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KAPLAN MT445 UNIT 1 QUIZ

Question 1. Question :

Which of the following statements is true about scarcity?

Scarcity refers to the situation in which unlimited wants exceed limited resources.

Scarcity is not a problem for the wealthy.

Scarcity is only a problem when a country has too large a population.

Scarcity arises when there is a wide disparity in income distribution.

Question 2. Question :

What does the term “marginal” mean in economics?

the edge of a market

illegal

secondary

trivial

Question 3. Question :

Economics promote which of the following as the way to make the best decision?

Continue an enjoyable activity as long as you do not have to pay for it.

Continue an enjoyable activity until it is no longer enjoyable.

Continue an enjoyable activity until you cannot afford to pursue it.

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Question 4. Question :

Making “how much” decisions involve

calculating the total benefits of the activity and determining if you are satisfied with that amount.

calculating the total costs of the activity and determining if you can afford to incur that expenditure.

calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity.

Question 5. Question :

Cassie’s Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent \$800

purchasing, cleaning and reconstructing an antique quilt which she expects to sell for \$1,500 once she is finished. After having spent \$800, Cassie discovers that she would need some special period fabric that would cost her \$200 in material and time in order to complete the task. Alternatively, she can sell the quilt “as is” now for \$900. What is the marginal cost of completing the task?

\$200

\$500

\$1,000

\$1,000 plus the value of her time

Question 6. Question :

Table 2-2

Table 2-2 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens.

Refer to Table 2-2. What is George’s opportunity cost of mowing a lawn?

half a garden cultivated

two lawns mowed

two-thirds of a garden cultivated.

one and a half lawns mowed

Question 7. Question :

The production possibilities frontier model shows that

if consumers decide to buy more of a product its price will increase.

a market economy is more efficient in producing goods and services than is a centrally planned economy.

economic growth can only be achieved by free market economies.

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

Question 8. Question :

Figure 2-6

German auto producer, BMW currently produces two types of automobiles sports utility vehicles (SUVs) and coupes in its US plant. Since it opened in 1994, the company had made and continues to make several strategic production decisions. Figure 2-6 shows changes to its production possibilities frontier in response to some of these production strategies.

Refer to Figure 2-6. In response to changing consumer demands, BMW has cut back on the production of coupes and increased its production of SUVs. This strategy is best represented by

: movement from E to F in Graph A.

movement from G to H in Graph B.

movement from K to L in Graph C.

movement from J to H in Graph B.

Question 9. Question :

Figure 2-7

Figure 2-7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.

Refer to Figure 2-7. Which country has a comparative advantage in the production of cashews?

Indonesia

They have equal productive abilities.

Pakistan

neither country

Question 10. Question :

Table 2-3

Table 2-3 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.

Refer to Table 2-3. What is South Korea’s opportunity cost of producing one pound of wheat?

5 digital cameras

60 digital cameras

20 digital cameras

0.05 units of a digital camera

KAPLAN MT445 UNIT 2 QUIZ

1. Question : The law of demand implies, holding everything else constant, that

as the price of bagels increases, the quantity of bagels demanded will decrease.

as the price of bagels increases, the demand for bagels will decrease.

as the price of bagels increases, the quantity of bagels demanded will increase.

as the price for bagels increases, the demand of bagels will increase.

Question 2. Question : Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase?

An increase in consumer income.

A drought that sharply reduces barley output.

A decrease in consumer income.

Unusually good weather that results in a bumper crop of barley.

Question 3. Question : Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production. What happens in the Australian wool market as a result of this announcement?

The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future.

The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.

The supply curve for Australian wool shifts to the right in anticipation of higher prices in the future.

The supply curve for Australian wool shifts to the left in anticipation of lower quantities in the future.

Question 4. Question : George Gnat subscribes to a monthly pest control service for his home. Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?

There is an increase in the supply of pest control services.

There is a decrease in the demand for pest control services.

There is a decrease in the quantity supplied of pest control services.

There is a decrease in the supply of pest control services.

Question 5. Question : How does the increasing use of digital cameras affect the market for traditional camera film?

The demand curve for traditional camera film shifts to the right.

The supply curve for traditional camera film shifts to the left.

The supply curve for traditional camera film shifts to the right.

The demand curve for traditional camera film shifts to the left.

Question 6. Question : Table 4-3

Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.

Refer to Table 4-3. If a minimum wage of \$7.50 an hour is mandated, what is the quantity of labor supplied?

390,000

370,000

340,000

380,000

Question 7. Question : Figure 4-5

Refer to Figure 4-5. The figure above represents the market for iced tea. Assume that this is a competitive market. If 20,000 units of iced tea are sold

the deadweight loss is equal to economic surplus.

producer surplus equals consumer surplus.

the marginal benefit of each of the 20,000 units of iced tea equals \$3.

marginal benefit is equal to marginal cost.

Question 8. Question : In Singapore the government places a \$5,000 tax on the buyers of new automobiles. After the purchase of a new car, a buyer must pay the government \$5,000. How would the imposition of the tax on buyers be illustrated in a graph?

The tax will shift the demand curve to the right by \$5,000.

The tax will shift the demand curve to the left by \$5,000.

The tax will shift both the demand and supply curve to the right by \$5,000.

The tax will shift the supply curve to the left by \$5,000.

Question 9. Question : In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is

rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is.

landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others.

because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows.

the legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging their tenants more than the maximum rent.

Question 10. Question : Figure 4-7

Figure 4-7 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.

Refer to Figure 4-7. What area represents consumer surplus after the imposition of the price floor?

A + B + E

A + B

A + B + E + F

A

KAPLAN MT445 UNIT 3 QUIZ

1. Question : The internet has made it easy for consumers to buy books online. As a result, many traditional booksellers like Barnes & Noble and Borders (starting in 2008) along with Amazon sell books on their websites. What effect will the internet have on the demand curve that any bookstore faces?

The demand facing a bookstore will become more elastic.

The demand facing a bookstore will become more inelastic.

The demand facing a bookstore becomes horizontal.

The price elasticity of demand remains unchanged; only the cross-price elasticity

changes.

Question 2. Question : Suppose the value of the price elasticity of supply is 4. What does this mean?

A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.

A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.

A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.

For every \$1 increase in price, quantity supplied increases by 4 units.

Question 3. Question : Figure 6-4

Refer to Figure 6-4. Which of the following statements is true about the price elasticity of demand?

The elasticity coefficient is constant along the demand curve.

The elastic portion of straight-line downward sloping demand curve corresponds to the segment above the midpoint.

The inelastic portion of the demand curve corresponds to the segment above the midpoint.

At the midpoint of the demand curve, the elasticity coefficient is zero.

Question 4. Question : When demand is unit price elastic, a change in price causes total revenue to stay the same because

the percentage change in quantity demanded exactly offsets the percentage change in price.

total revenue never changes with price changes.

the change in profit is offset by the change in production cost.

Question 5. Question : Consider the following pairs of items:

Which of the pairs listed will have a positive cross-price elasticity?

a and b only

c and d only

e only

a, b, and c only

Question 6. Question : Which of the following is a reason why some firms do not use commission pay?

It gives workers incentive to produce more.

It increases firm profits.

It is difficult to measure the output and attribute output to a particular worker.

The best workers stay and less productive workers leave.