Final Exam - Exams

Question 1

Economics is best defined as the study of:
A) the financial concerns of businesses and individuals. B)inflation, interest rates and the stock market.
C)supply and demand.
D) how people make choices in the face of scarcity and the implications of those choices for society as a whole.

Answer 1

D

Question 2

Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay to fly to another city to go to a concert. The cost of transportation for the trip is $250. The cost of the concert ticket is $50. The opportunity cost of Tammie's trip to the concert is: 
A) $300 
B)$500 
C)$600 
D) $450

Answer 2

C

Question 3

The term “ceteris paribus” means:
A) other things equal.
B)that if event A precedes event B, A has caused B. C)prosperity inevitably follows recession.
D) that economics deals with facts, not values.

Answer 3

A

Question 4

Which of the following is a microeconomic statement? A) The price of personal computers declined last year.
B)The real domestic output increased by 2.5 percent last year.
C)The general price level increased by 4 percent last year.
D) Unemployment was 8.3 percent of the labour force last year.

Answer 4

A

Question 5

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.

Products A B C D E
Capital goods 0 1 2 3 4
Consumer goods 22 18 13 7 0

Refer to the above table. What is the opportunity cost of producing the third unit of capital goods? 
A) 6 units of consumer goods 
B)4 units of consumer goods 
C)7 units of consumer goods 
D) 5 units of consumer goods

Answer 5

A

Question 6

If the equation y = 15 - 4x was plotted, the: 
A) slope would be +15. 
B)vertical intercept would be -4. 
C)vertical intercept would be +11. 
D) slope would be -4.

Answer 6

D

Question 7

Suppose industry A is realizing substantial economic profits. Which of the following best describes the adjustment process which would bring about a new equilibrium?
A) Firms will enter the industry, output will rise, and product price will fall.
B)Firms will leave the industry, output will rise, and product price will fall.
C)Firms will leave the industry, output will fall, and product price will rise.
D) Firms will enter the industry, output will rise, and product price will rise.

Answer 7

A

Question 8

The market system is said to be characterized by “consumer sovereignty.” This is because:
A) a large number of consumer goods are produced.
B)consumer goods are more profitable than investment goods.
C)of the role of consumers in determining what goods are produced.
D) the prices of consumer goods are regulated by government.

Answer 8

C

Question 9

An increase in demand for strawberries is most likely to:
A) increase the demand for strawberry pickers.
B)reduce the supply of strawberries.
C)reduce the supply of strawberry pickers.
D) reduce the demand for strawberry pickers.

Answer 9

A

Question 10

The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of: 
A) the "invisible hand." 
B)the guiding function of prices. 
C)dollar votes. 
D) capital accumulation.

Answer 10

A

Question 11

When the price of one fruit increases, consumers buy more of another fruit. This situation is an illustration of: A) the rationing function of prices.
B)the income effect.
C)diminishing marginal utility.
D) the substitution effect.

Answer 11

D

Question 12

One reason why the quantity demanded of a good increases when its price falls is that the:
A) lower price shifts the demand curve to the right.
B)lower price increases the real incomes of buyers, enabling them to buy more.
C)lower price shifts the supply curve to the left.
D) lower price shifts the demand curve to the left.

Answer 12

B

Question 13

If product Y is an inferior good, an increase in consumer incomes will:
A) shift the demand curve for product Y to the right.
B)shift the demand curve for product Y to the left.
C)result in a surplus of product Y.
D) not affect the sales of product Y.

Answer 13

B

Question 14

If L and M are complementary goods, an increase in the price of L will result in:
A) no change in either the price or sales of M.
B)an increase in the sales of M.
C)an increase in the sales of L.
D) a decrease in the sales of M.

Answer 14

D

Question 15

A leftward shift of a product supply curve might be caused by:
A) an increase in consumer incomes.
B)some firms leaving the industry.
C)a decline in the prices of needed inputs.
D) an improvement in the relevant technique of production.

Answer 15

B

Question 16

Price Quantity supplied Quantity demanded
10 100 295
11 150 275
12 190 250
13 220 220
14 245 180
15 265 135

Refer to the above data. Equilibrium Quantity will be: A) 220
B)150
C)245
D) 13

Answer 16

A

Question 17

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? 
A) an increase in demand 
B)a decrease in supply 
C)a decrease in demand 
D) an increase in supply

Answer 17

D

Question 18

One can say with certainty that equilibrium price will decline when supply: 
A) decreases and demand increases. 
B)and demand both decrease. 
C)increases and demand decreases. 
D) and demand both increase.

Answer 18

C

Question 19

An effective price floor will: A) force some firms in this industry to go out of business.
B)clear the market.
C)result in a product shortage.
D) result in a product surplus.

Answer 19

D

Question 20

If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will:
A) decrease quantity demanded less than 10 percent.
B)increase quantity demanded less than 10 percent.
C)decrease quantity demanded more than 10 percent.
D) increase quantity demanded more than 10 percent.

Answer 20

B

Question 21

Refer to the demand schedule below. In which price range is the demand elastic?

Price Quantity demanded
4 2
3 4
2 6
1 8

A) $2-$1
B)below $1
C)$4-$3
D) $3-$2

Answer 21

C

Question 22

At what input level the marginal product is zero?
Input Total product
0 0 
1 5
2 20
3 32
4 42
5 50
6 55
7 58
8 58
9 56

a) 8
b) 0
c) 7
d) 58

Answer 22

A

Question 23

The indifference curve in the diagram yields Juan 100 units of utility. If Juan’s money income were to increase by 20%, the indifference curve would?

a) shift rightward
b) become steeper
c) not be affected
d) shift leftward

Answer 23

C

Question 24

Kai quit his job where he earned $45000 a year. His entrepreneurial talent worth $5000 a year. He invests $100000 of his savings that earned 10% interest annually to start a software company. The firm has material and wage costs of $75000.

Kai’s implicit cost is:

a) 50000
b) 160000
c) 60000
d) 75000

Answer 24

C

Question 25

The marginal utility schedules for product X and Y are given below. The price of product X is $4 and the price of product Y is $2. The income of the consumer is $20.

Product X
Quantity MU
1 32
2 28
3 24
4 20
5 16

Product Y
Quantity MU
1 24
2 20
3 16
4 12
5 8

How much will the consumer buy of each goods to maximize utility?

a) 4X and 3Y
b) 4X and 2Y
c) 3X and 4Y
d) 5X and 3Y

Answer 25

C

Question 26

Where total utility is at a maximum, marginal utility is:

a) zero
b) positive and increasing
c) positive but decreasing
d) negative

Answer 26

A

Question 27

The short run is a time period in which:

a) all factors of production are fixed
b) the size of the production plant is variable
c) the level of output is fixed
d) some factors of production are fixed and others are variable

Answer 27

D

Question 28

Refer to the data. The average fixed cost of producing 3 units of output:
Output Total cost
0 24
1 33
2 41 
3 48
4 54
5 61
6 69

a) is $5.50
b) is $16
c) is $8
d) is $6.40

Answer 28

C

Question 29

Refer to the table and information. The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table. The average total cost of the firm when 3 units of output are being produced is:
Output Total variable cost
1 400
2 720
3 1000
4 1400
5 2000
6 3600

a) $400
b) $500
c) $700
d) $350

Answer 29

B

Question 30

If the wage rates paid to a firm’s labour inputs were to increase, we would expect the:

a) AVC, ATC, and MC curves all will shift up
b) MP curve will shift down
c) AFC, AVC, ATC, and MC curves will shift up
d) AFC and ATC curves will shift down

Answer 30

A

Question 31

The graph below shows the relationship between the price of product B and the quantity product A demanded. The curve is a horizontal line. It may be concluded that the cross elasticity of demand A with respect to B is:

a) zero
b) infinity
c) positive but less than 1
d) positive but greater than 1

Answer 31

A

Question 32

Essential water is cheaper than “nonessential” diamonds because:

a) the supply of water is great relative to demand and the supply of diamonds is small relative to demand.
b) the supply of diamonds is great relative to demand and the supply of water is small relative to demand
c) new industrial uses for diamonds have been discovered
d) although the total utility of diamonds is greater, their marginal utility is small

Answer 32

A

Question 33

Sharon purchases mineral water and popcorn. The marginal utility of mineral water is 60 and the marginal utility of popcorn is 30. The price of mineral water is $2 and the price of popcorn is $1. The utility-maximizing rule suggests that Sharon should:

a) make no change in consumption of mineral water or popcorn
b) increase consumption of popcorn and decrease consumption of mineral water
c) increase consumption of both popcorn and mineral water
d) decrease consumption of popcorn and increase consumption of mineral water

Answer 33

A