Question 1

By assuming that people are rational, economists assume that ____.

A. people never have regrets

B. people always spend their income on goods and services, while never saving income for future consumption

C. people never sacrifice their own interests in order to help others

D. people always make the best choices from their personal perspective at a point in time

Question 2

Marginal analysis studies how individuals decide:

A. whether to live on the margin of society.

B. to do bit more activity versus a bit less activity.

C. to analyze marginal businesses.

D. none of the above.

Question 3

When someone has to spend a limited resource on two or more things, any allocation of the resource will have an opportunity cost.

True

False

Question 4

The problem of determining what goods and services society should produce:

A. exists because we can produce more than we need or want.

B. would not exist if all goods and services were scarce.

C. exists because there are not enough resources to provide all the goods and services that people want to purchase.

D. would not exist if government owned all of the resources.

Question 5

An ____ exists whenever a choice is made regarding the use of something scarce.

A. income

B. efficient allocation

C. opportunity cost

D. inverse relationship

Question 6

For a printing shop, the copy machine would be considered _____, according to economics.

A. real estate (land)

B. rental income

C. savings

D. physical capital

Question 7

The problem of scarcity is ____

A.that people have unlimited wants but limited means to satisfy them

B.that people never have enough things to consume

C.that consumption always leads to dissatisfaction

D.that people have limited wants but unlimited means to satisfy them

Question 8

According to the marginal decision rule, if marginal benefit:

A.is equal to marginal cost, an activity should be reduced.

B.exceeds marginal cost, an activity should be reduced.

C.is less than marginal cost, an activity should be reduced.

D.exceeds marginal cost, net benefit is maximized.

Question 9

A decrease in supply is caused by:

A.an increase in the number of sellers in the market.

B.an advancement in the technology for producing the good.

C.a decrease in input prices.

D.suppliers' expectations of higher prices in the future.

Question 10

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes ________ in the equilibrium price of a hamburger and ________ in the equilibrium quantity of hamburgers.

A.a rise; a decrease

B.a fall; a decrease

C.a rise; an increase

D.a fall; an increase

Question 11

A competitive market with flexible prices and many buyers and sellers will:

A.eliminate surpluses and shortages and reach equilibrium.

B.eliminate surpluses.

C.reach equilibrium.

D.eliminate shortages.

Question 12

An inferior good is one for which ________ in buyers' income causes ________.

A.a decrease; a decrease in demand

B.an increase; a decrease in demand

C.an increase; an increase in demand

D.an increase; an increase in quantity demanded

Question 13

The supply and demand model can be used to describe markets where there are only a few dominant sellers producing products for many buyers.

True

False

Question 14

The supply curve in a market is given by P = 12 + 6.00(Q), while the demand curve is P = 125 - 7(Q). The equilibrium price and quantity will be P_E= _____ Q_E= _____ .

A.$79.85 ; 9.4

B.$64.15 ; 8.7

C.$79.85 ; 11.3

D.$64.15 ; 9.4

E.$68.31 ; 11.3

Question 15

If goods A and B are substitutes, a decrease in the price of good B will:

A.increase the demand for good B.

B.increase the demand for good A.

C.decrease the demand for good A.

D.increase the demand for good B and decrease the demand for good A.

Question 16

A shortage of the product means that ____.

A.the demand curve will shift to the left

B.the price in the market is too low and will rise

C.the supply curve will shift to the right

D.the equilibrium quantity is too high and will decrease

E.None of the above

Question 17

When demand increases while the quantity supplied of the product is fixed, then the price of the product will ____.

A.not change

B.increase

C.decrease

D.All of the above are possible

Question 18

A firm produces 3 unit(s) with a total cost (TC) of 23.037. ItsTCat 4 units is 26.925, while itsVCat 4 is 14.925. This means that ____.

A.the marginal cost (MC) of the unit 4 is 4.709

B.the average fixed costs (AFC) of 4 units is 18

C.the average fixed costs (AFC) of 3 unit(s) is 4

D.the average variable costs (AVC) of 4 units is going to be 18

Question 19

The shutdown price is:

A.the price at which economic profit is zero.

B.the minimum level ofAVC.

C.the minimum level ofAFC.

D.the intersection of theMCandATCcurves.

Question 20

The marginal revenue received by a firm in a perfectly competitive market:

A.increases with the quantity of output sold.

B.is greater than the market price.

C.is less than the market price.

D.is constant over the quantity of output sold.

Question 21

If a relation betweenXandYis provided by the equationy= 29 + -3.3x, then we know that _____.

A.the slope of the graph will be -3.3

B.the slope of the graph will be 4.29

C.the slope of the graph will be -7.26

D.the slope of the graph will be positive

E.Only B and DF.Only C and D

Question 22

If a relation betweenXandYis provided by the equationy= 19 + -1.8x, then we know that there is a _____ relationship between the variablesXandY.

A.non-linear

B.linear

C.constant

D.negative

E.Only A and C

F.Only B and D

G.Only B, C, and D

Question 23

The firm in a competitive market has found that itsAVCis minimized at 9 units, when theAVCis 3.50 and it incurs anAFCof 13.20. From this information, we know that they will shut-down in the short-run when ____.

A.the market price is less than $16.70

B.the market price falls below $13.20

C.the loss (negative profit) from production exceeds a loss of $118.80

D.the loss (negative profit) from production exceeds a loss of $31.50

Question 24

A firm produces 10 unit(s) with a total cost (TC) of 114.13. ItsTCat 11 units is 118.76, while itsVCat 11 is 48.762. This means that ____.

A.the average fixed costs (AFC) of 10 units is 16.5

B.the marginal cost (MC) of the unit 11 is 9.168

C.the average fixed costs (AFC) of 10 unit(s) is 4.242

D.the average variable costs (AVC) of 10 units is 4.41

Question 25

James faces two goods at the movie theater concessions stand, popcorn (P) and soda (S). The price of popcorn is $1.60, and the price of soda is $1.50. James has a budget of $6.40, enjoys both of these products, and understands that the opportunity cost of 2 popcorn would be ____ soda. (Answers may be rounded to the nearest hundredth.)

A.4.27

B.4.00

C.2.13

D.0.94

Question 26

The optimal quantity (Q*) occurs where the total cost (TC) is minimized.

True

False

Question 27

The competitive firm's supply curve is ____.

the upward sloping portion of the MC curve above the AVC

the marginal revenue curve

the upward sloping portion of the ATC curve below the MC curve

the MC curve above the ATC curve