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2. Opportunity cost is
a. the additional cost of buying an additional unit of a product.
b. a cost that cannot be avoided, regardless of what is done in the future.
c. the additional cost of producing an additional unit of output.
d. that which we forgo, or give up, when we make a choice or a decision.
Refer to the information provided in Figure 1 below to answer the questions that follow.
9. Since Becky plays basketball well, therefore the other members of her team must also
play basketball well. This statement is an example of the
a. inductive reasoning.
b. ceteris paribus
c. post hoc, ergo propter hoc.
d. fallacy of composition.
10. The inputs that are used in the production process are labeled as factors of production.
Which of the following below is a factor of production?
a. Land
b. Labor
c. Capital
d. All of the above
13. Refer to the graphs below. Which one shows the impact of a decrease in income,
assuming that the good in question is a normal good?
a. A
b. B
c. C
d. D
14. According to the law of supply, there is a
a. negative relationship between price and the quantity of a good supplied.
b. positive relationship between price and the quantity of a good supplied.
c. negative relationship between price and the change in supply.
d. positive relationship between price and the change in supply.
15. A decrease in the wage rate of pizza makers will cause a movement from Point B on
supply curve S2 to
a. Point A on supply curve S2.
b. Point B on supply curve S2.
c. supply curve S3.
d. supply curve S1.
16. An increase in the price of pizza sauce will cause a movement from Point B on supply
curve S2 to
a. supply curve S3.
b. supply curve S1.
c. Point A on supply curve S2.
d. Point C on supply curve S2.
17. Refer to the figure below. The market for blue jeans is in equilibrium at a price of
__________ and a quantity of __________ blue jeans.
a. $20; 1,000
b. $20; 200
c. $30; 175
d. $40; 100
18. Which of the following situations certainly leads to a lower equilibrium price?
a. An increase in demand accompanied by an increase in supply.
b. A decrease in demand accompanied by an increase in supply.
c. A decrease in supply accompanied by an increase in demand.
d. An increase in demand, without a change in supply.
19. Assume the market equilibrium price of rice is $5.00 per pound. If the government does
not allow rice farmers to charge more than $1.00 per pound of rice,
a. there will be a rice surplus.
b. there will be a rice shortage.
c. quantity demanded will equal quantity supplied.
d. the market equilibrium price will move from $5.00 to $1.00.
20. The difference between the maximum amount a person is willing to pay for a good and
its current market price is known as
a. producer surplus.
b. profits.
c. revealed preferences.
d. consumer surplus.
21. The difference between the minimum amount a firm is willing to accept for a good and
its current market price is known as
a. the paradox of value.
b. profits.
c. producer surplus.
d. consumer surplus.
Refer to the information provided in Figure 1 below to answer the questions that follow.
Figure 1
22. Refer to Figure 1, which of the following areas represents consumer surplus?
a. A
b. B
c. C
d. E
23. Refer to Figure 1, which of the following areas represents producer surplus?
a. A
b. B
c. C
d. E
24. Which of the following could lead to a rightward shift of the demand curve for a good?
Refer to the information provided in Table 1 below to answer the questions that follow.
25. Refer to Table 1. This market will be in equilibrium if the price per pizza is
a. 6 b. 8 c.10 d. 12
26. Refer to Table 1. If the price per pizza is $6, there is an excess _________ pizzas.
a. demand of 150
b. demand of 50
c. supply of 200
d. supply of 50
27. When the price of fresh fish increases 5%, quantity demanded decreases 10%. The price
elasticity of demand for fresh fish is
a. Perfectly inelastic
b. elastic
c. inelastic
d. unitary elastic
29. When income increases from $20,000 to $30,000 the quantity of inter-city bus trips
taken per year decreases from 10 to 8. Hence
30. Which of the following would increase the amount of an inferior good that buyers would
like to purchase?
a. an increase in buyers' incomes
b. an increase in the price of a complement
c. a decrease in the price of a substitute
d. a decrease in buyers' incomes
Essay Questions
1. Answer following questions referring to the table below.
c. Is there excess demand or excess supply when price is 0.5? How much? Does price
tend to increase or decrease?
Elasticity
Quantity Total Percent Change in Percent Change in
Price (Absolute
Demanded Revenue Price Quantity
Value)
1 12
3 8
5 4
7 0
a. When the elasticity εp > 1: if the price increases, does the total revenue increase,
decrease, or remain unchanged?
b. When the elasticity εp < 1: if the price increases, does the total revenue increase,
decrease, or remain unchanged?