Name: ______Date: ______
1. / If resources are “scarce” it means that they:A) / cannot provide enough goods or services to satisfy all human material wants and needs.
B) / have no opportunity cost.
C) / are probably not valued by consumers.
D) / have an unlimited supply.
2. / The best measure of the opportunity cost of any choice is:
A) / the monetary cost of that choice.
B) / whatever you have given up to make that choice, even if no monetary costs are involved.
C) / the cost associated with not taking full advantage of the opportunity offered by that choice.
D) / your hourly wage.
3. / Marginal analysis studies how individuals decide:
A) / whether to live on the margin of society.
B) / to do a bit more activity versus a bit less activity.
C) / to analyze marginal businesses.
D) / how much down payment to make when buying stocks.
4. / Some Bears fans decide to leave the Patriots game after the 1st quarter in order to avoid the post-game traffic. The fans are:
A) / not considering they have already paid the cost of their tickets.
B) / making marginal decisions by comparing the cost of leaving early to the benefit of leaving early.
C) / thinking only about the benefits of avoiding traffic.
D) / finally realizing how awful the Bears truly are.
Use the following to answer questions 5-7: Figure: Strawberries and Submarines
5. / Suppose the economy is operating at point G. This implies that:A) / the economy can move to a point such as C only if it improves its technology.
B) / the economy is experiencing unemployment and/or inefficient allocation of resources.
C) / the economy lacks the resources to achieve a combination such as C.
D) / people in this economy don't really like strawberries and submarines.
6. As the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine:
A) fallsB) risesC) remains unchangedD) doubles
7. / (Figure: Strawberries and Submarines) Suppose the economy is now operating at point C. Moving to point E would require that the economy:A) / achieve full employment and an efficient allocation of resources.
B) / eliminate its production of strawberries.
C) / reduce its production of submarines.
D) / improve its technology or increase the quantities of factors of production it has.
8. / All points outside the production possibility frontier represent:
A) / efficient production points.
B) / inefficient production points.
C) / nonfeasible production points.
D) / economic growth.
9. / In a single day, Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. We then know that:
A) / Sarah has a comparative advantage in making hamburgers.
B) / Sarah has an absolute advantage in making hamburgers.
C) / Abe has a comparative advantage in making hamburgers.
D) / Abe has an absolute advantage in making hamburgers.
10. / If the price of mozzarella cheese (an ingredient in pizza) declines due to a major technological breakthrough in the dairy industry, there would be:
A) / a decrease in the supply of pizza.
B) / an increase in the supply of pizza.
C) / an increase in the quantity of pizza supplied.
D) / no change in the supply of pizza.
11. / Which would not cause the supply curve to shift?
A) / a change in technology
B) / a change in factor costs
C) / a change in the price of the good
D) / a change in suppliers' expectations of prices
12. / When the price of corn is rising, we would expect:
A) / the quantity demanded for corn to be rising.
B) / the quantity supplied of corn to be rising.
C) / the demand for corn to be shifting inward.
D) / the supply of corn to be shifting outward.
Use the following to answer questions 13-16:
13. / If the price of chocolate-covered peanuts is $0.60, the price will:A) / remain unchanged. B) fall to $0.30 C) fall to $0.50 D) rise to $0.70
14. / The equilibrium quantity and the equilibrium price are ______bags and ______.
A) / 140; $0.40 B) 175; $0.60 C) 175; $0.80 D) 210; $0.50
15) If the price of chocolate-covered peanuts is $0.80, there is:
A) a surplus of 140 bags per month.B) a shortage of 140 bags per month.
C) a surplus of 70 bags per month.D) a shortage of 70 bags per month.
16. / A shortage of 210 bags of chocolate-covered peanuts exists if the price is ______per bag.A) / $0.80 B) $0.60 C) $0.40 D) 0.30
17. / Economists generally believe that a country should specialize in the production of a good or service if:
A) / the production possibility frontier is larger than that of any other country.
B) / the production possibility frontier is smaller than that of any other country.
C) / the country can produce the product using fewer resources than any other country.
D) / the country can produce the product while forgoing fewer alternative products than any other country.
18. / If they produce only hamburgers, then in a single day Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. If they only make milkshakes, then in a single day Sarah can produce 10 milkshakes while Abe can produce 4 milkshakes. We then know that:
A) / Sarah has an absolute advantage and a comparative advantage in making hamburgers.
B) / Sarah has an absolute advantage and a comparative advantage in making milkshakes.
C) / Abe has an absolute advantage and a comparative advantage in making hamburgers.
D) / Abe has an absolute advantage and a comparative advantage in making milkshakes.
19. / If goods A and B are substitutes, a decrease in the price of good B will:
A) / increase the demand for good A.
B) / increase the demand for good B.
C) / decrease the demand for good A.
D) / increase the demand for good B and decrease the demand for good A.
20. / If goods A and Z are complements, an increase in the price of good Z will:
A) / increase the demand for good A.
B) / decrease the demand for good A.
C) / decrease the demand for good Z.
D) / decrease the demand for good A and decrease the demand for good Z.
21. / A decrease in the price of a good will result in:
A) / an increase in demand.
B) / an increase in supply.
C) / an increase in the quantity demanded.
D) / more being supplied.
22. / The demand for meals at a local Applebee's will fall if:
A) / the Olive Garden offers a 10% discount coupon in the local newspaper.
B) / the price of a meal at Applebee's rises.
C) / local incomes increase and Applebee's is a normal good.
D) / people finally realize that Applebee's is terrible. Seriously, go anywhere else!!
23. / The demand curve for videos has shifted to the right. What could have caused it?
A) / a fall in the price of videos
B) / an increase in the price of videos
C) / an increase in the supply of videos
D) / an increase in the incomes of buyers
Use the following to answer questions 24-26:
Figure: Market for Hamburgers
24. / The figure shows the weekly market for hamburgers at the Tasty Burger Palace. If the price of a burger is $2, consumer surplus will equal:A) / $650. B) $400 C) $225 D) $450
25. / The figure shows the weekly market for hamburgers at the Tasty Burger Palace. If the Palace sells 400 burgers, consumer surplus will equal:
A) / $650. B) $400 C) $225 D) $450
26. / The figure shows the weekly market for hamburgers at the Tasty Burger Palace. If the Palace lowers the price of a burger from $2 to $1.50, the gain in consumer surplus to consumers who are persuaded to buy at the lower price (and who were not buying when the price was $2) is equal to:
A) / $100. B) $75 C) $50 D) $25
Use the following to answer questions 27-30:
27. / (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if the price for Phantom tickets is $55, which student has the highest individual producer surplus?A) / Tim B) Laura C) Rick D) Ralph
28. / (Table) Given the information in the table, if the price for Phantom tickets is $140, and there is no other market for tickets, total producer surplus for these five students is:
A) / $139. B) $110 C) $40 D) $379
29. / (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if the price for Phantom tickets is $55, total producer surplus for the five students is:
A) / $54. B) $79 C) $84 D) $64
30. / (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if these students can sell their Phantom tickets for only $5, then:
A) / Tim will be the only student not to sell his ticket.
B) / Laura, Whitney, Ralph, and Rick will sell their tickets.
C) / the total producer surplus for the five students will be $4.
D) / the total producer surplus for the five students will be $330.
31. / The likely result of a price floor is:
A) / a surplus of the good at a price above the market equilibrium price.
B) / a shortage of the good at a price below the market equilibrium price.
C) / a surplus of the good at a price below the market equilibrium price.
D) / a shortage of the good at a price above the market equilibrium price.
32. / A persistent shortage may occur if:
A) / the government imposes a price ceiling.
B) / a price floor is imposed.
C) / demand keeps falling.
D) / supply shifts rightward.
Use the following to answer question 33:
Figure: Market for Hybrid Cars
33. / (Figure: Market for Hybrid Cars) Identify the area(s) that represent deadweight loss if there is a binding price floor.A) / a + b + c
B) / b + c + d + e
C) / c + e
D) / c
34. / The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to ______and demand is described as ______.
A) / 0.2; inelastic
B) / 5; inelastic
C) / 0.2; elastic
D) / 5; elastic
35. / The demand for textbooks is price inelastic. Which of the following would explain this?
A) / Many alternative textbooks can be used as substitutes.
B) / Students have a lot of time to adjust to price changes.
C) / Textbook purchases consume a large portion of most students' income.
D) / The good is a necessity.
36. / A perfectly price-inelastic demand curve is:
A) / horizontal.
B) / downward-sloping.
C) / upward-sloping.
D) / vertical.
37. / On a linear demand curve:
A) / demand is elastic at high prices.
B) / demand is inelastic at high prices.
C) / elasticity is the same at all points on the demand curve.
D) / demand is elastic at low prices.
38. / A linear demand curve:
A) / has a constant price elasticity of demand.
B) / has price elasticity of demand equal to one.
C) / has price elasticity of demand that is positive.
D) / can have both elastic and inelastic price elasticities of demand.
39. / A good is likely to have an inelastic demand curve if:
A) / the consumer has significant time to respond to the price change.
B) / the good has few available substitutes.
C) / the good is a luxury.
D) / the good accounts for a large share of consumer income.
40. / If the University of Michigan increases the price of football tickets, this will result in increasing revenues if the price elasticity of demand is:
A) / price-inelastic.
B) / price-elastic.
C) / equal to 1.
D) / perfectly elastic.
41. / The principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably:
A) / greater than that from the first.
B) / equal to that from the first.
C) / less than that from the first.
D) / not comparable to that from the first.
Use the following to answer questions 42-44:
42. / (Table: Utility II) The marginal utility for the sixth unit is:A) / –25. B) 0 C) 25 D) -15
43. / (Table: Utility II) Total utility is maximized at the ______unit.
A) / First B) second C) fourth D) sixth
44. / (Table: Utility II) Marginal utility is zero for the ______unit.
A) / First B) second C) third D) fifth
45. / The short run is defined as a:
A) / period of time less than 1 year.
B) / period of time less than 6 months.
C) / period in which some inputs are considered to be fixed in quantity.
D) / time period in which some inputs are fixed, but it cannot exceed 1 year.
46. / In the long run:
A) / all inputs are fixed.
B) / inputs are neither variable nor fixed.
C) / at least one input is variable and one input is fixed.
D) / all inputs are variable.
Use the following to answer questions 47-48:
47. / (Table: Production of Bagels) The marginal product of the fifth worker is:A) / 5,000. B) 9,000 C) 10,000 D) 12,000
48. / (Table) Diminishing marginal returns begin with the addition of the ______worker.
A) / Third B) fourth C) fifth D) sixth
Use the following to answer questions 49-50:
Figure and Table: Variable, Fixed, and Total Costs
49. / (Figure and Table: Variable, Fixed, and Total Costs) In the figure, the marginal cost of increasing production from 51 to 64 bushels of wheat is:A) / $16.
B) / $15.38.
C) / $12.50.
D) / $18.75.
50. / (Figure and Table: Variable, Fixed, and Total Costs) In the figure, when 96 bushels of wheat are produced, average fixed cost is ______, average variable cost is ______, and average total cost is ______.
A) / $7.84; $11.76; $19.60
B) / $133.33; $200; $333.33
C) / $4.17; $16.67; $20.83
D) / $5.33; $13.33; $18.67
51. / When an increase in the firm's output reduces its long-run average total cost, it experiences:
A) / increasing returns to scale (economy in scale).
B) / decreasing returns to scale.
C) / constant returns to scale.
D) / variable returns to scale.
52. / An assumption of the model of perfect competition is:
A) / discrimination.
B) / difficult entry and exit.
C) / many buyers and sellers.
D) / limited information.
53. / If all firms in an industry are price-takers, then:
A) / each firm can take the price that it wants to charge and sell at this price, provided it is not too different from the prices other firms are charging.
B) / each firm takes the market price as given for its current output level, recognizing that the price will change if it alters its output significantly.
C) / an individual firm cannot alter the market price even if it doubles its output.
D) / the market sets the price, and each firm can take it or leave it (by setting a different price).
54. / If a perfectly competitive firm is producing a quantity that generates MCMR, then profit:
A) / is maximized.
B) / can be increased by increasing production.
C) / can be increased by decreasing production.
D) / can be increased by decreasing the price.
55. / If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit:
A) / is maximized.
B) / can be increased by increasing production.
C) / can be increased by decreasing production.
D) / can be increased by decreasing the price.
56. / In the short run, if AVCPATC, a perfectly competitive firm:
A) / produces output and earns an economic profit.
B) / produces output and incurs an economic loss.
C) / does not produce output and earns an economic profit.
D) / does not produce output and earns zero economic profit.
57. / In the short run, if PAVC, a perfectly competitive firm:
A) / produces output and earns an economic profit.
B) / produces output and incurs an economic loss.
C) / does not produce output and earns an economic profit.
D) / does not produce output and incurs an economic loss.
58. / People with more education tend to experience lower poverty rates.
A) / True
B) / False
59. / The welfare state often:
A) / takes up a large share of government spending in wealthy countries.
B) / is referred to as Social Security.
C) / makes up only a small share of government spending in wealthy countries.
D) / impacts only low-income households.
60. / Political conservatives and liberals:
A) / both oppose the creation of welfare state programs.
B) / strongly agree on their support of welfare state programs, but disagree on the appropriate extent of these programs.
C) / have conflicting views; conservatives support the creation of welfare state programs while liberals oppose the creation of welfare state programs.
D) / have conflicting views; liberals support the creation of welfare state programs while conservatives oppose the creation of welfare state programs.
61. / The poverty threshold depends upon:
A) / only the major wage earner's annual income.
B) / the size and composition of a family.
C) / only the size of the family.
D) / only the composition of the family.
62. / Means-tested programs:
A) / provide benefits for all.
B) / are poverty programs that specifically help those with low incomes.
C) / provide benefits only for those households that earn below the mean household income in the United States for a given year.
D) / provide only in-kind benefits.
63. / Non-means-tested programs:
A) / provide benefits for all regardless of income level.
B) / are poverty programs that specifically help those with low incomes.
C) / provide benefits only for those households that earn below the mean household income in the United States for a given year.
D) / provide only in-kind benefits.
64. / Increases in income inequality in the United States have been attributed to:
A) / equal and rising increases in the salaries of low-wage workers.
B) / the impact of technological innovation on the demand for labor.
C) / a drop in international trade's effects on the economy.
D) / stricter immigration policies.
65. / A social insurance program would be one aimed at:
A) / keeping people from earning less than $10,000.
B) / people who have encountered unexpected financial distress.
C) / reducing the percentage of families earning incomes below the poverty line.
D) / households with children.
Answer Key
1. / A2. / B
3. / B
4. / B
5. / B
6. / B
7. / B
8. / C
9. / B
10. / B
11. / C
12. / B
13. / A
14. / B
15. / A
16. / D
17. / D
18. / B
19. / C
20. / B
21. / C
22. / A
23. / D
24. / C
25. / B
26. / D
27. / A
28. / D
29. / C
30. / C
31. / A
32. / A
33. / C
34. / A
35. / D
36. / D
37. / A
38. / D
39. / B
40. / A
41. / C
42. / A
43. / C
44. / D
45. / C
46. / D
47. / B
48. / B
49. / B
50. / C
51. / A
52. / C
53. / C
54. / B
55. / A
56. / B
57. / D
58. / A
59. / A
60. / B
61. / B
62. / B
63. / A
64. / B
65. / B
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