1. What is the difference between demand and quantity demanded? a. They are both numbers, but there are other differences. b. Demand is a curve, while quantity demanded is a number or point. c. Demand is a number or point, while quantity demanded is a curve. d. They are both curves, but there are other differences. e. The terms are synonymous.
2. The market-clearing price is also known as the a. equal price b. point price c. market-jumping price d. equilibrium price e. marketable price
3. A change in quantity demanded, but not demand, could occur if a. the market shifted right b. the equilibrium price remained the same c. the supply curve shifted d. the good or service was perfectly inelastic e. the good or service was elastic
4. Supply expresses the relationship between a. price and quantity supplied b. quantity supplied and quantity demanded c. demand and quantity supplied d. cost and revenue e. quantity demanded and price
5. The market-clearing price for a product is at the point where a. demand and supply are as far apart as they get b. price is at its highest point c. price is at its lowest point d. demand and supply intersect e. price is at the average point
6. If the price for a product is lower than the market-clearing price, there will be a. a surplus b. greater quantity supplied than quantity demanded c. a shortage d. perfect competition e. a monopoly
7. A government-mandated minimum price on a good or service is a a. This cannot happen; it violates the laws of supply and demand. b. price ceiling c. price wall d. price floor e. price door
8. A perfectly elastic demand curve is a. vertical b. horizontal c. positively sloped d. A demand curve cannot be perfectly elastic. e. negatively sloped
9. The demand curve for insulin is a. perfectly elastic b. unit elastic c. inelastic d. elastic e. perfectly inelastic
10. Which of the following matters MOST in the determination of the benefits of trade? a. absolute advantage b. financial advantage c. comparative advantage d. resource advantage e. relative advantage
11. If the United States collapses from internal and external strain, causing the demand and supply for bombs, guns, and weapons to decrease, what would happen to the price and quantity exchanged? a. The change in both would be ambiguous. b. The price and quantity would increase. c. The price and quantity would decrease. d. The price would be lower and the change in quantity would be ambiguous. e. The quantity would be lower and the change in price would be ambiguous.
12. If a blight wipes out half of the worlds red cabbage in the same month that scientists discover that red cabbage cures cancer, what would happen to the price and quantity of red cabbage exchanged? a. The change in both would be ambiguous. b. The price would increase, while the change in quantity would be ambiguous. c. Both would increase. d. The quantity would increase, while the change in price would be ambiguous. e. The quantity would decrease, while the change in price would be ambiguous.
13. If Michael can make 10 paper airplanes or 5 paper footballs in five minutes, and Daron can make 7 airplanes or 2 footballs in the same time, what should they do? a. Michael should make only footballs while Daron makes only airplanes, and they should trade. b. Michael and Daron should both make only airplanes. c. Michael and Daron should both make only footballs. d. Daron should make only footballs while Michael makes only airplanes, and they should trade. e. Michael should not trade, since he is better at making both.
14. If two goods demonstrate positive cross price elasticity (that is, when the price of one rises the demand for the other rises in response), they are a. complementary goods b. excludable goods c. substitute goods d. rival goods e. luxury goods
15. If demand for a good decreases as income increases, the good is a(n) a. inferior good b. normal good c. ordinary good d. common good e. elastic good
16. Producer surplus is the a. surplus quantity when there is a price floor b. extra benefit consumers receive when they pay less than they are willing to for a good c. extra benefit producers receive when they get paid more than the lowest price they are willing to accept for a good d. additional quantity produced when demand increases e. price consumers pay below the equilibrium price
17. If an increase in price does NOT change total revenue, demand is a. perfectly elastic b. elastic c. unit elastic d. inelastic e. perfectly inelastic
18. An decrease in supply combined with a increase in demand will cause a(n) a. ambiguous effect on price and an increase in quantity b. ambiguous effect on price and a decrease in quantity c. decrease in price and an ambiguous effect on quantity d. increase in price and an ambiguous effect on quantity e. increase in price and an increase in quantity
19. A rational producer wishes to maximize A. production B. revenue C. labor D. standards of living E. profit
20. The golden rule of profit maximization says a producer should produce at which of these points? a. the point at which marginal supply equals marginal demand (MR = MD) b. the point at which variable cost equals marginal benefit (VC=MB) c. the point at which marginal revenue equals marginal cost (MR=MC) d. the point at which price equals quantity (P+Q e. the point at which demand equals supply (D=S)
21. The minimum wage is an example of a(n) a. excise b. externality c. price floor d. subsidy e. price ceiling
22. An economic agent that can produce a good with fewer inputs than any other economic actor has a(n) a. absolute advantage in producing that good b. comparative advantage in producing that good c. marginal advantage in producing that good d. productive advantage in producing that good e. technical advantage in producing that good
23. You should trade when there is a. absolute advantage b. comparative advantage c. marginal advantage d. productive advantage e. technical advantage
24. The theory of comparative advantage was first expounded by a. Thomas Malthus b. Adam Smith c. John Maynard Keynes d. David Ricardo e. Jean-Baptiste Say
25. If Ed can produce 15 bologna sandwiches or 3 orders of nachos, the relative price of one order of nachos is a. 1/5 bologna sandwich b. 5 bologna sandwiches c. 3 bologna sandwiches d. 1/3 bologna sandwich e. $12.00
26. Joe is playing a game of poker. He already has $200 committed in the pot when his opponent raises him $500. Joe's sunk cost is a. $500 b. $200 c. $1000 d. $700 e. $300
27. An externality of the operation of Bill's farm is the cost a. of tractors and other farming equipment b. of the farmland c. of the damage inflicted on Steve's farm by Bill's fertilizer runoff d. inflicted by an unexpected swarm of locusts e. of property taxes paid to the government
28. If Thailand can produce 10 apples or 15 pineapples and Indonesia can produce 5 apples or 20 pineapples, a. Thailand should produce pineapples, Indonesia should produce apples, and they should trade b. Thailand and Indonesia should both produce pineapples c. Indonesia should produce pineapples, Thailand should produce apples, and they should trade d. Thailand and Indonesia should both produce apples e. Thailand and Indonesia should produce both goods and not trade
29. If Michael can produce 10 plants or 10 lobsters, and Sarah can produce 15 plants or 12 lobsters, a. Michael and Sarah should both produce lobsters b. Michael should produce lobsters, Sarah should produce plants, and they should trade c. Sarah should produce lobsters, Michael should produce plants, and they should trade d. Michael and Sarah should both produce plants e. Sarah should not trade with Michael because she is better at producing both goods
30. In which of the following situations should Dan and John NOT trade? a. Dan can produce 10 shrimp or 20 books and John can produce 6 shrimp or 15 books. b. Dan can produce 10 shrimp or 15 books and John can produce 12 shrimp or 20 books. c. Dan can produce 10 shrimp or 20 books and John can produce 12 shrimp or 12 books. d. Dan can produce 6 shrimp or 10 books and John can produce 9 shrimp or 15 books. e. Dan can produce 10 shrimp or 10 books and John can produce 15 shrimp or 5 books.
31. If a decrease in the price of a good results in increased quantity demanded, total revenue will increase. Demand for this good is a. inelastic b. perfectly inelastic c. perfectly elastic d. unit elastic e. elastic
32. What kind of good do you want more of if you get a raise? a. inferior good b. normal good c. ordinary good d. common good e. elastic good
33. Which of the following goods is likely to have the lowest price elasticity of demand? a. orange juice b. speed boats c. cigarettes d. soda pop e. movie tickets
34. Comparative advantage exists for the parties with the lowest a. variable cost b. marginal cost c. average cost d. fixed cost e. opportunity cost
35. The Arizona Cardinals give away complimentary tickets to several charity groups. Among those receiving the gift tickets are kids from a local orphanage, volunteer athletic coaches from the Boys & Girls Clubs of America, students from Phoenix College Student Council, and doctors from the Arizona Heart Institute. What can you say about the cost of giving the tickets away? a. In all cases, the tickets are free, so it costs nothing to give them away. b. The cost of giving the tickets away is lowest for the group least likely to pay to see a game. c. The cost of giving the tickets away is highest for the group least likely to pay to see a game. d. The cost of giving away tickets to a particular game does not depend on how many tickets would have been sold for that game. e. The cost of giving away free tickets is the same no matter who gets them.
36. If Mortimer can go from Phoenix to Los Angeles in 7 hrs. by bus (bus fare is $20), or go in 2 hrs. by airplane (air fare is $120). Assume that Mortimer does not get any particular enjoyment or discomfort from either form of transportation. Which statement is correct? a. It is certainly less costly for Mortimer to take the bus. b. It is certainly more costly for Mortimer to take the bus. c. It is less costly for Mortimer to fly if he values his time at more than $20 per hr. d. It is less costly for Mortimer to fly if he values his time at less than $20 per hr. e. none of these.
37. Which is TRUE? a. The cost of attending school is the same for everybody. b. The cost of attending school is tuition, the price of books, transportation expenses, an other fees all added together. c. The cost of attending school is lower if the number of high-paying jobs for college-age workers increases. d. Your cost of attending school does not depend on such personal things as your marital status or the number of children you have e. The costs of attending school would fall for many people if a new law made it illegal to work until the age of 25.
38. A hospital decides not to use its coronary care facilities to give a 95-yr. old woman a heart transplant (which may not be successful). Instead, it uses the coronary care facilities to save a 42-yr. old man who has just had a massive heart attack. The hospital seems concerned with a. men instead of women. b. money instead of lives. c. opportunity costs. d. the young instead of the old. e. corporate profits instead of people.
39. In Los Angeles, the value of land is high compared to Phoenix (an acre of land in L.A. is about 3-6 times as expensive as in Phoenix, depending on the exact area.) Most other things are about the same price in L.A. as in Phoenix. This situation explains why a. it is hotter in Phoenix than in L.A. in the summer b. shopping centers in L.A. are more likely to have multi-level parking structures than those in Phoenix. c. there are fewer 75-mm Dolby theaters in Phoenix. d. per-person sales of ice cream are higher in Phoenix than in L.A. e. the L.A. newspapers use more space on stories involving the entertainment industry.
40. Right after natural disasters (such as earthquakes) the prices of certain items (such as flashlights) rise, while the prices of other items (such as Rolex watches) do not. One possible reason is that a. the sellers of luxury items, such as Rolex watches, are less greedy than the sellers of flashlights. b. the people who sell flashlights are able to force people to buy the flashlights against their wills. c. the value of keeping a flashlight for ones own use has gone down because of the disaster. d. If a person buys a flashlight, only the seller benefits, but if a person buys a watch, both the buyer and seller benefit. e. the opportunity cost of selling a flashlight to any one person has gone up, while this is not the case with watches.