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1. (TCO 1) Our basic economic problem would be solved if (Points: 3)Everyone was given $1 Million.Our population stopped growing.All sickness and disease were wiped out.Our wants could be satisfied with available resources.2. (TCO 1) The Production Possibilities Curve (PPC) is bowed out from the origin of the graph, which represents: (Points: 3)Increasing opportunity costs.Decreasing opportunity costs.The fact opportunity costs are no longer relevant.Constant opportunity costs.3. (TCO 1) In the market for goods and services (“Real Flow” of the Circular Flow Model): (Points: 3)households buy resources from firmshouseholds supply goods and services to firmsfirms supply resources to householdsfirms supply goods and services to households4. (TCO 1) A mixed economy (e.g. the United States, Canada and Mexico): (Points: 3)Functions without government interferenceis completely controlled by the governmenthas government control only over the financial marketNone of the above5. (TCO 1) In a mixed economy: (Points: 3)All of the decisions are made by consumers only.The public industries only produce final goods and services.Automobile markets are completely controlled by the government.Housing markets are completely controlled by the government.None of the above6. (TCO 1) In the market economy that relies on the law of supply and demand, which of the following does not fit with the other: (Points: 3)Perfect CompetitionCentral Government’s complete economic controlAdam Smith’s “Invisible Hand”Buyers and sellers in the marketplace7. (TCO 1) The ‘Law of Increasing Costs’ is generated by (Points: 3)ScarcityImproper use of resourcesWasteful production techniquesDiminishing Marginal Output8. (TCO 1) As depicted in the circular flow model, firms: (Points: 3)demand the goods and services that households supply in product markets.supply the goods and services that households demand in product markets.demand the resources that households supply in product markets.supply the resources that households demand in resource markets.9. (TCO 1) Which of the following is not an example of the definition of economics? (Points: 3)Shortage of resources cause people to substitute.Goods and services wanted by people exceed the availability of resources to produce them.There are many goods and services that no one really wants.Goods and Services are scarce relative to the demand for them.10. (TCO 1) The old Soviet communist economy: (Points: 3)Permitted the market exchange of goods and services for all goods.Used authority to answer the economizing questions.Had many of its members unable to acquire necessities due to low incomes.Encouraged the profit motive to increase output.11. (TCO 2) Which of the following will change the ‘Quantity’ demanded (Qd) for strawberries? (Points: 3)a change in the cost of strawberry farmersa change in the price of strawberriesdecrease of the strawberry subsidiesa change in the income of strawberry producersNone of the above12. (TCO 2) An increase in the price of GM Cars would be most likely to cause: (Points: 3)demand for Ford cars (Substitute of GM) will increase.demand for Ford cars(Substitute of GM) will decrease.supply of Ford cars(Substitute of GM) will decrease.the quantity demanded for GM cars will not change.None of the above13. (TCO 2) Which of the following does not shift the demand curve for new condominiums? (Points: 3)changes in income.changes in tastes for new condominiumschanges in the price of new condominiumschanges in the population.14. (TCO 2) Which of the following will cause an increase in demand for home remodeling, other things being equal? (Points: 3)An increase in the price of remodeling materialsAn increase in consumers’ incomesA fall in the number of remodeling businessesA fall in the number of home buyers15. (TCO 2) Which of the following would shift the supply curve for a product to the right (i.e. Supply would Increase)? (Points: 3)an increase in the cost of a resource used in the good’s production.the expectation of a higher oil price in the near future.a decrease in the demand of the product.an increase in the price of an alternative good.an improvement in the technology for producing the good.16. (TCO 2) Which of the following would most likely increase the supply of college textbooks? (Points: 3)five major publishers go out of business.paper costs double.the wages of print workers increase.producers expect the sales to fall in the future.technology of book production improves.17. (TCO 2) Which of the following will increase the supply of catnip? Think about the supply determinants. (Points: 3)Decrease in the productivity of ‘catnip’ employees.Decrease in the taxes on the production of ‘catnip’.Decrease the number of sellers of ‘catnip’.Increase in the number of cats per household.None of the above18. (TCO 2) If the demand for and supply of gasoline both increase at the same time, what will happen to market equilibrium price and quantity? (Points: 3)Market price may go up, down or stay the same but quantity will increase.Market price and quantity both go up.Market price and quantity both go down.Market price doesn’t change but quantity goes up.19. (TCO 2) Which of the following will not cause a decrease in the demand for apples? (Points: 3)Reports surface that apples are infected with a deadly virus.Consumers’ incomes drop.The price of apples rises.Consumers expect the price of apples to decrease in the future.20. (TCO 2) As price slowly goes up, if quantity demanded [Qd] decreases very sharply, (Points: 3)The supply of the good is price elastic.The demand for the good is price elastic.The supply of the good is price inelastic.The demand for the good is price inelastic.21. (TCO 2) As coffee price goes up just a little bit, if quantity demanded [Qd] drops by a large amount, (Points: 3)The supply of coffee is price elastic.The demand for coffee is price elastic.The supply of coffee is price inelastic.The demand for coffee is price inelastic.22. (TCO 2) If SUVs have an ‘elastic’ demand, the automaker would ______ in order to ‘increase’ total revenue. (Points: 3)decrease priceincrease pricehold price steadystop selling23. (TCO 2) If you buy more fresh salmon when your income increases, we would consider salmon to be: (Points: 3)complementsnormal goods inferior goods substitutes 24. (TCO 2) If a 10 percent big increase in the Price of heating oil causes a very tiny 0.1 percent drop in the quantity demanded (Qd) of heating oil in cold winter, then the price elasticity of demand (Ep) is (Points: 3)perfectly inelastic.perfectly elastic.inelastic.elastic.25. (TCO 2) If a 1 percent tiny increase in the Price of apples causes 5 percent drop in the quantity demanded (Qd) of apples, then the price elasticity of demand (Ep) is (Points: 3)perfectly elastic.elastic.inelastic.perfectly inelastic.26. (TCO 2) If a 10 percent big increase in the Price of gas causes a very tiny 1 percent drop in the quantity demanded (Qd) of gas, then the price elasticity of demand (Ep) is (Points: 3)perfectly elastic.elastic.inelastic.perfectly inelastic.27. (TCO 2) The price of a product increases from $0.75 to $1.00 while at the same time sales quantity [Qd] of the product drop from 200 to 100 units per week. The price elasticity of demand [Ep] is:(Points: 3)2.330.81.331.7528. (TCO 2) The Coca Cola ‘advertiser’ wants to push Coke Demand curve: (Points: 3)to the right and make it more elasticto the right and make it less elasticto the left and make it more elasticto the left and make it less elastic29. (TCO 2) Demand is more “elastic” when (Points: 3)the demand curve is steeperthe time period becomes longera good takes a smaller percentage of a consumer’s budgetNone of the above30. (TCO 2) If the price of a good decreases by 5% and total revenue does not change, then the price elasticity of demand is (Points: 3)equal to 0.05unit-elasticperfectly elasticvery inelastic1. (TCO 3) If output is zero: (Points: 3)total cost must be zerototal variable cost must be zerototal fixed cost must be zeroall of the above2. (TCO 3) The main difference between ‘economic profit’ and ‘accounting profit’ is that (Points: 3)economic profit considers economic costs that are out of pocket costs firms pay, but not opportunity costs.economic profit considers economic costs that are out of pocket costs firms pay as well as opportunity costs.economics profits are only paid in leap years.accounting profit is what’s left over from sales after the firm has paid all its economic costs3. (TCO 3) How long is the short-run? (Points: 3)1 daythe current monthuntil the contract expiresas long as there are fixed costs in an operation4. (TCO 3) When output is zero, variable cost is: (Points: 3)zeromore than zerounknown5. (TCO 3). The ‘law of diminishing marginal returns’ implies (Points: 3)the more hours you spend studying economics the less you will know.your understanding of economics will be increased by decreasing your marginal study time.after a certain point, the more hours you spend studying economics per day, the less you will learn with each added hour.the more hours you spend studying economics per day, the more you will learn with each added hour.6. (TCO 3) The ‘law of diminishing returns’ may also be called the law of (Points: 3)diminishing marginal outputdiminishing positive returnsnegative returnsincreasing returns7. (TCO 3) If a firm’s ‘total cost’ equals ‘total revenue,’ then ‘economic profit’ (Points: 3)exceeds normal profit [break-even].is zero.equals fixed costs.equals variable costs.equals accounting costs.8. (TCO 3) You can work at a local company making $38,000 a year, or you could choose to open a gift shop.Assume that except for monetary reward you do not care which of the two you decide to pursue. In the gift shop, you must invest your savings of $22,000. The annual ‘cost of operating’ your gift shop is $6000.If you do not open your gift shop, you could earn 10% bank interest annually on your $22,000.What is the ‘Explicit Cost’ ($) of opening the gift shop?(Points: 3)22006000820038009. (TCO 3) The term “Diseconomies of Scale” means: (Points: 3)per unit costs increase when all resources are increased.per unit costs decrease when all resources are increased.per unit costs remain constant when all resources are increased.per unit costs are no longer important.10. (TCO 3) ‘Price discrimination’ [Monopolistic Competition] is best described as a situation where a firm (Points: 3)charges different customers different prices when the costs of producing the good for the two consumer groups are identical.sells a product for different prices during two different periods of time.charges different prices to different customers.none of the above11. (TCO 3) A ‘purely [perfectly] competitive’ firm: (Points: 3)accepts the price in the marketplace.has the ability to set its own price irrespective of what the other firms do.is the only firm in the market.has tremendous market power.12. (TCO 3) Restaurants, dry cleaners, dentists and plumbers are typically: (Points: 3)Monopolistic CompetitorsMonopolistsOligopolistsPerfect Competitors13. (TCO 3) Agriculture, the stock market, and the foreign exchange market represent: (Points: 3)Monopolistic CompetitionNear-Perfect CompetitionMonopolyOlgopoly14. (TCO 3) Price is “given” to the individual firm in a ‘Perfectly Competitive’ industry because: (Points: 3)Consumers have no good substitutes for the output of this industry.Demand for the firm’s output is perfectly elastic.Price discrimination is very great among firms in this industry.Market demand for the firm’s output changes as the firm’s output changes.(Points: 3)a Monopolyan Oligopolya Monopolistic Competitiona Perfect Competition16. (TCO 3) If both a purely competitive firm and a monopolist with market control have identical costs, the monopolist will (Points: 3)Produce more and sell it for less than a pure competitor.Produce less and sell it for less than a pure competitor.Produce less and sell it for more than a pure competitor.Produce more and sell it for more than a pure competitor.17. (TCO 3) The kinked demand curve under fierce competition explains: (Points: 3)rapid price fluctuations in monopoly marketsprice rigidity in purely competitive marketsprice rigidity in oligopolistic industriesnone of the above18. (TCO 3) Which is a tactic that has been used by the ‘price leader’ in the price leadership model of ‘oligopoly’? (Points: 3)Prime rate set by big banksConstant price changesExpanding a fierce price war with competitorsGiving no announcement of a price change19. (TCO 3) The ‘monopolist’ and the ‘perfect competitor’ differ in that (Points: 3)the monopolist is more efficient.the monopolist is always a large firm.the monopolist does not always produce at an output in which MC = MR.they face different demand curves.20. (TCO 3) ‘Fixed’ Costs (FC) are incurred: (Points: 3)only in the long runboth in the long run and in the short runonly if production occursin the short run even if production is zero
1. (TCO 1) Our basic economic problem would be solved if (Points: 3)Everyone was given $1 Million.Our population stopped growing.All sickness and disease were wiped out.Our wants could be…
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