Choose the correct Answer

1, Economics is the study of

1. How society manages its unlimited resources
2. How to reduce our wants until we are satisfied
3. How society manages its scarce resources
4. How to fully satisfy our unlimited wants

2, Which of the following is not part of the opportunity cost of going on holiday?

1. The money you spent on a theatre show there
2. The money you could have made if you had stayed at home and worked
3. The money you spent on food
4. The money you spent on Airline tickets

3, Which of the following will not shift a country 's production possibilities frontier (PPF) outwards?

1. An advance in Technology
2. An increase in the labour force
3. An increase in the capital stock
4. A reduction in unemployment

4, Economic growth is depicted by

1. A shift in the production possibilities frontier (PPF) outward
2. A movement from inside the curve toward the curve
3. A shift in the production possibilities frontier (PPF) inward
4. A movement along a production possibilities frontier (PPF) toward capital goods

5, Which of the following statements is Normative?

1. Large Government deficits cause an economy to grow more slowly
2. People work harder if the wage is higher
3. The unemployment rate should be lower
4. Printing too much money causes Inflation

6, If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are

1. Complements
2. Inferior goods
3. Normal goods
4. Substitutes

7, The law of supply states that an increase in the price of a good

1. Increases the quantity supplied of that good along its supply curve
2. Increases the supply of that good
3. Decreases the demand for that good
4. Decreases the quantity demanded for that good along its demand curve

8, Which of the following shifts the demand for watches to the right

1. An increase in the price of watches
2. A decrease in the price of watch batteries if watch batteries and watches are complements
3. A decrease in consumer incomes if watches are a normal good
4. A decrease in the price of watches

9, If the price of a good is above the equilibrium price

1. There is a surplus (i.e. an excess supply) and price will rise
2. There is a surplus (i.e. an excess supply) and the price will fall
3. There is a shortage (i.e. an excess demand) and the price will fall
4. The quantity demanded is equal to the quantity supplied and the price remains unchanged

10, An inferior good is one for which an increase in income causes a(n)

1. Decrease in supply
2. Increase in demand
3. Increase in supply
4. Decrease in demand

11, Positive statements are

1. Macroeconomic
2. Microeconomic
3. Statements of description that can be tested
4. Statements of prescription that involve value judgement

12, In General, a flatter demand curve is more likely to be

1. Price elastic
2. Unit price elastic
3. Price inelastic
4. Non of these answers above

13, In General, a steeper supply curve is more likely to be

1. Price elastic
2. Unit price elastic
3. Price inelastic
4. Non of these answers above

14, If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered,

once the fish are caught the fisherman 's price elasticity of supply for fish is

1. Zero
2. Infinite
3. One
4. Unable to be determined from this information

15, If a producer has market power (can influence the price of the product in the market) then free

Free market solutions

1. Are equitable
2. Are efficient
3. Maximize consumer surplus
4. Are inefficient

16, Which of the following market would most closely satisfy the requirements for a competitive

market?

1. Electricity
2. Cable television
3. Cola
4. milk

17, If a competitive firm doubles its output, its total revenue

1. doubles
2. more than doubles
3. less than doubles
4. cannot be determined because the price of the good may rise or fall

18, The Inefficiency associated with Monopoly is due to

1. underproduction of the good
2. the monopoly 's profits
3. the monopoly 's losses
4. overproduction of the good

19, Compared to a perfectly competitive market, a Monopoly market will usually generate

1. higher prices and lower output
2. higher prices and higher output
3. lower prices and lower output
4. lower prices and higher output

20, If Marginal revenue exceeds Marginal costs, a monopolist should

1. increase output
2. decrease output
3. keep output the same because profits are maximized when marginal revenue exceeds

marginal cost

1. raise the price