Question 1

1. Which one of the following would be included in the calculation of GDP by the expenditure approach?

a)the purchase of an eighteenth century work of art

b)the cost of new kitchen cupboards when you renovate your house

c)the income you pay to your gardener

d)the value of your brother's services when he mows the lawn for the family

e)the purchase of 20 shares of a new issue of IBM stock

Question 2

1. Marginal benefit is

a)the benefit that arises from an increase in an activity.

b)the cost of an increase in an activity.

c)the sum of benefit and cost that arises from an increase in an activity.

d)the benefit that arises from a decrease in an activity.

e)the cost of a decrease in an activity.

Question 3

1. If the price is above the equilibrium price, then

a)a surplus exists.

b)none of the good will be sold.

c)the price must rise further to reach the new market equilibrium.

d)a shortage exists.

e)price will not change; producers will cut back production until the market is in equilibrium.

Question 4

1. A property right is

a)any arrangement that enables buyers and sellers to get information and to do business with each other.

b)a medium of exchange.

c)a social arrangement that governs the ownership, use, and disposable of anything that people value.

d)an economic unit that hires factors of production and organizes those factors to produce and sell goods and services.

e)any commodity or token that is generally acceptable as a means of payment.

Question 5

1. When the demand for good Aincreases,

a)the equilibrium price will rise, but the equilibrium quantity will decrease.

b)the equilibrium price and equilibrium quantity will increase.

c)a surplus will result.

d)the equilibrium price will decrease, but the equilibrium quantity will increase.

e)the equilibrium price and equilibrium quantity will decrease.

Question 6

1. Marginal cost

a)is the opportunity cost of producing one more unit of a good or service.

b)equals marginal benefit.

c)is less than marginal benefit.

d)is unrelated to the production possibilities frontier.

e)is greater then marginal benefit.

Question 7

1. Marginal benefit from a good or service is the benefit received from consuming ________. It is measured by the most that people are willing to pay for ________.

a)as much as is available; the total amount consumed

b)goods that you prefer; more of it

c)one more unit of it; more of it

d)one more unit of it; an additional unit of it

e)goods that you prefer; an additional unit of it