1) Suppose that Ms. Thomson is currently exhausting her money income by purchasing
10 units of A and 8 units of B at prices of $2 and $4 respectively. The marginal utility of
the last units of A and B are 16 and 24 respectively. These data suggest that Ms.
Thomson:
A.has preferences that are at odds with the principle of diminishing marginal utility.
B.considers A and B to be complementary goods.
C.should buy less A and more B
D.should buy less B and more A
2) Suppose the income elasticity of demand for toys is +2.00. This means that:
A.a 10 percent increase in income will increase the purchase of toys by 20 percent.
B.a 10 percent increase in income will increase the purchase of toys by 2 percent.
C.a 10 percent increase in income will decrease the purchase of toys by 2 percent.
D.toys are an inferior good.
3)
If the supply and demand curves above represent the market supply and demand for a
purely competitive industry, then the demand curve that an individual firm in the
industry faces:
A.Is identical to the market demand
B.Is equal to the marginal-revenue curve which is a flat line at P0
C.Is more elastic than the market demand but has a marginal-revenue curve lying below
it
D.Has the same slope as the market demand, but at P0 its quantity demanded is only a
fraction of Q0
4) Consumer acceptance of a new product depends on:
A.Price alone
B.Marginal utility alone
C.Price and marginal utility
D.Total utility divided by marginal utility
5) In a market system, self-interest is the motivating force that:
A.Makes individuals unwilling to deliver anything of value to others
B.Makes owners of resources always want to use their resources themselves
C.Leads the economy to chaos and confusion, especially the larger economies
D.Coordinates and creates consistency in the operations of various parts of the economy
6) Assume the supply curve for product X is perfectly elastic and that government
imposes a $2-per-unit excise tax. We can conclude that the resulting:
A.increase in output will be greater the less elastic the demand curve.
B.decrease in output will be greater the less elastic the demand curve.
C.decrease in output will be greater the more elastic the demand curve.
D.increase in output will be greater the more elastic the demand curve.
7) Which of the following factors fosters the survival of alternative-energy companies?
A.Low price of conventional energy
B.Taxes on alternative energy
C.Government subsidies for alternative energy
D.High production costs of alternative energy
8) If one person’s consumption of a good does not preclude another’s consumption, the
good is said to be:
A.nonrival in consumption.
B.rival in consumption.
C.nonexcludable.
D.excludable.
9) The following graph is the production possibilities curve of a nation:
Refer to the above graph. Which of the following combinations would be unattainable?
A.8 drill presses and 1 bread
B.7 drill presses and 2 bread
C.10 drill presses and 4 bread
D.2 drill presses and 3 bread
10) Implicit costs are:
A.Equal to total fixed costs
B.Comprised entirely of variable costs
C.”payments” for self-employed resources
D.Always greater in the short run than in the long run
11) A potential negative effect of advertising for society is that it can:
A.Be the major cause of price wars among firms in the industry
B.Reduce mutual interdependence and increase competition
C.Be self-canceling and contribute to economic inefficiency
D.Lower barriers to entry and undermine profits in the industry
12) Because the demand for agricultural products is highly price-inelastic, a modest
increase in supply will cause:
A.Relatively large declines in farm prices and incomes
B.Relatively large increases in farm prices and incomes
C.A small decline in farm prices, but an increase in farm incomes
D.A large decline in farm prices, but an increase in farm incomes