Assignment One

September 15, 2014

Due date: September 25, 2014
Answer all the questions by circling the most appropriate answer.
1.

The author of the text defines economics as the

a. science of efficiency.
b. science of scarcity.
c. study of markets.
d. study of human activity.

2.

Economics deals with the actions of

a. individuals only.
b. societies only.
c. both individuals and societies.
d. neither individuals nor societies.

3.

When economists speak of scarcity, they are referring to the

a. condition in which society is not employing all its resources in an efficient way.
b. condition in which peoples wants outstrip the limited resources available to satisfy those
wants.
c. economic condition that exists in only very poor countries of the world.
d. condition in which society produces too many frivolous goods and not enough socially
desirable goods.

4.

Which of the following items would an economist consider to be a good?

a. leisure time
b. jeans
c. pizzas
d. all of the above

5.

There would be no subject of economics (and you would have to drop this course immediately!) if
a. wants and resources were finite.
b. wants were finite and resources were infinite.
c. wants were infinite and resources were finite.
d. wants and resources were infinite.

6.

Which of the following is not one of the categories of resources?

a. labor
b. government
c. capital
d. entrepreneurship

Page 1 of 6

7.

The physical and mental talents people bring to production processes comprise the resource called
a. entrepreneurship.
b. natural resources.
c. capital.
d. labor.

8.

Choice is fundamentally a consequence of

a. living in a world where there are both good and bad.
b. how wealthy one is.
c. scarcity.
d. opportunity cost.

9.

Points outside (or beyond) the PPF are

a. attainable.
b. unattainable.
c. efficient.
d. inefficient.

12. If the maximum price a person is willing and able to pay for a good is $50, and consumers surplus
is $10, then it follows that the price the buyer paid for the good is
a. $10.
b. $60.
c. $50.
d. $40.
13. Which of the following statements is true?
a. The concept of opportunity costs cannot be illustrated within a PPF framework.
b. If scarcity did not exist, neither would a PPF.
c. All PPFs are downward-sloping straight lines.
d. There are more attainable points than unattainable points in every PPF diagram.
14. A PPF can
a. shift outward but not inward.
b. shift inward but not outward.
c. shift inward or outward.
15. Consider two points on the PPF: point A, at which there are 10 apples and 20 pears, and point B, at
which there are 7 apples and 21 pears. If the economy is currently at point A, the opportunity cost
of moving to point B is
a. 1 pear.
b. 7 apples.
c. 3 apples.
d. 21 pears
16. The point where the PPF intersects the vertical axis is
a. unattainable.
b. attainable and efficient.
c. attainable but inefficient.
d. attainable and neither efficient nor inefficient.

Page 2 of 6

17. The point where the PPF intersects the horizontal axis is
a. unattainable.
b. attainable and efficient.
c. attainable but inefficient.
d. attainable and neither efficient nor inefficient.
18. An increase in resources
a. shifts the PPF inward.
b. shifts the PPF outward.
c. moves the economy up a given PPF.
d. moves the economy down a given PPF.
19.

A decrease in resources
a. shifts the PPF inward.
b. shifts the PPF outward.
c. moves the economy up a given PPF.
d. moves the economy down a given PPF.

20. A demand schedule is a listing of

a. incomes and quantities demanded.
b. costs and quantities demanded.
c. prices and quantities demanded.
d. assets and quantities demanded.
21.

22.

If an increase in income results in an increase in the demand for chicken, then

chicken is
a. a neutral good.
b. a luxury good.
c. a normal good.
d. an inferior good.
K2
If Maxs demand for hot dogs falls as his income rises, then hot dogs are
a. a bad good.
b. an inferior good.
c. a preferential good.
d. a normal good.

23.

A decrease in the number of buyers in an area will result in a

a. movement up the demand curve.
b. movement down the demand curve.
c. leftward shift in the demand curve.
d. rightward shift in the demand curve.

24.

If the demand curve for a good shifts leftward,

a. quantity demanded is less at each price.
b. quantity demanded remains constant at each price.
c. quantity demanded is greater at each price.
d. demand is greater at each price.

Page 3 of 6

25.

If people begin to favor romance novels to a greater degree than previously, the demand curve for
romance novels
a. shifts rightward.
b. shifts leftward.
c. stays constant.
d. can shift either rightward or leftward.

26. As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are
a. substitutes.
b. normal goods.
c. complements.
d. inferior goods.
27.

As the price of good A rises, the demand for good B rises. Therefore, goods A and B are
a. normal goods.
b. inferior goods.
c. substitutes.
d. complements.

28.

If good A is a normal good, an increase in income will

a. shift the demand curve for good A leftward.
b. shift the demand curve for good A rightward.
c. not affect the demand for good A.
d. result in a surplus of good A.

29.

As the price of apples goes up, the demand for apples goes down. The author of this statement
a. implies that price and demand are unrelated.
b. uses the word demand when he should use the word supply.
c. uses the word demand when he should use the words quantity demanded.
d. implies that demand and price have a direct relationship.

30.

The law of supply states that price and quantity supplied are
a. inversely related, ceteris paribus.
b. directly related, ceteris paribus.
c. not related.
d. fixed.

31. Which of the following will not shift a supply curve?

a. a change in the price of relevant resources
b. a change in the goods price
c. a change in the number of sellers
d. a change in per-unit costs brought about by a change in taxes.
32.

At a price above equilibrium price, there is

a. a shortage.
b. a surplus.
c. excess demand.

Page 4 of 6

d. super-equilibrium.
33.

At a price below equilibrium price, there is

a. a surplus.
b. a shortage.
c. excess supply.
d. sub-equilibrium.

34.

On a supply-and-demand diagram, equilibrium is found

a. where the supply curve intercepts the vertical axis.
b. where the demand curve intercepts the horizontal axis.
c. where the demand and supply curves intersect.
d. at every point on either curve

35.

On a supply-and-demand diagram, quantity demanded equals quantity supplied

a. only at the single equilibrium price.
b. at every price at or above the equilibrium price.
c. at every price at or below the equilibrium price.
d. at every price.

CALCULATION QUESTION {Use graph sheets}

Price
$
100
90
80
70
60
50
40
30
20
10

Quantity
Demanded
1
5
10
20
25
30
40
50
75
100

Quantity
Supplied
125
90
70
50
35
30
20
10
5
0

Table 1 above shows the price-quantity relationship between buyer and sellers for chickens
i)
Plot the demand and supply curves.
ii)

What price represents the equilibrium price? Why?

iii)

What would happen to the market demand for chickens as a result of each of the
following:

An increase in the average level of income.

Page 5 of 6

An increase in the advertising campaign for beef and mutton.

An increase in the prices of beef and mutton.

Illustrate each of the above scenarios in part 111 graphically

Page 6 of 6