MULTIPLE CHOICE. Choose the one alt
Record your answers on the scantron. Answer all questions. Total 100 marks ( 4 marks each). MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When a market price allocates a scarce resource 1) _______
A) ability to pay for the resource is less important than willingness-to-pay. B) only those who show interest can use the resource. C) everyone in the economy can use the resource. D) only those who are willing and able to pay get the resource. E) willingness-to-pay is not an issue. 2) Choose the statement or statements that are correct. I. The value of one more unit of a good or service is its marginal benefit. II. Marginal benefit equals the total amount we spend on a good or service. III. Marginal benefit is the maximum amount willingly paid for another unit of a good or service. 2) _______ I only. I and III. III only. II only.
A) B) C) D) E)
I, II, and III. 3) Charlene is willing to pay $5.00 for a sandwich. If the price of a sandwich is ________, Charlene ________. 3) _______ A) $4.00; receives a producer surplus B) $6.00; receives a consumer surplus C) $4.00; does not receive any consumer surplus D) $4.00; receives a consumer surplus E) $6.00; receives a marginal cost Use the information below to answer the following question.
Figure 5.3.1 4) Consider the demand and supply curves in Figure 5.3.1. If the market is at the competitive equilibrium, which area in the diagram indicates the opportunity cost of production? 4) _______
A)
ABC B) 0BCD C) EBC D) AEC E) 0ECD 5) A negative externality results in 5) _______ A) zero production. B) zero deadweight loss. C) underproduction. D) overproduction.
E) efficient production. 6) According to the "big tradeoff," 6) _______ A) income transfers reduce efficiency. B) efficiency requires income transfers. C) a more equally shared pie results in a larger pie. D) income transfers should make the poorest person as well off as possible. E) property rights and voluntary exchange insure equality of opportunity. Use the figure below to answer the following questions.
Figure 6.1.1 7) Refer to Figure 6.1.1. If the demand for rental housing increases and the demand curve shifts rightward from D to D , and there is a strictly enforced rent ceiling of $150 per room, 0 1 7) _______
A) the number of rooms rented will increase to 2,000. B) the number of rooms rented is 1,500. C) there is a housing shortage of 500 rooms. D) both B and C. E) the number of rooms rented decreases to 1,000.
Use the figure below to answer the following questions.
Figure 6.1.2 8) Refer to Figure 6.1.2. What would be the maximum black market price of the good if a price ceiling is set at $10 a unit? 8) _______
A) 50 goods sold at $10 and 50 goods sold at $15. B) $10. C) $20. D) 50 goods sold at $10 and 50 goods sold at $20. E) $15. 9) Suppose a minimum wage of $4 an hour is in force, resulting in unemployment of 10 million hours. Then the demand for labour increases such that supply and demand intersect at a wage rate of $5 per hour. What will happen to the equilibrium wage rate and employment? 9) _______ A) The wage rate is B) The wage rate is C) The wage rate is D) The wage rate is E) The wage rate is
$4 an hour and there will be a surplus of labour. $5 an hour and there will be no unemployment. $4 an hour and there will be unemployment. $5 an hour and there will be a surplus of labour. $4 an hour and there will be no unemployment.
10) If the price of a good is not affected by a tax, then
10) ______
A) supply is perfectly elastic. B) the elasticity of supply is greater than elasticity of demand. C) demand is perfectly elastic. D) demand is unit elastic. E) supply is unit elastic. 11) When an effective production quota is applied in the market for wheat, the quantity produced ________ and the price ________. The marginal social benefit ________ marginal social cost. 11) ______
A) decreases; falls; is less than B) decreases; rises; exceeds C) increases; rises; exceeds D) decreases; rises; is less than E) increases; falls; is less than
12) If enforcement of the law is aimed at buyers of an illegal good, the result will be 12) ______ A) a decrease in the supply of the good. B) a decrease in the demand for the good. C) an increase in the supply of the good. D) a rise in the price of the good. E) no change in the equilibrium quantity. 13) Diminishing marginal utility means that 13) ______
A) the utility from eating two hamburgers will be more than twice the utility from eating the first one. B)
Ralph will enjoy his second hamburger less than the first one. C) the price of two hamburgers is less than twice the price of one. D) the utility from one hamburger is greater than the utility from two hamburgers. E) hamburgers seem smaller as you eat more of them. Use the table below to answer the following questions. Table 8.1.2
14) Refer to Table 8.1.2. Consider Sam's utility from sailing and skiing. The price of sailing is $10 per hour and the price of skiing is $20 per hour; Sam's income to spend on these activities is $80. In consumer equilibrium, Sam will sail for 14) ______ A) 2 hours and ski for 4 hours. B) 4 hours. C) 4 hours and ski for 2 hours. D) 8 hours. E) 3 hours and ski for 2 hours. 15) Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12. The price of a hot dog is $2 and the price of a Coke is $2. Which one of the following can you conclude? 15) ______
A) The total utility from hot dogs is maximized. B) The marginal utilities from hot dogs and Cokes must be equal. C) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal. D) You are purchasing three hot dogs and three Cokes. E) The total utilities from hot dogs and Cokes must be equal.
Use the table below to answer the following questions. Table 8.2.1 Windsurfing equipment rents for $10 per hour, snorkeling equipment for $5 per hour.
16) Devon enjoys windsurfing and snorkeling. His total utility from each activity is summarized in Table 8.2.1. Devon has $35 to spend. How long will Devon choose to windsurf and to snorkel? 16) ______
A) 3 hours windsurfing and 1 hour snorkeling B) 4 hours windsurfing and no hours snorkeling C) 2 hour windsurfing and 4 hours snorkeling D) 2 hours windsurfing and 3 hours snorkeling E) 1 hour windsurfing and 5 hours snorkeling 17) Which one of the following statements is true? 17) ______ A) Consumers choosing between goods X and Y will set MU = MU . X Y B) If the marginal utility per dollar of good X is less than the marginal utility per dollar of good Y, then the consumer should shift some spending from X to Y. C) Consumer surplus on a unit of a good will never be zero. D) Since consumers of a good consume this good until the price equals the value of the last unit, they clearly get no benefit from consuming this good. E) The value of a good to a consumer is measured by the price. 18) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket is $6 and the price of a bus ticket is $2. What is David's real income?
18) ______ $38
A)
B) 15 movie tickets or 5 bus tickets C) 5 movie tickets or 15 bus tickets D) $30 E) $32 19) When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis, which statement is true? 19) ______ A) The slope of the budget line is independent of relative prices. B) The steeper the slope of the budget line, the more expensive the good measured on the horizontal axis. C) The steeper the slope of the budget line, the less expensive the good measured on the horizontal axis. D) The steeper the slope of the budget line, the more expensive the good measured on the vertical axis. E) The flatter the slope of the budget line, the more expensive the good measured on the horizontal axis.
20) Martha consumes cake and muffins. Suppose Martha's income doubles and the prices of cake and muffins also double. Martha's budget line 20) ______
A) shifts rightward but the slope does not change. B) shifts leftward but the slope does not change. C) remains unchanged. D) shifts rightward and becomes flatter. E) shifts rightward and becomes steeper. 21) If two goods are perfect substitutes, then their 21) ______ A) indifference curves are negatively-sloped straight lines.
B) indifference curves are positively-sloped straight lines. C) marginal rate of substitution is zero. D) indifference curves are L-shaped. E) marginal rate of substitution is infinity. Use the figure below to answer the following question.
Figure 9.3.2 22) Which one of the following statements about Figure 9.3.2 is true? 22) ______
A) Point R is not affordable. B) Points Q and S cost the same, but Q is preferred to S. C) Point S is preferred to point Q, but S is not affordable. D) Point T is preferred to point Q, but T is not affordable. E) Point R is the best affordable point. 23) Which one of the following is always true of the price effect? 23) ______ A) It decreases consumption. B) It leads to a negative income effect. C) It is positive. D)
It leads to a positive income effect. E) None of the above.
Use the figure below to answer the following questions.
Figure 9.3.3 24) Consider an initial budget line labelled RS in Figure 9.3.3. The budget line becomes RT with 24) ______ A) a rise in the price of good Y. B) a fall in the price of good X. C) an increase in real income. D) a decrease in the preference for good X. E) a rise in the price of good X. 25) Firm A can produce a unit of output with 10 hours of labour and 5 units of capital. Firm B can produce a unit of output with 5 hours of labour and 10 units of capital. Firm C can produce a unit of output with 10 hours of labour and 10 units of capital. If the prices of labour and material are $10 and $5, respectively which firm is technologically efficient? 25) ______ A
A) B)
B C) C D) A and B E) A and C
D B D E D A D C
1) 2) 3) 4) 5) 6) 7) 8)
9) B 10) C 11) B 12) B 13) B 14) C 15) B 16) A 17) B 18) C 19) B 20) C 21) A 22) D 23) E 24) E 25) D
A) ability to pay for the resource is less important than willingness-to-pay. B) only those who show interest can use the resource. C) everyone in the economy can use the resource. D) only those who are willing and able to pay get the resource. E) willingness-to-pay is not an issue. 2) Choose the statement or statements that are correct. I. The value of one more unit of a good or service is its marginal benefit. II. Marginal benefit equals the total amount we spend on a good or service. III. Marginal benefit is the maximum amount willingly paid for another unit of a good or service. 2) _______ I only. I and III. III only. II only.
A) B) C) D) E)
I, II, and III. 3) Charlene is willing to pay $5.00 for a sandwich. If the price of a sandwich is ________, Charlene ________. 3) _______ A) $4.00; receives a producer surplus B) $6.00; receives a consumer surplus C) $4.00; does not receive any consumer surplus D) $4.00; receives a consumer surplus E) $6.00; receives a marginal cost Use the information below to answer the following question.
Figure 5.3.1 4) Consider the demand and supply curves in Figure 5.3.1. If the market is at the competitive equilibrium, which area in the diagram indicates the opportunity cost of production? 4) _______
A)
ABC B) 0BCD C) EBC D) AEC E) 0ECD 5) A negative externality results in 5) _______ A) zero production. B) zero deadweight loss. C) underproduction. D) overproduction.
E) efficient production. 6) According to the "big tradeoff," 6) _______ A) income transfers reduce efficiency. B) efficiency requires income transfers. C) a more equally shared pie results in a larger pie. D) income transfers should make the poorest person as well off as possible. E) property rights and voluntary exchange insure equality of opportunity. Use the figure below to answer the following questions.
Figure 6.1.1 7) Refer to Figure 6.1.1. If the demand for rental housing increases and the demand curve shifts rightward from D to D , and there is a strictly enforced rent ceiling of $150 per room, 0 1 7) _______
A) the number of rooms rented will increase to 2,000. B) the number of rooms rented is 1,500. C) there is a housing shortage of 500 rooms. D) both B and C. E) the number of rooms rented decreases to 1,000.
Use the figure below to answer the following questions.
Figure 6.1.2 8) Refer to Figure 6.1.2. What would be the maximum black market price of the good if a price ceiling is set at $10 a unit? 8) _______
A) 50 goods sold at $10 and 50 goods sold at $15. B) $10. C) $20. D) 50 goods sold at $10 and 50 goods sold at $20. E) $15. 9) Suppose a minimum wage of $4 an hour is in force, resulting in unemployment of 10 million hours. Then the demand for labour increases such that supply and demand intersect at a wage rate of $5 per hour. What will happen to the equilibrium wage rate and employment? 9) _______ A) The wage rate is B) The wage rate is C) The wage rate is D) The wage rate is E) The wage rate is
$4 an hour and there will be a surplus of labour. $5 an hour and there will be no unemployment. $4 an hour and there will be unemployment. $5 an hour and there will be a surplus of labour. $4 an hour and there will be no unemployment.
10) If the price of a good is not affected by a tax, then
10) ______
A) supply is perfectly elastic. B) the elasticity of supply is greater than elasticity of demand. C) demand is perfectly elastic. D) demand is unit elastic. E) supply is unit elastic. 11) When an effective production quota is applied in the market for wheat, the quantity produced ________ and the price ________. The marginal social benefit ________ marginal social cost. 11) ______
A) decreases; falls; is less than B) decreases; rises; exceeds C) increases; rises; exceeds D) decreases; rises; is less than E) increases; falls; is less than
12) If enforcement of the law is aimed at buyers of an illegal good, the result will be 12) ______ A) a decrease in the supply of the good. B) a decrease in the demand for the good. C) an increase in the supply of the good. D) a rise in the price of the good. E) no change in the equilibrium quantity. 13) Diminishing marginal utility means that 13) ______
A) the utility from eating two hamburgers will be more than twice the utility from eating the first one. B)
Ralph will enjoy his second hamburger less than the first one. C) the price of two hamburgers is less than twice the price of one. D) the utility from one hamburger is greater than the utility from two hamburgers. E) hamburgers seem smaller as you eat more of them. Use the table below to answer the following questions. Table 8.1.2
14) Refer to Table 8.1.2. Consider Sam's utility from sailing and skiing. The price of sailing is $10 per hour and the price of skiing is $20 per hour; Sam's income to spend on these activities is $80. In consumer equilibrium, Sam will sail for 14) ______ A) 2 hours and ski for 4 hours. B) 4 hours. C) 4 hours and ski for 2 hours. D) 8 hours. E) 3 hours and ski for 2 hours. 15) Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12. The price of a hot dog is $2 and the price of a Coke is $2. Which one of the following can you conclude? 15) ______
A) The total utility from hot dogs is maximized. B) The marginal utilities from hot dogs and Cokes must be equal. C) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal. D) You are purchasing three hot dogs and three Cokes. E) The total utilities from hot dogs and Cokes must be equal.
Use the table below to answer the following questions. Table 8.2.1 Windsurfing equipment rents for $10 per hour, snorkeling equipment for $5 per hour.
16) Devon enjoys windsurfing and snorkeling. His total utility from each activity is summarized in Table 8.2.1. Devon has $35 to spend. How long will Devon choose to windsurf and to snorkel? 16) ______
A) 3 hours windsurfing and 1 hour snorkeling B) 4 hours windsurfing and no hours snorkeling C) 2 hour windsurfing and 4 hours snorkeling D) 2 hours windsurfing and 3 hours snorkeling E) 1 hour windsurfing and 5 hours snorkeling 17) Which one of the following statements is true? 17) ______ A) Consumers choosing between goods X and Y will set MU = MU . X Y B) If the marginal utility per dollar of good X is less than the marginal utility per dollar of good Y, then the consumer should shift some spending from X to Y. C) Consumer surplus on a unit of a good will never be zero. D) Since consumers of a good consume this good until the price equals the value of the last unit, they clearly get no benefit from consuming this good. E) The value of a good to a consumer is measured by the price. 18) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket is $6 and the price of a bus ticket is $2. What is David's real income?
18) ______ $38
A)
B) 15 movie tickets or 5 bus tickets C) 5 movie tickets or 15 bus tickets D) $30 E) $32 19) When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis, which statement is true? 19) ______ A) The slope of the budget line is independent of relative prices. B) The steeper the slope of the budget line, the more expensive the good measured on the horizontal axis. C) The steeper the slope of the budget line, the less expensive the good measured on the horizontal axis. D) The steeper the slope of the budget line, the more expensive the good measured on the vertical axis. E) The flatter the slope of the budget line, the more expensive the good measured on the horizontal axis.
20) Martha consumes cake and muffins. Suppose Martha's income doubles and the prices of cake and muffins also double. Martha's budget line 20) ______
A) shifts rightward but the slope does not change. B) shifts leftward but the slope does not change. C) remains unchanged. D) shifts rightward and becomes flatter. E) shifts rightward and becomes steeper. 21) If two goods are perfect substitutes, then their 21) ______ A) indifference curves are negatively-sloped straight lines.
B) indifference curves are positively-sloped straight lines. C) marginal rate of substitution is zero. D) indifference curves are L-shaped. E) marginal rate of substitution is infinity. Use the figure below to answer the following question.
Figure 9.3.2 22) Which one of the following statements about Figure 9.3.2 is true? 22) ______
A) Point R is not affordable. B) Points Q and S cost the same, but Q is preferred to S. C) Point S is preferred to point Q, but S is not affordable. D) Point T is preferred to point Q, but T is not affordable. E) Point R is the best affordable point. 23) Which one of the following is always true of the price effect? 23) ______ A) It decreases consumption. B) It leads to a negative income effect. C) It is positive. D)
It leads to a positive income effect. E) None of the above.
Use the figure below to answer the following questions.
Figure 9.3.3 24) Consider an initial budget line labelled RS in Figure 9.3.3. The budget line becomes RT with 24) ______ A) a rise in the price of good Y. B) a fall in the price of good X. C) an increase in real income. D) a decrease in the preference for good X. E) a rise in the price of good X. 25) Firm A can produce a unit of output with 10 hours of labour and 5 units of capital. Firm B can produce a unit of output with 5 hours of labour and 10 units of capital. Firm C can produce a unit of output with 10 hours of labour and 10 units of capital. If the prices of labour and material are $10 and $5, respectively which firm is technologically efficient? 25) ______ A
A) B)
B C) C D) A and B E) A and C
D B D E D A D C
1) 2) 3) 4) 5) 6) 7) 8)
9) B 10) C 11) B 12) B 13) B 14) C 15) B 16) A 17) B 18) C 19) B 20) C 21) A 22) D 23) E 24) E 25) D
