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Economics 2410-001 Exam 1
Multiple Choice
You have 1 hour and 30 minutes to complete the following multiple choice examination. There are a total of 33 questions
worth 3 points each. Identify the letter of the choice that best completes the statement or answers the question. You are
expected to complete your work in accordance with the honor code.
____ 1. Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December and you
will start a new job in January. You have no plans to purchase hot dogs in January. For you, hot dogs are
a. a law-of-demand good.
b. a normal good.
c. a substitute good.
d. an inferior good.
____ 2. The price at which quantity supplied equals quantity demanded is called the
a. monopoly price.
b. equilibrium price.
c. coordinating price.
d. All of the above are correct.
____ 3. Lead is an important input in the production of crystal. If the price of lead decreases, other things equal, we
would expect the supply of
a. crystal to be unaffected.
b. crystal to increase.
c. crystal to decrease.
d. lead to increase.
____ 4. What you give up to obtain an item is called your
a. opportunity cost.
b. true cost.
c. direct cost.
d. explicit cost.
Figure 2-6
____ 5. Refer to Figure 2-6. What is the opportunity cost to society of the movement from point A to point C?
a. 100 baseballs
b. 300 bananas
c. 100 bananas
d. 50 baseballs
____ 6. Refer to Figure 2-6. If the economy moves from point C to point B, then which of the following statements
is correct?
a. The opportunity cost of each additional banana is 2 baseballs.
b. The move involves no opportunity cost; it simply reflects the desires of the economy’s
citizens.
c. The economy benefited from a technological advance in the production of baseballs.
d. The opportunity cost of each additional baseball is 2 bananas.
____ 7. Refer to Figure 2-6. A movement from point C to point D could be caused by
a. fewer resources available for production of bananas.
b. a decrease in society's preference for bananas.
c. unemployment.
d. All of the above are correct.
____ 8. Efficiency means that
a. society is conserving resources in order to save them for the future.
b. society's goods and services are distributed equally among society's members.
c. society's goods and services are distributed fairly, though not necessarily equally, among
society's members.
d. society is getting the maximum benefits from its scarce resources.
____ 9. Production possibilities frontiers are usually bowed outward. This is because
a. the more resources a society uses to produce one good, the fewer resources it has available
to produce another good.
b. of the effects of technological change.
c. resources are specialized, that is, some are better at producing particular goods rather than
other goods.
d. it reflects the fact that the opportunity cost of producing a good decreases as more and
more of that good is produced.
____ 10. Which of the following events would cause the price of oranges to fall?
a. There is a shortage of oranges.
b. An article is published in which it is claimed that tangerines cause a serious disease, and
oranges and tangerines are substitutes.
c. The price of land throughout Florida decreases, and Florida produces a significant
proportion of the nation’s oranges.
d. All of the above are correct.
____ 11. Which of these statements is a normative statement (as opposed to a positive statement)?
a. Gasoline prices ought to be lower than they are now.
b. The social security system is a good system and it deserves to be preserved as it is.
c. The federal government should raise taxes on wealthy people.
d. All of the above are normative statements.
____ 12. Suppose the number of buyers in a market increases and a technological advancement occurs also. What
would we expect to happen in the market?
a. The equilibrium price would increase, but the impact on the amount sold in the market
would be ambiguous.
b. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
c. The equilibrium price would decrease, but the impact on the amount sold in the market
would be ambiguous.
d. Both equilibrium price and equilibrium quantity would increase.
____ 13. Suppose Spencer and Kate are the only two demanders of lemonade. Each month, Spencer buys six glasses of
lemonade when the price is $1.00 per glass, and he buys four glasses when the price is $1.50 per glass. Each
month, Kate buys four glasses of lemonade when the price is $1.00 per glass, and she buys two glasses when
the price is $1.50 per glass. Which of the following points is on the market demand curve?
a. (quantity demanded = 3, price = $1.50)
b. (quantity demanded = 16, price = $2.50)
c. (quantity demanded = 10, price = $1.00)
d. (quantity demanded = 4, price = $2.50)
____ 14. In the simple circular-flow diagram, the participants in the economy are
a. households and government.
b. elected officials and ordinary citizens.
c. households and firms.
d. firms and government.
____ 15. People generally choose to depend upon others for goods and services. Economists view this interdependence
as
a. a bad thing, since self-sufficiency may become necessary in the future.
b. a good thing, since it allows people to consume more goods and services than they would
otherwise be able to consume.
c. a good thing, since it fosters friendships and bonds that otherwise would never develop.
d. a bad thing, since interdependence reduces people’s self-esteem and causes various social
problems.
Use the accompanying table to answer the following questions:
Table 3-6
Labor hours needed to make one
unit of Amount produced in 40 hours
Cheese Bread Cheese Bread
England 1 2 40 20
Spain 2 8 20 5
____ 16. Refer to Table 3-6. The opportunity cost of 1 unit of cheese in Spain is
a. 1/2 unit of bread.
b. 2 unit of bread.
c. 1/4 unit of bread.
d. 1 unit of bread.
____ 17. Refer to Table 3-6. The opportunity cost of 1 unit of bread in England is
a. 1/2 unit of cheese.
b. 2 units of cheese.
c. 1 unit of cheese.
d. 4 units of cheese.
____ 18. Refer to Table 3-6. England has an absolute advantage in
a. neither good and Spain has an absolute advantage in both goods.
b. cheese and Spain has an absolute advantage in bread.
c. both goods and Spain has an absolute advantage in neither good.
d. bread and Spain has an absolute advantage in cheese.
____ 19. Refer to Table 3-6. England has a comparative advantage in
a. bread and Spain has a comparative advantage in cheese.
b. neither good and Spain has a comparative advantage in both goods.
c. cheese and Spain has a comparative advantage in bread.
d. both goods and Spain has a comparative advantage in neither good.
____ 20. Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative
advantage, England will export which product to Spain?
a. both cheese and bread
b. England cannot benefit from trade with Spain.
c. cheese
d. bread
____ 21. The two loops in the circular-flow diagram represent
a. (i) inputs into production processes and (ii) outputs from production processes.
b. (i) the flows of inputs and outputs and (ii) the flow of dollars.
c. (i) the flow of goods and (ii) the flow of services.
d. (i) the flow of dollars and (ii) other financial flows.
____ 22. Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that
the price of bananas has increased. How would this price increase affect your demand for vanilla pudding?
a. It would be unaffected.
b. It would decrease.
c. It would increase.
d. There is insufficient information given to answer the question.
____ 23. Which of the following events will definitely cause equilibrium quantity to fall?
a. demand and supply both decrease
b. demand decreases and supply increases
c. demand and supply both increase
d. demand increases and supply decreases
____ 24. An example of a firm with market power is a
a. clothing store in Los Angeles.
b. a deli in New York.
c. cable TV provider in St. Louis.
d. family farm in Illinois.
____ 25. If, at the current price, there is a shortage of a good,
a. the market must be in equilibrium.
b. quantity demanded equals quantity supplied.
c. the price is below the equilibrium price.
d. sellers are producing more than buyers wish to buy.
____ 26. The term "productivity"
a. means the same thing as "efficiency."
b. refers to the variety of goods and services from which households can choose when they
shop.
c. is seldom used by economists, as its meaning is not precise.
d. refers to the quantity of goods and services produced from each hour of a worker's time.
____ 27. Economics deals primarily with the concept of
a. poverty.
b. change.
c. scarcity.
d. power.
____ 28. Which of the following is not a characteristic of a perfectly competitive market?
a. Sellers must accept the price the market determines.
b. There are many sellers.
c. Different sellers sell identical products.
d. All of the above are characteristics of a perfectly competitive market.
____ 29. Low rates of inflation are generally associated with
a. low rates of government spending.
b. small or nonexistent government budget deficits.
c. low rates of growth of the quantity of money.
d. low rates of productivity growth.
Table 4-3. The demand schedule below pertains to sandwiches demanded per week.
Quantity
Price
Demanded
$3.00 3
Alfred
$5.00 1
$3.00 4
Belinda
$5.00 2
$3.00 3
Charissa
$5.00 x
____ 30. Refer to Table 4-3. Regarding Alfred and Belinda, for whom are sandwiches a normal good?
a. for Alfred and for Belinda
b. This cannot be determined from the given information.
c. only for Bellinda
d. only for Alfred
____ 31. Refer to Table 4-3. Regarding Alfred and Belinda, whose demand for sandwiches conforms to the law of
demand?
a. only Belinda’s
b. only Alfred’s
c. neither Alfred’s nor Belinda’s
d. both Alfred’s and Belinda’s
____ 32. Factors of production are
a. also called output.
b. assumed to be owned by firms in the circular-flow diagram.
c. used to produce goods and services.
d. abundant in most economies.
____ 33. A dress manufacturer recently has come to expect higher prices for dresses in the near future. We would
expect
a. the dress manufacturer to supply more dresses now than it was supplying previously.
b. no change in the dress manufacturer's current supply; instead, future supply will be
affected.
c. the demand for this manufacturer's dresses to fall.
d. the dress manufacturer to supply fewer dresses now than it was supplying previously.
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