Multiple Choice Questions.

1.The fundamental economic problem faced by all societies is:

a.unemploymentb.poverty

c.inequalityd.scarcity

2.Which of the following would cause the demand for gasoline to shift to the left?

a.a decrease in the price of automobiles due to interest-free financing

b.the price of gasoline falls by $0.50 per gallon

c.buyers buy SUVs that are larger and obtain fewer miles per gallon

d.for health reasons, people desire to bicycle more.

3.Community Colleges desired to increase revenues.They decided to raise fees paid by students with Bachelors degrees to $50 because they believed this would result in greater revenues. But the revenues received actually fell. Therefore, the demand for Community College courses by people with Bachelors degrees must have been:

a.relatively inelastic

b.unit elastic

c.relatively elastic

d.perfectly elastic

4.Supply is likely to be more price elastic:

a.In the short run rather than the long run

b.If factors of production are relatively immobile between industries

c.If there are very few producers

d.If it is easy to expand output

5.At the equilibrium price:

a.there will be a shortage

b.there will be neither a shortage nor a surplus

c.there will be a surplus

d.there are forces that cause the price to change

6.If the quantity supply of oranges exceeds the quantity demanded:

a.there is a shortage of oranges

c.market forces will cause the price to fall

c.market forces will cause the price to rise

d.the market is in equilibrium

7. The concept of cross-price elasticity is used to examine the responsiveness of demand:

a.to changes in income.

b.to changes in "own" price.

c.for one product to changes in the price of another.

d.to changes in income.

8.Which of the following is not the determinant of supply

a.cost of production

b.price of the product

c.income

d.economic condition

9.A reduction in the costs of production will:

a.Lead to a movement along the supply curve

b.Shift the demand curve

c.Shift the supply curve

d.Lead to an extension of supply

10. If a 3% fall in price leads to a 12% increase in quantity demanded then

a.Elasticity of demand is equal to -0.5.

b.Elasticity of demand is equal to -4.

c.Elasticity of demand is equal to -0.25

d.Elasticity of demand is equal to -2.5.

11. Price controls are

a.established by firms with monopoly power.

b.used to make markets more efficient.

c.nearly always effective in eliminating inequities.

d.usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

12. An example of an implicit cost of production would be the

a.cost of raw materials for a printing company to print books.

b.income an entrepreneur could have earned working elsewhere.

c.cost of a delivery truck in a business that rarely makes deliveries.

d.All of the above are correct.

13. The slope of the total product curve reveals information about the

a.marginal product of workers.

b.average product of workers.

c.maximum product of workers.

d.total product of workers.

14. Accounting profit is equal to total revenue minus

a.implicit costs.

b.variable costs.

c.the sum of implicit and explicit costs.

d.explicit costs.

15. Which of the following statements is true?

a.All costs are fixed in the short run.

b.All costs are variable in the long run.

c.All costs are variable in the short run.

d.All costs are fixed in the long run.

16. A market structure with a few firms is known as

a.monopoly.

b.oligopoly.

c.monopolistic competition.

d.perfect competition.

17. Which of the following costs will be zero if a firm produces zero?

a.average cost

b.variable cost

c.opportunity cost

d.All of the above are correct.

18. Average total cost equals

a.(fixed costs + variable costs)/quantity produced.

b.(fixed costs + variable costs)/change in quantity produced.

c.change in total costs/quantity produced.

d.change in total costs/change in quantity produced

19.Perfect competition is an industry with

a.a few firms producing identical goods.

b.many firms producing goods that differ somewhat.

c.a few firms producing goods that differ somewhat in quality.

d.many firms producing identical goods.

20. The average product of labor is equal to

a.the additional labor required to produce one more unit of output.

b.marginal product when average product is at a minimum.

c.the additional output produced by hiring one more unit of labor.

d.the slope of a ray drawn from the origin to a point on the total product curve.

21. The cost to produce an additional unit of output is the firm's

a.average variable cost.

b.marginal cost.

c.average opportunity cost.

d.total productivity cost.

22. Sandy produces umbrellas. Her current production is 300 a month. Her average fixed cost is $2. Her average variable cost is $5. It follows that her total cost is

a.$600.

b.$900.

c.$1,500.

d.$2,100

23. The term used by economists for the benefit received by buyers in a market is

a.producer surplus.

b.consumer surplus.

c.total expenditures.

d.willingness to pay.

24. When a tax is levied on a good

a.the market price falls because demand declines.

b.the market price falls because supply falls.

c.the market price rises because demand falls.

d.a wedge is placed between the price buyers pay and the price sellers receive.

25. If by using 3 units of labour, the firm produces 500 units of the good and if employing 4 units of labour it produces 650 units of the good. The marginal product of the fourth unit of labour is:

a.300

b.250

c.200

d.150