Multiple Choice Answers

Question 1
The assumption of rational self-interest in economics means that people do not care about the well-being of others.
True
False

Question 2
The production possibilities curve represents the maximum combination of outputs that can be produced, given a fixed amount of resources.
True
False

Question 3

Figure 1.2
no figure supplied so answer may not be correct
What is happening if the economy moves from point A to point D in Figure 1.2?
Previously unemployed resources are now being used to produce more civilian goods.
Resources that were initially being used to produce military goods are now being used to produce civilian goods.
Resources that were initially being used to produce civilian goods are now being used to produce military goods.
Previously unemployed resources are now being used to produce more military goods.

Question 4

Figure 1.3
no figure supplied
If an economy is producing at point A in Figure 1.3,
it is producing 3300 units of housewares and 3300 units of consumer electronics.
it is producing 3300 units of housewares and 1800 units of consumer electronics.
it is producing 1800 units of housewares and 1800 units of consumer electronics.
it is producing 1800 units of housewares and 3300 units of consumer electronics.

Question 52 points
Opportunity cost is always
a forgone alternative.
a financial cost.
unmeasurable.
the result of a poor decision.

Question 6
One of the assumptions underlying the production possibilities curve is that
there is at least one factor of production that is employed inefficiently.
some of the factors of production are not being used.
the quantity of resources available is fixed over a given time period.
at least one of the factors of production is a free good.

Question 7
Points beyond the production possibilities curve
represent an equal income distribution.
are highly efficient.
are unattainable.
correspond to high levels of unemployment.

Question 8

Figure 1.3
What would be true of a movement from point C to point B in Figure 1.3?
no figure supplied
The output of housewares would fall by 900 units and the output of consumer electronics would increase by 1000 units.
The output of housewares would fall by 900 units and the output of consumer electronics would increase by 1500 units.
The output of housewares would fall by 1200 units and the output of consumer electronics would increase by 800 units.
The output of housewares would fall by 900 units and the output of consumer electronics would increase by 2500 units.

Question 9
Those things we like to have and consume are called
goods.
impulse purchase items.
needs.
necessities.

Question 10

Figure 1.1

Which one of the following statements is FALSE with regard to Figure 1.1?
The opportunity cost of producing more corn is the lost production of soybeans.
Point A is an efficient point of production.
The farmer incurs no opportunity cost as he expands production of soybeans.
Point B is an efficient point of production.

Question 11
A movement along the production possibilities curve would imply that
the labor force has grown.
productivity has increased.
productivity has declined because workers are demanding more leisure.
society has chosen a different set of outputs.

Question 12
Each point on the production possibilities curve corresponds to a different level of employment.
True
False

Question 13
If two goods are substitutes, then
an increase in the price of one causes a decrease in supply of the other.
a decrease in the supply of one increases demand for the other.
an increase in the price of one causes a decrease in demand for the other.
a decrease in the price of one causes a decrease in demand for the other.

Question 14
Table 3.1
Price per Constant-Quality UnitQuantity Demanded of Constant-Quality Units per YearQuantity Supplied of Constant-Quality Units per Year
$1.001,000200
2.00800400
3.00600600
4.00400800
5.002001,000
According to Table 3.1, what happens at a price of $4 per unit?
There is a shortage of 400 units.
There is a shortage of 800 units.
Equilibrium is reached.
There is a surplus of 400 units.

Question 15
A surplus results when the quantity supplied exceeds the quantity demanded.
True
False

Question 16
Table 3.2
Price per Constant Quality of XQuantity of X Demanded per Time PeriodQuantity of X Supplied per Time Period
$100150
820120
64090
46060
28030
01000
What is the equilibrium quantity in the market described in Table 3.2?
0
60
90
30

Question 17
Along a given supply curve, higher prices correspond to higher quantities supplied.
True
False

Question 18
Table 3.2
Price per Constant Quality of XQuantity of X Demanded per Time PeriodQuantity of X Supplied per Time Period
$100150
820120
64090
46060
28030
01000
According to the market data in Table 3.2, which price will generate a shortage of 50 units?
$2
$8
$4
$6

Question 19
Any improvement in overall production technology that permits more output to be produced with the same level of inputs causes
no movement of the supply curve, but a fall in price and a decrease in quantity supplied.
an increase in demand.
a rightward shift of the supply curve so that more is offered at each price.
a leftward shift of the supply curve so that less is offered for sale at each price.

Question 20
Along a given demand curve, higher prices correspond to higher quantities demanded.
True
False

Question 21
The market demand curve is the vertical summation of the demand curves of all the individuals in the market.
True
False

Question 22
Suppose that most consumers consider ice cream and frozen yogurt to be substitutes for one another. How is the market for ice cream affected by an increase in the price of frozen yogurt?
The quantity of ice cream demanded increases, but the demand is unchanged.
The quantity of ice cream supplied decreases.
The demand for ice cream increases.
The supply of ice cream decreases.

Question 23
A shortage results when the quantity demanded exceeds the quantity supplied.
True
False

Question 24
The equilibrium price of a good is a price at which quantity supplied and quantity demanded are equal.
True
False

Question 25
If the price elasticity of demand is 0.5, a 10 percent increase in the price will cause
the quantity demanded to decrease by 20 percent.
the quantity demanded to decrease by 50 percent.
the quantity demanded to increase by 50 percent.
the quantity demanded to decrease by 5 percent.

Question 26
The price elasticity of demand is calculated using information on
taxes and prices.
income and prices.
costs and wages.
prices and quantities.

Question 27
Which one of the following would make the demand for satellite subscription TV relatively less elastic?
The cost of administering the satellite service is lowered.
Cable TV service becomes less widely available.
Other networks of wireless entertainment become more widely available.
The cost of transmitting satellite signals is lowered.

Question 28
Inelastic demand implies
that a one percent cut in price results in a larger than one percent increase in quantity demanded.
that price changes leave quantity demanded unchanged.
that a one percent increase in price results in a larger than one percent decrease in quantity demanded.
that a one percent increase in price results in a smaller than one percent decrease in quantity demanded.

Question 29

Figure 4.1
no figure supplied
Given Figure 4.1, when Joey eats a third piece of pizza his marginal utility is ________ and his total utility is ________.
rising; falling
rising; rising
falling; rising
falling; falling

Question 30
Table 4.4
Quantity of CDs PurchasedTotal UtilityMarginal Utility
175
2135
3185
435
525
615
According to Table 4.4, what is the total utility when four CDs are purchased?
135
150
220
44

Question 31
When marginal utility is negative, total utility declines.
True
False

Question 32
The price elasticity of demand measures
changes in the wage rate in response to changes in the number of workers hired.
changes in the cost of production in response to changes in the volume of production.
changes in the cost of production in response to changes in the number of customers.
changes in the quantity demanded in response to changes in price.

Question 33
Total utility derived from consuming one good declines when
marginal utility is positive.
there is an opportunity cost associated with consuming more of the good.
marginal utility is negative.
the consumer receives a discounted price for the good.

Question 34
If the total utility derived from consuming three oysters was 40 utils and if the total utility derived from consuming four oysters was 52 utils, what was the marginal utility derived from the consumption of the fourth oyster?
92
52
0
12

Question 35
Which of the following statements is TRUE?
The marginal utility you expect to derive from a good determines whether you will be willing to buy it at a given price.
Marginal utility increases as you increase consumption of a good.
Saving money always provides more utility than spending it.
As the price of a good declines, your marginal utility from consuming it increases.

Question 36
Bill ate four hot dogs at the baseball game. The first one tasted best, but he found that as he ate more hot dogs the amount of extra satisfaction he was receiving was beginning to fall. This would demonstrate
the law of total utility maximization.
the law of diminishing marginal utility.
the law of diminishing costs.
the law of zero utility.

Question 37
Consumers will purchase those goods
for which the price is no greater than the value derived form consumption.
for which the highest cost production methods have been used.
which have been produced in an environmentally sound manner.
which have been produced by workers earning more than the minimum hourly wage.

Question 38
Why does a sports car cost more than a mountain bike?
because sports cars are priced higher in order to make them attractive as status symbols
because mountain bike manufacturers know that their customers have relatively low incomes
because sports car manufacturers are greedier than mountain bike manufacturers
because more scarce resources are needed to produce a sports car than to produce a mountain bike

Question 39
In the past five years, two trends have characterized the residential construction industry in Las Vegas, Nevada. First, the growing population has resulted in an increased demand for housing. Also, wages of skilled tradesmen working in construction have risen rapidly. Taken together, how have these two trends affected the market for new homes?
New home buyers in Las Vegas will pay any price for a home.
The price of housing will reflect the fact that it is relatively more scarce.
Home builders in Las Vegas are guaranteed high rates of profit.
The price of housing has not changed, and new people moving into Las Vegas can easily find affordable housing.

Question 40
Most workers in the U.S. labor force are involved in providing services, rather than in manufacturing physical goods.
True
False

Question 41
Using the least-cost combination of inputs enables a firm to
sell its products at a price everyone can afford.
compete with other firms selling the same item.
eliminate the scarcity of the good.
all of the above

Question 42

Buyers and sellers receive information about the markets
from the gossip columns in the newspapers.
by listening to the TV news programs.
from their friends and acquaintances.
through the price system.

Question 43
An irrigation system is installed on a farm in North Dakota. This is an example of which factor of production?
land
human capital
labor
physical capital

Question 44
Land refers to
manufactured items used to produce goods or provide services.
natural resources present as gifts of nature.
the skills workers acquire through training and education.
the time workers spend carrying out their jobs.

Question 45
Exchanges taking place in a price system
are intended to benefit one person at the expense of the other.
are voluntary.
are monitored by the government to ensure that resources are not being wasted.
always leave one party to the transaction worse off.

Question 46
Suppose that extremely cold winter weather destroys the current crop of oranges on the trees in Florida. Which of the following statements is then true?
Oranges are now relatively more scarce.
The price of oranges can be expected to decline.
Oranges are now relatively less scarce.
The price that the typical consumer is willing to pay for an orange will decline.

Question 47
The price of a good tells the consumer how much he or she will enjoy consuming it.
True
False

Question 48
The U.S. labor force is projected to grow over the next two decades due to high birth rates.
True
False

Question 49
You buy organic pears and frozen yogurt at your local health food store. Which of the following statements correctly describes the contribution of the factors of production to your purchase?
The freezer which holds the store’s inventory of frozen yogurt is a capital resource.
Labor, capital, and entrepreneurship have contributed to your purchase, but land has not.
The pears and other produce displayed as inventory are a capital resource.
The worker who stocks the produce bins is a capital resource.

Question 50
How does a consumer decide whether to purchase a particular item?
by comparing the value she expects to derive from consuming it with its cost of production
by comparing its relative scarcity with its cost of production
by comparing the value she expects to derive from consuming it with its purchase price