QuestionQuestion 1Farm prices tend to be unstable bec

Question 1

1. Farm prices tend to be unstable because:

   Answer

   	a.	the equilibrium remains relatively constant.
   	b.	the demand for some farm products is relatively insensitive to changes in price.
   	c.	the supply of some farm products is relatively sensitive to changes in price.
   	d.	the demand for some farm products is relatively sensitive to changes in price.

2.5 points

Question 2

1. Suppose cheese is a normal good. An increase in income will cause:

   Answer

   	a.	a rightward shift of the demand curve for cheese.
   	b.	a leftward shift of the demand curve for cheese.
   	c.	a movement upward along the demand curve for cheese.
   	d.	a movement downward along the demand curve for cheese.

2.5 points

Question 3

1. A decrease in supply will result in:

   Answer

   	a.	a decrease in equilibrium price and an increase in equilibrium quantity.
   	b.	an increase in both equilibrium price and quantity.
   	c.	a decrease in both equilibrium price and quantity.
   	d.	an increase in equilibrium price and a decrease in equilibrium quantity.

2.5 points

Question 4

1. Suppose cookies and milk are complements. A decrease in the price of milk will lead to:

   Answer

   	a.	an decrease in the demand for cookies.
   	b.	an increase in the demand for cookies.
   	c.	a decrease in the demand for milk.
   	d.	a decrease in the quantity of cookies demanded.

2.5 points

Question 5

1. The wages paid to grape harvesters increases. We would expect:

   Answer

   	a.	a decrease in both the equilibrium price and quantity of wine.
   	b.	an increase in both the equilibrium price and quantity of wine.
   	c.	a decrease in the equilibrium price of and an increase in the equilibrium quantity of wine.
   	d.	an increase in the equilibrium price of and a decrease in the equilibrium quantity of wine.

2.5 points

Question 6

1. A target price program will:

   Answer

   	a.	lower prices of the product for consumers.
   	b.	increase tax collections because of government deficiency payments.
   	c.	increase revenues for farmers.
   	d.	All of the above.

2.5 points

Question 7

1. Diagram 4-2
   Use the following diagram to answer the following questions.

   Refer to Diagram 4-2. In the above diagram the competitive level of output is:

   Answer

   	a.	P3
   	b.	Q2
   	c.	Q1
   	d.	C

2.5 points

Question 8

1. Diagram 4-3
   Use the following diagram to answer the following questions.

   Refer to Diagram 4-3. In the above diagram the competitive level of output is:

   Answer

   	a.	Q2
   	b.	Q1
   	c.	P3
   	d.	C

2.5 points

Question 9

1. An increase in demand is represented as a rightward shift in the demand curve.

   Answer True

    False

2.5 points

Question 10

1. An advance in technology in the production of cheese will cause an increase in the supply of cheese.

   Answer True

    False

2.5 points

Question 11

1. If an increase in income causes the demand for steak to fall, then steak is an inferior good.

   Answer True

    False

2.5 points

Question 12

1. The benefit consumers receive when they consume an additional unit of a good is measured by:

   Answer

   	a.	the height of the demand curve.
   	b.	the height of the marginal revenue curve.
   	c.	the intersection of the demand and supply curves.
   	d.	the height of the supply curve.

2.5 points

Question 13

1. Bicycles
   Use the following information to answer the following questions.

   Quantity of	Price per
   Bicycles Demanded	Bicycle
   1	$125
   2	100
   3	75
   4	50
   5	25

   Refer to Bicycles. The marginal benefit of the fourth bicycle is:

   Answer

   	a.	$375.
   	b.	$25.
   	c.	$325.
   	d.	$50.

2.5 points

Question 14

1. Which of the following is an example of market failure?

   Answer

   	a.	Monopoly.
   	b.	Agricultural price support.
   	c.	Rent controls.
   	d.	Taxes.

2.5 points

Question 15

1. Suppose a market is currently producing at a point where marginal social benefit exceeds marginal cost. For efficiency, production should:

   Answer

   	a.	not be changed. The current level of production is generating positive net benefits for society.
   	b.	be temporarily increased in order for firms to create more jobs and then decreased to the original level before cost increases set in.
   	c.	be decreased.
   	d.	be increased.

2.5 points

Question 16

1. Diagram 4-4
   Use the following diagram to answer the following questions.

   Refer to Diagram 4-4. If the target price is P₃, the output produced must be sold in the market at a price of:

   Answer

   	a.	P3
   	b.	P1.
   	c.	less than P1.
   	d.	P2.

2.5 points

Question 17

1. Diagram 4-2
   Use the following diagram to answer the following questions.

   Refer to Diagram 4-2. Suppose equilibrium price and quantity exchanged are initially P₂ and Q₄, respectively. If the wage paid to peach pickers increases, then the new equilibrium price and quantity of peaches exchanged will be:

   Answer

   	a.	P3 and Q1, respectively.
   	b.	P1 and Q3, respectively.
   	c.	P4 and Q2, respectively.
   	d.	P2 and Q4, respectively.

2.5 points

Question 18

1. The economic decisions that influence growth are those that increase capital and improve technology.

   Answer True

    False

2.5 points

Question 19

1. It is always better for the economy to experience economic growth.

   Answer True

    False

2.5 points

Question 20

1. Since 1973, the growth rate of per capita GDP in the U.S. has been lower than it was in previous periods.

   Answer True

    False

2.5 points

Question 21

1. Housing
   Use the following diagram to answer the following questions.

   Refer to Housing. The best technology is being used at:

   Answer

   	a.	point D.
   	b.	point A.
   	c.	any point beyond the production possibilities curve.
   	d.	none of the points shown represent use of the best technology.

2.5 points

Question 22

1. Consumption Goods
   Use the following diagram to answer the following questions.

   Refer to Consumption Goods. Production at which of the above points would result in the greatest long-term growth in GDP?

   Answer

   	a.	A.
   	b.	D.
   	c.	C.
   	d.	B.

2.5 points

Question 23

1. In a market economy, as producers compete for profits by increasing production:

   Answer

   	a.	prices will rise.
   	b.	prices will fall.
   	c.	prices will not be affected by this action.
   	d.	prices will at first fall and then increase.

2.5 points

Question 24

1. The demand price is:

   Answer

   	a.	the price at which producers receive just enough money to cover their production costs.
   	b.	the price at which consumers will buy a greater quantity than the market is offering.
   	c.	the price at which quantity demanded is equal to quantity supplied.
   	d.	the price just high enough so that a specified quantity will be purchased.

2.5 points

Question 25

1. Which of the following economic systems is characterized by central government planning?

   Answer

   	a.	a market economy
   	b.	a command economy
   	c.	a price system
   	d.	a feudal economy

2.5 points

Question 26

1. Excess demand will exist when:

   Answer

   	a.	quantity supplied exceeds quantity demanded.
   	b.	market price exceeds the equilibrium price.
   	c.	market price is equal to the equilibrium price.
   	d.	market price is less than the equilibrium price.

2.5 points

Question 27

1. An economic system determines:

   Answer

   	a.	the methods that will be used to produce goods and services.
   	b.	the methods that will be used to determine property rights.
   	c.	how a government will be established
   	d.	the culture of a society.

2.5 points

Question 28

1. Which situation is indicative of barter?

   Answer

   	a.	A physician chooses to grow her own food and trade it for carpentry work.
   	b.	The government accepts fuel, fertilizer, and pesticides in lieu of tax payments by companies.
   	c.	A power company accepts medicine from a pharmaceutical company as payment for electricity.
   	d.	All of the above are indicative of barter.

2.5 points

Question 29

1. The division of labor increases output because workers experience a feeling of accomplishment when performing the same task a number of times.

   Answer True

    False

2.5 points

Question 30

1. Relative price measures what must be given up in order to purchase an item.

   Answer True

    False

2.5 points

Question 31

1. Allocative efficiency exists when net benefit is as large as possible.

   Answer True

    False

2.5 points

Question 32

1. No external benefits are provided by the public goods.

   Answer True

    False

2.5 points

Question 33

1. The monopolist will set the price at the level where its profits are maximized.

   Answer True

    False

2.5 points

Question 34

1. Tea
   Use the following diagram to answer the following questions.

   Refer to Tea. Suppose the supply for tea decreases from S₁ to S₂. The new equilibrium price and quantity are:

   Answer

   	a.	P1 and Q1, respectively.
   	b.	P1 and Q2, respectively.
   	c.	P2 and Q3, respectively.
   	d.	P2 and Q2, respectively.

2.5 points

Question 35

1. Case
   Use the following diagram to answer the following questions.

   Refer to Case. If the price of soft drinks is $6 per case, the quantity demanded per month is:

   Answer

   	a.	4 cases.
   	b.	1 case.
   	c.	2 cases.
   	d.	3 cases.

2.5 points

Question 36

1. If an economy is currently producing at the point where marginal benefit and marginal cost are equal, we know that:

   Answer

   	a.	the best combination of goods and services is being produced.
   	b.	the economy should change its allocation of resources.
   	c.	unemployment exists in the economy.
   	d.	the best technology is not being used.

2.5 points

Question 37

1. A PPF can:

   Answer

   	a.	shift outward but not inward.
   	b.	shift inward or outward.
   	c.	shift inward but not outward.
   	d.	shift neither inward nor outward.

2.5 points

Question 38

1. Man-made, durable items used in the production processes are:

   Answer

   	a.	equipment.
   	b.	labor.
   	c.	land.
   	d.	capital.

2.5 points

Question 39

1. Resources found in nature, such as land, water, forests, mineral deposits, and air are called:

   Answer

   	a.	land resources.
   	b.	capital resources.
   	c.	natural resources.
   	d.	labor resources.

2.5 points

Question 40

1. Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country’s

   Answer

   	a.	PPF after the war has probably shifted to the left compared to its PPF prior to the war
   	b.	production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war.
   	c.	PPF after the war is probably the same PPF as before the war.
   	d.	ability to produce goods and services has increased