Supplemental Instruction
Iowa State University / Leader: / Katie
Course: / Econ 101
Instructor: / Kreider
Date: / September 21, 2011
1. Which of the following is one of the main characteristics of a market economy?
a) The objective of individuals is to maximize society’s well-being.
b) Firms must meet production quotas
c) Sellers can sell all they want to, regardless of price
d) Private property
e) People ignore financial incentives
2. The fundamental problem of economics is, in short,
a) too many poor people
b) finding jobs for all
c) scarcity of resources relative to wants
d) constantly rising prices
e) none of the above
3. Scarcity is a problem that
a) more efficient production would eliminate
b) is nonexistent in wealthy economics
c) exists due to finite amounts of resources and unlimited human wants
d) arises when productivity growth slow down
e) exists in command economies but not market economies
4. If a DVD costs $20 and VHS cost $10, then the opportunity cost of five DVDs is
a) 50 VHSs
b) 10 VHSs
c) 5 VHSs
d) 2 VHSs
e) $25
5. Assuming that the alternative is employment, the opportunity cost of a university education is
a) tuition cost only
b) tuition and book costs only
c) forgone salary only
d) tuition costs plus book costs plus forgone salary
e) all items in d plus university residence fees and the cost of cafeteria meals
6. Which of the following causes an outward shift in the production possibilities boundary?
a) a decrease in unemployment
b) a loss in the productive capacity of agricultural acreage caused by a prolonged drought
c) a increase in the productivity of all factors of production
d) a shifting resources away from the production of one good toward another
e) all of the above
7. Specialization of labor leads to a more efficient allocation resources because of
a) more self-sufficiency
b) the use of barter
c) the principle of comparative advantage
d) a decrease in scarcity
e) all of above
8. A traditional economy’s decision making
a) relies on a central authority
b) relies on private households and firms
c) relies on households, firms and government
d) relies on luck
e) past customs
9. Normative statements
a) concern an individual’s beliefs about what should be
b) are based on value judgments
c) cannot be subjected to empirical
d) cannot be deduced from positive statements
e) all of the above
10. Two economists argue about unemployment but it isn’t really an argument as
a) no one knows what they are talking about
b) there is no moderator
c) they really are in agreement
d) they have different definitions on unemployment
e) all of the above
11. Correlation may not be causation as
a) the pattern may be accidental
b) both are linked by a common cause
c) statistics can never determine causality
d) both a and b
e) both b and c
12. The term “economic model” may refer to
a) an application of a general theory in a specific context
b) a specific quantitative formulation of a theory
c) a particular theory or subset of theories in economics
d) an illustrative abstraction of some real world phenomenon
e) all of the above
13. The term quantity demanded refers to the
a) amount of a good that consumers are willing to purchase at some price during some given time period
b) amount of some good that consumers would purchase if they only had the income to afford it
c) amount of a good that is actually purchased during a given time period
d) minimum amount of a good that consumers require and demand for survival
e) amount of a good that consumers are willing to purchase regardless of price
14. Which of the following demonstrates the law of demand?
a) Fred buys more gum at $1 each since he got a $2 raise at work.
b) Sarah buys fewer pencils at $1 each than at $2 each
c) Chris buts more Snickers bars at $1 each than at $2 each
d) Sally buys fewer Pepsis at $2 each since the price of Cokes fell to $1 each
e) Fred buys less gum at $1 each since he got a $2 raise at work
15. An increase in demand means that
a) consumers actually but more of the good
b) at each price, consumers desire a greater quantity
c) consumers’ tastes have necessarily changed
d) price has decreased
e) all of the above
16. A shift in the supply curve may be caused by any of the following except
a) an improvement in technology
b) an increase in the wage paid to labor
c) an increase in average consumer income
d) an increase in the number of firms in the industry
e) both b and c are correct
Refer to the graph for questions 17-19. For each situation determine whether Demand, Supply, Price, and Quantity: Increase, decrease, no change, or undeterminable.
17. Market: Computers. Event: Technological advances reduce the cost of producing personal computers.
Demand:
Supply:
Price:
Quantity:
18. Market: Apartments. Event: Apartment rental prices rise as student enrollment swells.
Demand:
Supply:
Price:
Quantity:
19. Market1: Christmas trees. Market2: Milk. Increases in the price of Christmas trees cause tress to be planted on land previously used by dairy farmers.
Demand:
Supply:
Price:
Quantity: