Set 18

The study of economics is primarily concerned with:
1. Demonstrating that capitalistic economies are superior to socialistic economies.
2. Determining the most equitable distribution of society's output.
3. Keeping private businesses from losing money.
4. Choices which are made in seeking to use scarce resources efficiently.
Opportunity cost is:
1. That which we forego, or give up, when we make a choice or a decision.
2. A cost that cannot be avoided, regardless of what is done in the future.
3. The additional cost of producing an additional unit of output.
4. The additional cost of buying an additional unit of a product.
Periods of less than full employment correspond to:
1. Points outside the ppf. (production possibility frontier).
2. Points inside the ppf.
3. Points on the ppf.
4. Either points inside or outside the ppf.
In a free-market economy the allocation of resources is determined by:
1. votes taken by consumers
2. a central planning authority
3. Consumer preferences
4. the level of profits of firms
A firm produces chairs. An economist working for the firm predicts that 'if
people's incomes rise next year, then the demand for our chairs will increase,
ceteris paribus.' The accuracy of the economist's prediction depends on whether the chairs that firm produces:
1. Have many complementary goods.
2. Have few substitutes.
3. Have few complementar y goods.
4. Are normal goods .
According to law of demand, a demand curve is:
1. Horizontal
2. Vertical
3. Downward sloping
4. Directly related to law of supply
A rational decision maker will take only those actions for which the marginal
benefit:
1. Is positive.
2. Is at its maximum level.
3. Is less than marginal cost.
4. Is greater than or equal to the expected marginal cost.
All of the following are determinants of supply except:
1. Price
2. Income levels
3. Objectives of the firm
4. Level of technology
Normative economics:
1. Deals solely with the facts
2. Is never studied in the colleges
3. Involves opinions and interpretations
4. Is clearly preferable to positive economics
The transformation of resources into economic goods and services is:
1. Technical efficiency
2. Input
3. Production
4. Increasing returns
The price elasticity of demand is defined as the absolute value of the ratio of:
1. Price over quantity demanded.
2. Change in price over change in quantity demanded.
3. Percentage change in price over the percentage change in quantity demanded.
4. Percentage change in quantity demanded over the percentage change in price.
If a good is a luxury, its income elasticity of demand is:
1. positive and less than 1
2. negative but greater than -1
3. positive and greater than 1
4. zero
A resource is something that:
1. Is used to produce goods and services.
2. Is provided by nature, not made by society.
3. Exists in unlimited quantities.
4. Must be produced by a firm.
If the cross-price elasticity between home personal computers and video game
units for TV is positive, one can conclude that
1. These products are substitutes for one anouther.
2. These products complement one anouther.
3. These products are over-priced.
4. Consumers are irrational.
As one moves along a convex isoquant, which of the following does not
change?
1. The marginal rate of technical substitution.
2. The capital-labour ratio.
3. The marginal product of labour relative to the marginal product of capital.
4. The level output produced.
Of the following goods, the one where the law of diminishing marginal utility is
least likely to apply is:
1. Water.
2. Cigarettes.
3. Toothpaste.
4. Rap music.
The optimal purchasing rule states that total utility is maximised when a
consumer:
1. Consumes as much as possible of all good.
2. Consumes the same quantities of all goods.
3. Completely uses up their income.
4. Consumes to the point where the marginal utility per dollar spent on all
  goods is the same.
Which of the following pairs come closest to being complementary goods?
1. Apples and oranges.
2. Cameras and films.
3. A free hotel room and a free meal.
4. Cream and milk.
A Giffen good:
1. Is a good that people buy more of as their incomes fall
2. Is a good which people buy more of as its price increases
3. Is a good on which people spend a small portion of their income.
4. Has a vertical demand curve.
When an industry expands its costs of production will:
1. Increase.
2. Decrease.
3. stay the same.
4. none of the above.

Set 18

Quiz