Identity the choice that best completes the statement or answers the question. Economics is defined as the study of: a. central planning b. Business c. how society manages its scarce resources d. government regulation Which of the following is the best example of a non-renewable resource? Forests. Oil. Clean air. Fish in the ocean. P'PP'P' The study of microeconomics and macroeconomics differs in that: a. microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy. b. microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy. c. microeconomics studies the actions of households and macroeconomics studies the actions of business rms. d. microeconomics studies the economy in terms of private individuals and firms while macroeconomics includes the effect of government. e. microeconomics examines the whole economy while macroeconomics studies the individual units of the economy. Atelevision network newscaster reports that the national ination rate the past year was 3 per cent. This report would be of particular interest to a . a. Microeconomist b. normative economist c. Macroeconomist 5. Ben decides to spend an hour playing soccer rather than working at $13 per hour. His trade- off is: nothing, because he enjoys playing soccer more than working nothing, because he spent $13 for a music CD the $13 he could have earned the increase in skill he obtains from playing soccer for that hour Pd???\" 6. Which of the following is an example of capital? a. money. b. tea at home. c. tea in a restaurant. d. a DVD player in a household. 7. Which of the following is the best example of a nonnative economic statement? a. The unemployment rate for women has been two times lower than the overall rate. b. Increase in competition in the car manufacturing industry will result in price reduction for cars. c. Businesses make decisions based on market prices. d. A stronger regulation should be applied to polluting companies. C 400 A Cars 300 (millions per year) 200 B D 100 0 100 200 300 400 Grain (millions of tons per year) 8 For the economy shown in Exhibit 2-5, which of the following is true when the economy is at point A? a. Not enough grain is being produced. b. There must be resources that are not being used fully. c. If the economy reallocates resources from A to D, it has to sacrifice some car production. d. Increased grain production would be impossible. 9. The production possibilities curve for the nation of Economania shifts to the right. This could have been caused by: a. a decrease in Economania's capital stock. b. a decrease in Economania's labour supply. c. high unemployment in Economania for the previous time period. d. improvement in the health and skill level of Economania's workforce. 10. According to the law of demand, other things being equal, a. as the price of electronic games increases, the quantity of electronic games demanded will increase. b. as the price of electronic games increases, the quantity of electronic games demanded willdecrease. c. as household incomes rise, the quantity of electronic games demanded will decrease. d. as the demand for electronic games increases, the price of electronic games will fall. Exhibit 3-1 Market demand Jane Harry Bob $5 $5 $5 $4 $4 $4 Price (per bushel) 2 8 10 17 24 Quantity of corn 11. Suppose there are only three people in the economy: Jane, Harry and Bob. The individual demand for corn for each of these consumers is given in Exhibit 3-1. The total quantity demanded of corn if the market price is $4 is a. 3 b. 8 C. 17 d. 36 12. Which of the following things is assumed to be constant along an individual's demand curve for apples? a. the price of apples. b. the quantity of tractors demanded per unit of time. c. the prices of all other goods. d. the amount of apples the individual wishes to purchase. 13. A decrease in the quantity of smartphones demanded due to an increase in price involves: a. a shift of the demand curve for smartphones to the right. b. a shift of the demand curve for smartphones to the left. c. a movement upward and to the left along the demand curve for smartphones. d. a movement downward and to the right along the demand curve for smartphones.14. Suppose that Golden Delicious apple and Red Delicious apple are substitute goods. If the price of Golden Delicious apple increases, we can expect: the demand for Golden Delicious apple to shift to the left. an upward movement along the demand curve for Red Delicious apple. the demand curve for Red Delicious apple to shift to the right. a downward movement along the demand curve for Red Delicious apple. the demand curve for Red Delicious apple to shift to the left. PPJPP'P' 15. If oil suppliers expect the price of oil to increase. they would: a. increase the current supply. b. supply regardless of future prices. c. restrict the current supply. d. start supplying gas. 17. 13. Which of the following could cause the Supply of carrots to decrease? a. The price of carrots decreases. b. There is a technological advance in carrot production. c. Fertiliser costs increase. d. The number of farmers growing carrots increases. Which of the following will increase the Supply of a good? a. An increase in the price of another good producers could produce. b. A lower cost of resources used in the production of the good. c. A decrease in the number of sellers. d. An increase in taxes paid to the government by producers. Assuming that oranges and apples can both be grown on the same type of land, a decrease in the price of apples, other things being equal, will cause afan: a. upward movement along the supply curve for oranges. b. downward movement along the Supply curve for oranges. c. rightward shift of the supplyr curve for oranges. d. leftward shift of the Supply curve for oranges. We can predict a drop in the price of apples (and any other good, for that matter) if: a. there is a surplus at the current price. b. the current price is above equilibrium. c. the quantit}r supplied exceeds the quantity demanded at the current price. d. all of the above are true. 20. A shortage of wheat: 21. 22. a. indicates that the problem of scarcity of wheat has been solved. b. is impossible if the price of wheat is higher than the market equilibrium. c. will result when the quantity supplied exceeds the quantity demanded at the current price. d. is unlikely to cause any change in the price of wheat. Assume Q, represents the quantity supplied at a given price and Qd represents quantity demanded at a given price. Which of the following market conditions produces an upward movement of the price? a. Q,=10,Q..=5. b. Q5 : 5, Qd : 5. c. Q;=5,Q..=10. d. Q; = 5, Q. = 3. If there is a shortage of rental housing accommodation, an increase in rents charged will eventually eliminate the housing shortage because: a. as the rent rises, the quantity of housing demanded decreases while the quantity of housing supplied increases. b. as the rent rises, the quantity of housing demanded increases while the quantity of housing supplied decreases. c. as the rent rises, the demand for housing decreases while the supply of housing increases. d. as the rent rises, the demand for housing rises while the supply of housing decreases. Exhibit 3-4 Demand and supply curves 0 Quantity 23. In Exhibit 3-4, if price happened to Currently be $25 in this market, a wuuld result, causing afan in price. a. shortage; increase b. surplus; decrease c. surplus; increase d. shortage; decrease 24. If the market supply decreases and, simultaneously, market demand increases, the new equilibrium will show: a. market price will increase, decrease or remain the same and quantity exchanged will decrease. b. market price will increase and market quantity exchanged will decrease. c. market price will decrease and the quantity exchanged could increase, decrease or remain the same. d. market price could increase, decrease or remain the same and quantity exchanged will increase. e. market price will increase and market quantity exchanged could increase, decrease or remain unchanged. Exhibit 4-2 Supply and demand curves (unils per lime period) 25. The market shown in Exhibit 4-2 is initially in equilibrium at E3. Changes in market conditions result in a new equilibrium at E4. This change is stated as afan: a. increase in demand and an increase in supply. b. increase in quantity demanded and an increase in quantity supplied. c. increase in supply and an increase in quantity demanded. d. decrease in supply and a decrease in quantity demanded. Exhibit 4-3 Demand and supply curves S2 Price per unit (dollars) D2 D1 Quantity 26. If the market demand and supply curves shift as given in Exhibit 4-3, the resulting new equilibrium will show a/an: a. increase in market price and a decrease in the quantity exchanged. b. decrease in market price and a decrease in the quantity exchanged. C. increase in market price and an increase in the quantity exchanged. d. decrease in market price and an increase in the quantity exchanged.27. An explanation for the existence of black markets is: a. a price ceiling below the equilibrium price. b. a price ceiling above the equilibrium price. c. a price floor above the equilibrium price. d. a price floor below the equilibrium price. 28. Economists argue that the minimum wage results in: a. more bargaining power for unskilled workers. b. zero impact if the minimum wage is above the market-clearing price. c. a shortage of workers. d. a more equal income distribution and is worth the loss of some jobs. Exhibit 4-5 Supply and demand data for cars Cars demanded Price per Cars supplied per month car ($) per month 50 50 000 80 55 40 000 75 60 30 000 70 65 20 000 65 70 10 000 55 29. In Exhibit 4-5, assume that the government sets a price ceiling of $10 000 for cars. What will be the quantity of cars sold per month at the ceiling price? a. 15. b. 55. C. 65. d. 70.3E}. 31. 32. An externality is: always a benefit to the recipient. always a detriment to the recipient. an activity that occurs in a business which is unknown to management. an unintended benefit or cost imposed on third parties as a result of economic activity. P\"??? Which of the following would be a social cost? Price of a pack of cigarettes. lCost of the hospitalisation dueI to smoking related illnesses. Costs of new more efficient equipment to produce cigarettes. lCost of electricity to produce cigarettes. P'PP'P' When there is a positive aidernality associated with the watering of one's lawn, the free market results in: not enough lawn watering. too much lawn watering. the socially optimal level of lawn watering. people watering each otller's lawns. government subsidies for lawn watering. new?! 33. 35. 36. 37. Price elasticity of demand measures: a. the responsiveness of the quantity demanded of a good to a change in income. b. the responsiveness of the quantity demanded of a good to a change in consumers' preferences. c. the responsiveness of the quantity demanded of a good to a change in the price of that good. d. the reduction in the quantity demanded of a good when the price of that good is reduced. Which of the following will demand be most price elastic? a. drinks in general. b. fruit juice. c. Betta fruit juice. d. Betta fruit juice from a store in the CBD. Economics of scale exist when a. a nn's decision to hire additional inputs does not result in an increase in the price of inputs. b. the cost of producing a unit of output falls as the output rate increases. c. the rm is too large and too diversied. d. the rm is too small and too specialised. In economics, the short run refers to a time period: a. of one year or less. b. too short to permit an increase or (decrease) in production. c. too short t to enable a rm to start making prots. d. long enough for a firm to change the quantity of some inputs but too short for it to vary the quantity of all its inputs. The vertical distance between average total cost and average variable cost: a. increases as output increases, due to the operation of the law of diminishing returns. b. decreases as output increases, because xed costs are spread over a larger output. c. remains the same, because total xed cost is independent of the level of output. d. remains the same, because input prices are beyond the control of the rm. 33. The marginal cost (MC) curve intersects the: a. ATC andAFC curves at theirminimum points. b. AVG and AFC curves at their minimum points. c. ATC and AVG curves at their minimum points. d. ATC, AVG and AFC. curves at their minimum points. 39. Explicit costs would include: a. rent. b. the interest loss of the business owner on money withdrawn from hisfher saving account and invested in the business. c. the loss of rent on a building the business owner owns and uses in hisfher business. d. the use of tools owned by the business owner and dedicated to the business. 40. Which of the following are implicit costs for a typical firm? 3. Insurance costs. b. Electricity costs. c. Oppommity costs of capital owned and used by the rm. d. Cost of labour hired by the rm. 41. In the long run, total fixed cost: falls. does not exist. is constant. increases. P\"??? 42. Marginal cost is defined as the increase in total cost resulting from an increase in: a. 1 unit of output. b. output of 100 units. c. a rm's plant size. :1. 1 unit of labour. Exhibit 6-5 Cost schedule for a firm \" 43. In Exhibit 65, by filling in the blanks it can be determined that the fixed costs for the 2nd unit are a. $0. b. $200. c. $900. d. $1000. Exhibit 66 Cost schedule for firm X uanti cost 55 cost $ 44 As shown in Exhibit 66, the average total cost of producing 5 units is: a. $0. b. $27\". c. $50. d. $100. 45. At a price of $5, 24 units of a good would be sold. At a price of $10, 25 units of output would be sold. The marginal revenue of the 25th unit of output is: a. $14. '3. $55. c. $100. d. $130