Question ECN 6100 Winter 2016 Ch. 1-7 Multiple Choice (5 points per question) Identify the choice that best completes the statement or answers the question. 1. A normative economic statement: a. is a model used to collect data. b. is a statement of fact. c. is a statement of what ought to be, not what is. d. indicates what will occur if certain assumptions are true. 2. If everyone expects the price of almonds to rise in the near future, what will happen to the market for almonds? a. People will buy the same amount now. b. People will buy less now, causing a decrease in demand. c. The amount bought and sold today will increase. d. The supply will increase today. e. The amount bought and sold today will decrease. 3. Which of the following may cause a change in demand (shift to a new demand schedule) for a product? a. A change in the profitability of producing another product b. A decrease in the cost of producing the product c. A change in consumer incomes d. A change in the price of the product e. A change in the plans of producers Table 2.3 Table 2.3 Price per Loaf Quantity Demanded Quantity Supplied $5 $4 $3 $2 $1 30 48 66 84 102 102 84 66 48 30 4. Beginning with equilibrium in Table 2.3, an increase in price of $1 would a. cause a shortage of 36. b. cause a surplus of 36. c. cause a shortage of 72. d. cause a surplus of 72. e. lead to an increase in demand. 5. An equilibrium in a market results when the market a. produces a surplus. b. produces an output at which the price consumers are willing to pay exactly equals the price producers are willing to accept. c. produces an output at which the demand curve lies above the supply curve. d. results in a product that can be purchased at many different prices. e. produces an output at which the supply curve lies above the demand curve. Exhibit 2-10 Production possibilities curve data A B C D E Capital goods 0 1 2 3 4 Consumption goods 25 23 19 13 0 6. Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The second unit of capital goods production will cost ____ units of consumption goods, and the third unit of capital goods production will cost ____ units of consumption goods. a. 4; 6 b. 25; 23 c. 23; 19 d. 1; 23 e. 2; 19 7. The ability to produce at a lower opportunity cost than someone else is referred to as: a. absolute advantage. b. comparative advantage. c. absolute superiority. d. competitive disadvantage. e. comparative disadvantage. 8. Table 3.1 shows the quantities demanded and supplied at different prices. If the price were $1.40, a. the excess demand would cause the price to fall. b. the excess demand would cause the price to rise. c. the market would be in equilibrium. d. the excess supply would cause the price to fall. e. the excess supply would cause the price to rise. 9. To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n): a. upward movement along the supply curve for cigarettes. b. rightward shift of the supply curve for cigarettes. c. upward movement along the demand curve for cigarettes. d. leftward shift of the supply curve for cigarettes. 10. If the quantity supplied of a product decreases at every price (shifting the supply curve leftward) and the demand curve for the product is relatively inelastic, equilibrium quantity will _____, equilibrium price will _____, but equilibrium _____ will change proportionately more. a. decrease; increase; price b. increase; decrease; price c. decrease; decrease; price d. increase; increase; quantity e. increase; decrease; quantity Exhibit 4-3 Supply and demand curves 11. Initially the market shown in Exhibit 4-3 is in equilibrium at P3, Q3 (E3). Changes in market conditions result in a new equilibrium at P2, Q2 (E2). This change is stated as a(n): decrease (shift) in demand and an inc
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