is the error of reasoning

A)from models to predictions.

B)from predictions to theories.

C) from timing to cause and effect.

D)from cause and effect to models.

121) You are not surprised that it has started to rain. After all, a hour ago you just finished
washing your car. Your reasoning is an example of

A)the ceteris paribus assumption.

B)the distinction between positive and normative statements.

C) the post hoc fallacy.

D)the fallacy of composition.

122) The post hoc, ergo propter hoc fallacy is

A)a statement about the way the economic world ought to be.

B)the error of reasoning that a first event causes a second event because the first event
occurred before the second event.

C) an expression that means "other things being equal."

D)the (false) statement that what is true of the parts is true of the whole or what is true of the
whole is true of the parts.

123) A rooster crows and then the sun rises. The rooster thinks that the sun rises because he
crows. And he is very proud of it. The rooster falls prey to

A)the fallacy of composition.

B)his self interest.

C) marginal thinking.

D)thepost hoc fallacy.

124) "Every time I go to a basketball game, our team wins." This statement is an example of

A)a normative economic statement.

B)fallacy of composition.

C) post hoc fallacy.

D) ceteris paribusfallacy.

125) An economic expansion follows a stock market boom. A cautious economist would not
claim that the stock market caused the expansion because the economist wants to avoid

A)the fallacy of composition, which states that what is true of the parts is true of the whole.
B)the post hoc fallacy, which states that what is true of the parts is true of the whole.

C) the fallacy of composition, which is an error in reasoning from timing to cause and effect.

D)the post hoc fallacy, which is an error in reasoning from timing to cause and effect.

126) Most economists agree that

A)rent ceilings cut the availability of housing.

B)tariffs and import restrictions make most people worse off.

C) a minimum wage increases unemployment among young workers and low-skilled workers.

D)all of the above

127) The fact that wants cannot be fully satisfied with available resources reflects the definition
of

A)scarcity.

B)the big tradeoff.

C) the what tradeoff.

D)for whom to produce.

128) Studying the effects choices have on the individual markets within the economy is part of

A)microeconomics.

B)scarcity.

C) incentives.

D)macroeconomics.

129) Which of the following is NOT part of the first big economic question?

A)How are goods and services produced?

B)Why do incentives affect only marginal costs?

C) What goods and services are produced?

D)For whom are goods and services produced?

130) The question, "Should Taco Bell produce more tacos or more burritos?" is an example of
the A)"for whom" question.

B)"how" question.

C) "what" question.

D)"where" question.

131) The fact that KFC decides to produce chicken rather than meatloaf best reflects ________
tradeoff.

A)a what

B)an incentive

C) a for whom

D)a how

132) From 8 p.m. to 10 p.m., Susan can attend a movie, study, or talk with friends. Suppose that
Susan decides to go to the movie but thinks that, if she hadn't, she would otherwise have talked
with friends. The opportunity cost of attending the movie is

A)two hours of time.

B)studying.

C) talking with friends and studying.

D)talking with friends.

133) When the government hires people to serve in the army, these people are no longer
available to do other work. This choice illustrates the concept of

A)opportunity cost.
B)a social interest/private interest conflict.

C) marginal benefit.

D)an incentive.

134) A normative statement is

A)about what is.

B)about what ought to be.

C) one that does not use the ceteris paribusclause.

D)always true.

135) Which of the following is a positive statement?

A)My favorite dinner is pizza and soda.

B)The government must provide health insurance so that the poor can obtain decent medical
treatment.

C) The government should spend more on education.

D)An increase in the price of pizza will lead fewer students to buy pizza.

136) An economic model includes

A)only details considered essential.

B)all known details in order to increase its accuracy.

C) no use of ceteris paribus.

D)post hoc statements.

137) The Latin term ceteris paribus means

A)"false for the whole, false for the parts."

B)"buyer beware."
C) "other things the same."

D)"true for the parts not necessarily true for the whole."

138) One student in a football stadium with 30,000 students can see the game better if he or she
stands up. Assuming that all 30,000 students can each see the game better if they all stand is an
example of the

A)fallacy of large numbers.

B)post hocfallacy.

C) fallacy of composition.

D)fallacy of ceteris paribus.

139) The post hoc fallacy is the

A)assertion that what is true for parts of the whole must be true for the whole.

B)incorrect use of ceteris paribus in order to study the impact of one factor.

C) claim that normative statements are less important than positive statements.

D)claim that one event caused another because the one event came first.

140) Economics can be defined as the social science that explains the ________.

A)choices that we make as we cope with scarcity

B)choices made by households

C) choices made by politicians

D)choices we make when we trade in markets

141) Scarcity is a situation in which ________.

A)something is being wasted

B)long lines form at gas stations

C) some people are poor and others are rich

D)we are unable to satisfy all our wants

142) Microeconomics is the study of ________.

A)the global economy

B)the choices that individuals and businesses make

C) the national economy

D)all aspects of scarcity

143) Factors of production include all of the following EXCEPT ________.

A)machines made in past years

B)money

C) an wheat field that is not irrigated

D)entrepreneurship

144) The income earned by the people who sell the services of the factor of production
________ is called ________.

A)entrepreneurship; profit

B)entrepreneurship; wages

C) land; profit

D)capital; rent

145) When the government chooses to spend the tax dollars that it collects on homeland
security, its choice ________.

A)illustrates that scarcity does not always exist

B)involves no tradeoff because the defense is necessary

C) involves a tradeoff of other goods and services such as education for more homeland
security

D)primarily affects who gets the goods and services produced

146) Making a choice at the margin means ________.

A)making a choice by comparing the total benefit and the total cost

B)deciding to do a little bit more or a little bit less of an activity

C) waiting until the last minute to make a choice

D)letting someone else choose for you

147) Suppose that for the past two months, you have studied economics one hour a day. You
now decide to study economics two hours a day. For the past two months, ________.

A)your marginal cost of studying economics for an hour must have exceeded its marginal benefit

B)the opportunity cost of studying economics must have risen.

C) the marginal cost of studying economics must have fallen

D)your marginal benefit from studying economics an hour must have been greater than its
marginal cost

148) If the cost of a computer falls by a large amount, you have an incentive to ________.

A)use your friend's computer rather than buy one yourself

B)avoid buying anew computer because it is now less valuable

C) take a shorter vacation

D)buy a new computer

149) The statement that ________ is a positive statement.

A)the price of gasoline is too high

B)too many people in the United States have no health care insurance
C) the price of sugar in the United States is higher than the price in Australia

D)more students should study economics

150) The task of economic science is to ________.

A)tell us what is good for us

B)help us understand how the economic world works

C) make moral choices about things like drugs

D)save the earth from the overuse of natural resources

151) Economists make progress by ________.

A)asking people whether they are better off or worse off

B)concentrating on clarifying all normative statements while disregarding positive statements

C) building and testing economic models

D)discarding normative statements that do not pass extensive testing

152) The term ceteris paribus means ________.

A)when other things all change

B)equal access to public transportation

C) other things being equal

D)for better or worse

153) Which statement is an example of the post hocfallacy?

A)Fans crowding into a college football stadium cause the football game to be played.

B)The reason cows are not an endangered species is because many people eat beef.

C) Hold everything constant except the price of juice.

D)There should be equal access to public transportation.

154) The statement that ________ is an example of the fallacy of composition.

A)all children should have equal access to good public transportation

B)if one fan at a football can see better by standing, then all fans can see better if they all
stand

C) the ceteris paribus fallacy cannot lead to the posthoc fallacy

D)end-of the-year holiday season shopping causes the holiday season

155) Economists generally agree that ________.

A)minimum wages increase the employment of low-skilled workers

B)a large budget deficit makes no significant difference

C) tariffs make people better off

D)rent ceilings cut the availability of housing

The unemployment rate in sub-Saharan Africa is too high to sustain development.”

This is an example of;

Select one:

a. a positive economic statement.

b. a normative economic statement.

c. a hypothetical economic statement.

d. None of the above.

A student is thinking of enrolling in a 4 year university. The expenses of going to university are

$10,000/year. If he did not go to the university he could have worked as a chef earning $30,000

every year.
The opportunity cost of going to college is;

Select one:

a. $40,000

b. $120,000

c. $30,000

d. $160,000

If a country is producing at a point strictly within the PPF , then the country

Select one:

a. is not using its resources efficiently.

b. is not using one or more inputs of production completely.

c. can improve the production without technological improvements

d. All of the above are true

The American economy can be best described as a ___________ economy.

Select one:

a. command socialist

b. market capitalist

c. mixed

d. None of the above.

Consider the following table showing the benefits and costs (total, in dollars) of drinking glasses

of water.

Number of glasses Total benefit($) Total cost ($)

1 20 4
2 29 8

3 35 12

4 38 16

5 30 20

The person who has the above chart will drink ____________ glasses of water.

a.two

b.three

c.four

d.five

The “bowed out” shape of the PPF indicates the

a. law of increased opportunity cost.

b. law of demand.

c. law of constant cost

d. None of the above.

Which of the following resources is scarce in a developed economy?

Select one:

a. Labor

b. Land

c. Raw materials

d. Tools

e. All of these answers

The following sentence is a good example of which kind of statement?

The next Chairman of the Federal Reserve should be an economist.

Select one:

a. Normative because it can be verified

b. Normative because it expresses an opinion

c. Positive because it can be objectively verified

d. Positive because it does not express an opinion

e. Positive because it cannot be disproven.

The movement along a production possibilities frontier from points (2, 4) to (3, 1) represents
which of the following?

Select one:

a. An opportunity cost of 5 for the first good while maintaining efficient production

b. An opportunity cost of 2 for the second good while causing inefficient production

c. An opportunity cost of 1 for the first good while causing inefficient production

d. An opportunity cost of 2 for the first good while maintaining efficient production

e. An opportunity cost of 3 for the second good while maintaining efficient production

What does the slope of the production possibilities curve represent?

Select one:

a. The set of all efficient points of production

b. The marginal rate of transformation

c. The marginal rate of substitution

d. The law of diminishing marginal utility

e. The boundary of maximum production

Suppose you make the decision to volunteer for an event in school for an hour this week. This
means that you would have to take an hour off from your summer job, for which you earn $10
per hour. You spend $3 in bus fare in order to get to school and $5 for lunch. If you went to work,
you would have been able to walk to your job, and lunch would have been provided to you by
the office. The opportunity cost of volunteering is:

Select one:

a. $8

b. $2

c. $18

d. $10

e. $0

Tom owns a bakery and decides to bake a few extra loaves of bread each morning. If he is
making a decision "at the margin," it implies that he is comparing:

Select one:

a. The total revenue to the total cost of producing the bread.

b. The total revenue before and after producing the extra loaves.

c. The total revenue to the average cost of producing the bread.

d. The additional revenue earned to the additional cost of producing the extra loaves of bread.

e. The additional customer satisfaction to the additional cost of producing the extra loaves of
bread.

Marginal Cost is the:

Select one:

a. Cost of a small increase in an activity.

b. Cost of an activity minus the benefits.

c. Cost of a foregone alternative.

d. Total cost of an activity.

e. Total satisfaction from an activity.

Opportunity cost is best defined as:

Select one:

a. All of the possible alternatives given up.

b. The value of the next best alternative that is given up in making a choice.

c. The amount of money spent in consuming something.

d. The amount of time and money spent in consuming something.

e. Total satisfaction from an activity.

Suppose you work forty hours every week and earn $15 per hour. If you wish to work beyond
forty hours, your employer agrees to pay you $17 for every extra hour that you work. Your
Marginal Benefit from working each extra hour of overtime is:

Select one:

a. $2

b. $15

c. $17

d. $32

e. The answer cannot be determined from the information given.

When making a decision "at the margin," you will consider undertaking more of an activity if the
Marginal Benefit from it is __________ the Marginal Cost.

Select one:

a. Greater than

b. Less than

c. Less than or at least equal to

d. Greater than or at least equal to

e. Strictly equal to
The table below shows the Marginal Cost and the Marginal Benefits from producing and
consuming sodas (respectively):

Quantity Marginal Costs Marginal Benefits

1 6 20

2 8 15

3 10 10

4 12 8

5 14 5

Table 1: Marginal Costs and Benefits

In the table above, Economic Efficiency occurs at how many cans of soda?

Select one:

a. 1 can, because marginal benefit exceeds the marginal cost by as much as possible

b. 3 cans, because marginal cost equals marginal benefit at this point

c. 1 can, because marginal cost is the least at that point

d. 1 can, because marginal benefit is the highest at that point

e. The answer cannot be determined from the information given.

A point on the production possibilities frontier indicates:

Select one:

a. That some resources are unemployed.

b. That the point is unattainable.

c. That the point is inefficient in the production of the two goods.

d. That the point is efficient in the production of the two goods.

e. The economy is in recession.

Refer to the figure above, which shows the production possibility for a bakery. If the bakery
wants to move its production of bread from 4 units to 6, the opportunity cost of increasing bread
production is:

Select one:

a. 2 units of bread

b. The loss in muffin production in moving from B to C

c. The loss in muffin production in moving from A to B

d. The loss in muffin production in moving from A to C

e. A paradoxical gain in muffin production.

An example of a macroeconomic phenomenon is:

Select one:

a. The overall welfare (happiness) of a country.

b. Income tax rates.

c. Gross Domestic Product.

d. The unemployment level.

e. All of the above.

An example of a microeconomic phenomenon is:

a. The total value of Apple’s stock rises from $500 billion to $600 billion.

b. The country of Iceland increases healthcare expenditures by $1 billion.

c. The Saudi government builds a new road system for $5 billion.

d. India institutes a clean water initiative for $10 billion with the assistance of the World Bank.

e. None of the above.

Which of the following resources is scarce in a developed economy?

Select one:

a. Labor

b. Land

c. Raw materials

d. Tools

e. All of these answers

Which of the following causes movement along a product’s demand curve?

Select one:

a. A marketing campaign

b. A change in price of a substitute good

c. A change in price of a complimentary good

d. A change in the good’s own price

e. A change in the number of substitutes

Which of the following will cause the supply of honey to increase?

Select one:

a. A government tax on honey of 15% of the purchase price

b. An increase in the price of honey

c. A significant increase in the price of bee keepers’ wages

d. An increase in the price of beeswax, a natural derivative of the honey-making process

e. A newspaper article warning of possible negative side effects of consuming honey

Complete the following sentence. If the quantity demanded exceeds the quantity supplied, then
there is:

Select one:
a. a shortage and the price is below the equilibrium price.

b. a shortage and the price is above the equilibrium price.

c. a surplus and the price is below the equilibrium price.

d. a surplus and the price is above the equilibrium price.

e. a surplus and the price is at the equilibrium price.

Suppose the government imposes an excise tax on a product with a demand curve of constant
slope of -2. Which of the following will happen?

Select one:

a. The quantity supplied will fall, and the price will fall, creating a deadweight loss.

b. The quantity supplied will fall, and the price will rise, creating a deadweight loss.

c. The quantity supplied will fall, and the price will rise, avoiding a deadweight loss.

d. The quantity supplied will fall, and the price will fall, avoiding a deadweight loss.

e. Quantity supplied and price will remain the same.

The term ceteris paribus means:

Select one:

a. All other things remaining equal.

b. The greatest good for the greatest number.

c. The study of Scarcity and Choice.

d. Incentives.

e. Marginal Analysis

The Law of Demand states that other things remaining the same:

Select one:

a. As the price of bread increases, the quantity of bread demanded will increase.
b. As the price of bread increases, the quantity of bread demanded will decrease.

c. As the price of bread falls, the quantity of bread demanded will fall.

d. As the demand for bread increases, the price of bread will also increase.

e. As the demand for bread increases, the price of bread will stay the same.

The Workers Union in a company negotiates a wage increase. How would this affect the supply
of the product that the company makes?

Select one:

a. The Supply curve will shift to the left

b. The Supply curve will shift to the right

c. It will not affect the Supply curve

d. There will be a downward movement along the Supply curve

e. There is not enough information to answer

When the price is below the equilibrium price, which of the following is TRUE?

Select one:

a. Both the quantity demanded and supplied exceed the equilibrium quantity

b. Both the quantity demanded and supplied are less than equilibrium quantity

c. The quantity demanded is less than equilibrium quantity, but the quantity supplied is more
than equilibrium quantity

d. The quantity demanded is more than equilibrium quantity, but the quantity supplied is less
than equilibrium quantity

e. Both the quantity demanded and supplied equal the equilibrium quantity

If the quantity supplied exceeds the quantity demanded, then there is:

Select one:

a. a shortage and the price is below the equilibrium price

b. a shortage and the price is above the equilibrium price

c. a surplus and the price is below the equilibrium price

d. a surplus and the price is above the equilibrium price

e. equilibrium

A Price Floor that is set above the equilibrium price creates a(n) _______.

Select one:

a. Shortage

b. Surplus

c. Shift in the Demand curve

d. Shift in the Supply curve

e. Equilibrium

Price Controls create shortages by setting the price __________ the equilibrium price.

Select one:

a. Above

b. Below

c. At

d. In a different currency than

e. None of the above.

Deadweight loss can be described as:

Select one:

a. The difference between Marginal Benefit and Marginal Loss resulting from the carrying out of
an activity

b. Excess supply
c. Another term for Marginal Loss

d. The loss from not consuming an alternate product

e. The loss in social surplus resulting from a failure to carry out an activity at the efficient level

In the figure above, the region A= $40,000, the region B=$24,000, and the region C=$56,000.
Which of the following is the Consumer's Surplus?

Select one:

a. $64,000

b. $40,000

c. $80,000

d. $120,000

e. $4,000

In the figure above, the region A= $40,000, the region B=$24,000, and the region C=$56,000.
Calculate the Social Surplus.

Select one:

a. $24,000

b. $40,000

c. $56,000

d. $64,000

e. $120,000

In the figure above, a price floor “F” has been placed below the equilibrium price “E.” Which
algebraic expression correctly calculates the shortage caused at the price floor level?

Select one:

a. E - Y

b. Z - Y

c. X - Y

d. Z - X
e. E - X

1.The price elasticity of demand is:

a) the ratio of the percentage change in quantity demanded to the percentage change in price.

b) the responsiveness of revenue to a change in quantity.

c) the ratio of the change in quantity demanded divided by the change in price.

d) the response of revenue to a change in price.

2.If demand is price elastic, then:

a) a rise in price will raise total revenue.

b) a fall in price will raise total revenue.

c) a fall in price will lower the quantity demanded.

d) a rise in price won't have any effect on total revenues.

3. Complementary goods have:

a) the same elasticities of demand.

b) very low price elasticities of demand.

c) negative cross price elasticities of demand with respect to each other.

d) positive income elasticities of demand.

4. The price elasticity of demand generally tends to be:

a) smaller in the long run than in the short run.

b) smaller in the short run than in the long run.

c) larger in the short run than in the long run.

d) unrelated to the length of time.

5. If the price elasticity of supply of doodads is 0.60 and the price increases by 3 percent, then
the quantity supplied of doodads will rise by

a) 0.60 percent.

b) 0.20 percent

c) 1.8 percent

d) 18 percent.

6. Suppose we know that the price elasticity of demand of good X is equal to -1.2. Then, if its
price will increase by 5%, we can predict with certainty that

a) quantity demanded of that good will increase.

b) the revenue of the firm producing that good will increase by 6%.

c) the revenue of the firm producing that good will decrease by 6%.

d) the quantity demanded of that good will decrease by 6%.

e) None of the above.

7. A 10% increase in the price of movie ticket in Westridge 8 leads to a 15% decrease in the
number of tickets sold, indicating the demand for movie ticket in Westridge 8 is:

a) elastic.

b) inelastic.

c) unit elastic.

d) Can not tell from the information given.

8. If the cross-price elasticity between two commodities is 1.5,

a) the two goods are luxury goods.

b) the two goods are complements.

c) the two goods are substitutes.

d) the two goods are normal goods

Using the mid-point formula, what is the price elasticity of demand for a Starbucks latte whose
price increases from $3 a cup to $5 a cup with the resulting change in quantity demanded from
15 cups an hour to 5 cups an hour?

Select one:

a. 1/3

b. 3

c. 2

d. ½

e. 1

Using the mid-point formula, which describes the price elasticity of demand for a Starbucks latte
whose price increases from $3 a cup to $5 a cup with the resulting change in quantity demanded
from 15 cups an hour to 5 cups an hour?

Select one:

a. Inelastic

b. Elastic

c. Unitary elastic

d. Perfectly elastic

e. Perfectly inelastic

Given that total revenue = price x quantity, a reduction in price will lead to an increase in total
revenue when demand is:

Select one:

a. Elastic

b. Inelastic

c. Unit Elastic

d. In equilibrium

e. Discontinuous

A perfectly inelastic supply curve would be ___________.

Select one:

a. Horizontal

b. Downward-sloping

c. Upward-sloping

d. Vertical

e. None of the above

Positive Income Elasticity of a good indicates that the good is __________.

Select one:

a. A normal good

b. An inferior good

c. A substitute

d. A compliment

e. None of the above

Negative Cross Price Elasticity of Demand between two goods indicates that the two goods are
________.

Select one:

a. Substitutes

b. Inferior goods

c. Compliments

d. Normal goods

e. None of the above

If demand is more inelastic than supply, then who pays most of the taxes on a good?

Select one:

a. Suppliers

b. Producers
c. Consumers

d. The government

e. The deadweight loss

Elasticities are often _____ in the short run than in the long run.

Select one:

a. lower

b. higher

c. the same

d. unmeasurable

e. inflated

An example of a perfectly elastic demand curve would be at:

Select one:

a. A lawyer’s office

b. A supermarket

c. A clothing store

d. A pharmacy

e. A grain auction

Complete the following statement. We can expect the cross price elasticity of demand between
online and traditional classes to be:

Select one:

a. positive, indicating substitute goods.

b. positive, indicating inferior goods.

c. positive, indicating normal goods.

d. negative, indicating substitute goods.

e. zero, indicating normal goods.

When an increase in income means that one might purchase less of the good, that good is
known as:

Select one:

a. Normal

b. Unusual

c. Inferior

d. Superior

e. Unreal

A higher level of income for a normal good causes a demand curve to shift to the _____ for a
normal good, which means that the income elasticity of demand is ______.

Select one:

a. right, negative

b. left, negative

c. left, positive

d. right, positive

e. left, unitary

The % change in quantity of financial savings divided by % change in interest rate is defined as:

Select one:

a. Elasticity of labor supply

b. Elasticity of savings

c. Cross-price elasticity of demand

d. Elasticity of interest

e. Elasticity of banking

Which of the following goods are more likely to have producers shoulder the burden of a tax
increase on their good or service?

Select one:

a. Cable television providers

b. Electricity providers

c. Cigarette producers

d. Insulin producers

e. Wine makers

Restaurant meals are generally more elastic than gasoline.

Select one:

True

False

According to the textbook, economics is a:

social science

A/an _______ does not pose the problem of scarcity; one use of the good is not an alternative to
another use.

free good

Water is considered a scarce good rather than a free good because:

it has alternative uses.

The Case in Point on the oil extraction suggests that one reason oil may become more costly is
that:

we will have to give up more and more valuable alternatives to extract oil.

The opportunity cost of something is:

what is given up to acquire it.

The BEST example of making a choice at the margin is:

a coffee drinker drinking another cup of coffee.

The study of a single firm and how it determines prices would fall under:

microeconomics.

Each of the following statements about the use of models in the study of economics is true
EXCEPT:

models fit the observed facts exactly.

Suppose you observe that the sun sets every evening after the six o'clock business report. If you
conclude that the six o'clock business report makes the sun set, you are guilty of the fallacy of:

false cause.

An example of a normative statement is:

Everyone in the country needs to be covered by national health insurance.

Resources from nature that can be used to to produce other goods and services are called:

natural resources.
Increasing the level of education in the United States will:

lead to workers possessing greater human capital.

Technology is:

knowledge that can be applied to the production of goods and services.

A person who seeks to earn profits by finding ways to organize factors of production is called
a/an:

entrepreneur

If the production possibilities curve were a straight line sloping down from left to right, this
would suggest that:

no factor of production has any particular comparative advantage over other resources.

When moving along a production possibilities curve, the opportunity cost to society of getting
more of the good on the horizontal axis:

is measured by the amount of the other good that must be given up.

Efficient production implies that it is:

not possible to produce more of one good without producing less of another good.

In market capitalism:

factors of production are privately owned and decisions are made privately.

Government's role of taxing some citizens and transferring income to others is considered:

redistributing income.
The law of demand implies that:

consumers will, all other things unchanged, buy more at lower prices.

A decrease in the price of eggs, all other things unchanged, will result in a/an:

greater quantity of eggs demanded.

The price of oranges falls. What happens in the market for apples, which are a substitute for
oranges?

The equilibrium price and quantity fall.

After graduation from college you will receive a substantial increase in your income from a new
job. If you decide that you will purchase more T-bone steak and less hamburger, then for you
hamburger would be considered a/an:

inferior good.

The primary difference between a change in supply and a change in the quantity supplied is:

a change in quantity supplied is a movement along the supply curve, and a change in supply is
a shift of the supply curve.

If the price of a commodity increases as the result of increased demand, you would expect the:

quantity supplied to increase.

If the price in the market for a commodity is above the market equilibrium price, the:

quantity supplied exceeds the quantity demanded.

A market shortage occurs if the:

equilibrium price is above the market price.

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity
demanded does not change, this indicates that, if other things are unchanged, the price
elasticity of demand is:

Answer is 0

If the price elasticity of demand is found to be -3/4, then demand is:

price inelastic.

If total revenue goes down when price falls, the price elasticity of demand is said to be:

price inelastic.

The demand for agricultural output is price inelastic. This means that if farmers, taken
collectively, have a bumper crop, they will experience:

lower prices, greater quantities sold, and lower incomes.

In this exhibit (Demand for Bungalow Bob's Bagels) total revenue remains unchanged if the price
________ from ________.

decreases; $0.60 to $0.50

In this exhibit (Demand for Shirts) the price elasticity of demand for the segment CD is:

greater than 1 (absolute value).

A demand curve that is perfectly inelastic:

will be vertical.
If the price of chocolate-covered peanuts increases and the demand for strawberries does not
change, this indicates that these two goods are:

unrelated goods.

The cross price elasticity of demand for Coke with respect to the price of Pepsi has been
estimated to be 0.61. If the price of Pepsi falls by 10 percent in a period, how will that affect the
demand for Coke in that period, all other things unchanged?

The demand for Coke will fall.

Although in most cases the price elasticity of labor supply is ________ , for some individuals it
may be ________ .

positive; negative

A false statement

The income effect of normal goods counters the substitution effect so the demand curve is
upsloping.

For a/an _______ good, an increase in income will lead to an increase in _______ .

normal; consumption

Assume that the total utilities for the fifth and sixth units of a good consumed are 83 and 97,
respectively. The marginal utility for the sixth unit is:

14

The textbook states that the law of demand:

is confirmed by our real-world experience.

An indifference curve shows combinations of two goods that yield:

equal satisfaction.

A curve that represents combinations of two goods that yield equal levels of satisfaction is a/an:

indifference curve.

The marginal rate of substitution assumes that:

satisfaction remains unchanged.

If consumer income, preferences, and the prices of all other goods remain constant while the
price of X varies, the amount purchased of X is defined by the:

demand curve.

At 36 units of labor, a firm finds that both average product of labor and marginal product of
labor equal 42. We can conclude that the average product curve at 36 units of labor is:

horizontal.

Diminishing marginal returns for the first four units of a variable input is exhibited by the
marginal product sequence:

50, 40, 30, 20.

Fixed costs include:

op management salaries.

If the slope of the total product curve is decreasing, the slope of the total variable cost curve is:

increasing.

The marginal cost curve intersects the total variable cost curve at:
no point; the curves don't intersect.

Average total cost is the ratio of:

total cost to the quantity of output.

If marginal cost is equal to average total cost, then:

average total cost is at its minimum.

When an increase in the firm's output reduces its long-run average cost, it experiences:

economies of scale.

The slope of a long-run average cost curve exhibiting diseconomies of scale is:

positive.

The unemployment rate in sub-Saharan Africa is too high to sustain development.

This is an example of;

Select one:

a. a positive economic statement.

b. a normative economic statement.

c. a hypothetical economic statement.

d. None of the above

A student is thinking of enrolling in a 4 year university. The expenses of going to university are

$10,000/year. If he did not go to the university he could have worked as a chef earning $30,000
every year

The opportunity cost of going to college is

Select one:

a. $40,000

b. $120,000

c. $30,000

d. $160,000

Consider two roommates A and B who each have two tasks: typing one paper (T) and ironing

shirts (I). Below are their work capacities. Each roommate has one hour of time to allot to either

of the two tasks (or both)

A 30 min / paper 10 min/Shirt

B 1hour/ PAper 12 min / shirt

Select the correct answer in this and the following 5 questions

The opportunity cost for "A" of typing a paper is

Select one:

a. 3 shirts

b. 2 shirts

c. $20

d. insufficient information

A" has an absolute advantage in

Select one:

a. ironing shirts
b. typing papers

c. both

d. neither

B" has an absolute advantage in

Select one:

a. ironing shirts

b. typing papers

c. neither

d. both

"A" has an comparative advantage in

Select one:

a. ironing shirts

b. typing papers

c. neither

d. both

B" has an comparative advantage in

Select one:

a. ironing shirts

b. typing papers

c. neither

d. both
"A" should specializein _________ and "B" should Specialize in ____________

a. typing papers, ironing shirts

b. ironing shirts/typing papers

c. neither, both

d. both, neither

The slope of a horizontal line is zero.

Select one:

True

False

Bill Gates’ billion dollar fortune falls under the scope of Macroeconomics.

Select one:

True

False

Opportunity Cost of taking this course is the same for all students.

Select one:

True

False

If demand of bananas increases in a market this will usually lead to:

Select one:

a. A higher equilibrium price and output of bananas

b. A higher equilibrium price and output of bananas

c. A lower equilibrium price and output of bananas

d. A higher equilibrium price and lower output of banana

Suppose Ramen noodles is an inferior good An increase in income should:

Select one:

a. Shift demand for Ramen noodles outwards

b. Shift demand for an Ramen noodles inwards

c. Shift supply for an Ramen noodles outwards

d. Shift supply for an Ramen noodles inwards

An increase in the price of milk will result in

Select one:

a. Shift in demand for cookies outwards

b. Shift in demand for cookies inwards

c. Shift in supply for cookies outwards

d. Shift in supply for cookies inward

Demand for a normal product may shift outwards if:

Select one:

a. Price decreases

b. The price of a substitute falls

c. The price of a complement falls

d. Income falls

An increase in income will:

Select one:
a. Lead to a movement along the demand curve

b. Shift the supply curve

c. Shift the demand curve

d. Lead to an extension of demand

Assuming a downward sloping demand curve and upward sloping supply curve of apples, a

higher equilibrium price of apples may be caused by:

Select one:

a. An fall in apple demand

b. An increase in apple supply

c. Improvements in apple production technology

d. An increase in apple demand

If the price of oil was fixed below the equilibrium price there would be:

Select one:

a. Excess supply of oil

b. Excess demand of oil

c. Equilibrium in the oil market

d. Downward pressure on price of oil

A movement along the demand curve may be caused by:

Select one:

a. A change in income

b. A change in the number of buyers

c. A change in advertising

d. A shift in supply
A subsidy paid to producers of coffee:

Select one:

a. Shifts the supply curve of coffee

b. Shifts the demand curve of coffee

c. Leads to a contraction in supply of coffee

d. Leads to an extension of supply of coffee

A movement along the supply curve may be caused by:

Select one:

a. A change in technology

b. A change in the number of producers

c. A shift in demand

d. A change in costs

Which best describes a supply curve of CDs?

Select one:

a. The quantity of CDs consumers would like to buy in an ideal world

b. The quantity of CDs producers are willing and able to sell at each and every price all other

things unchanged

c. The quantity of CDs producers are willing and able to sell at each and every income all

other things unchanged

d. The quantity of CDs producers are willing and able to sell at each and every point in time

all other things unchanged

A contraction in supply occurs when:

Select one:

a. Demand shifts outwards

b. The supply curve shifts inwards

c. The quantity supplied falls when the price falls

d. The supply curve shifts outwards

If price of apples falls, ceterus paribus, demand increases, but the quantity of apples demanded

stays the same

Select one:

True

False

If the price of tea rises, the equilibrium price for coffee also rises

Select one:

True

False

The minimum wage is a case of markets clearing

Select one:

True

False

Consumer surplus is the area

Select one:

a. below the demand curve and above the price

b. above the supply curve and below the price

c. above the demand curve and below the price

d. below the supply curve and above the price

The supply of lettuce in the short run will be ___________ than the supply in the long run and

______________ than the supply today.

Select one:

a. more elastic; more elastic

b. less elastic; less elastic

c. less elastic; more elastic

d. more elastic; less elastic

When a good is taxed, then the following happens

Select one:

a. Consumer Surplus goes up, Producer Surplus goes up

b. Consumer Surplus goes up, Producer Surplus goes down

c. Consumer Surplus goes down Consumer Surplus goes up.

d. Consumer Surplus goes down, Producer Surplus goes down

Webster Dictionaries and Oxford Dictionaries are almost perfect substitutes. The price elasticity

of demand for Webster Dictionaries ____________________.

Select one:

a. is 1

b. is almost infinity

c. depends on the complements for dictionaries

d. is almost zero

Total surplus is the area

Select one:

a. above the supply curve and below the price

b. below the demand curve and above the price

c. below the demand curve and above the supply curve

d. below the supply curve and above the price

An increase in the price of a good along a stationary supply curve

Select one:

a. increases producer surplus

b. does all of the things described in these answers

c. decreases producer surplus

d. improves market equity

The price elasticity of demand is equal to the ____________ in the _____________ divided by

the ________________ in the ______________.

Select one:

a. change; price; change; quantity demanded

b. percentage change; price; percentage change; quantity demanded

c. change; quantity demanded; change; price

d. percentage change; quantity demanded; percentage change; price

When the demand for a good is perfectly inelastic, __________________.

Select one:

a. total revenue is as large as possible

b. price elasticity of demand is zero

c. the demand curve for the good is horizontal

d. the price elasticity of demand is greater than 1

The price of a bus ride decreases, but the total revenue of the bus company does not change.
The

demand for bus rides is _____________________.

Select one:

a. unit elastic

b. inelastic

c. elastic

d. perfectly inelastic

Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3,

Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate

truffles is ______________.

select one

a.Elastic

b.perfectly inelastic

c.illustrated by a horizontal demand curve

d.Unit elastic

Blue pens and black pens are close substitutes. The cross elasticity of Demand for black pens

with respect to the price of blue pens is ________________.

Select one:

a. equal to 1

b. zero

c. positive
d. negative

Of the following goods, the North American demand for ______________ has the largest

income elasticity of demand.

Select one:

a. Rice

b. Mediterranean cruises

c. Newspapers

d. compact car

Consumer surplus is measured by the area under the supply curve and above the price

Select one:

True

False

Income Elasticity of a good can be positive or negative

Select one:

True

False

If the cross-price elasticity between two goods is negative, they must be complements.

Select one:

True

False