MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) A store remains open from 8 a.m. to 4 p.m. each weekday. The store owner is deciding whether to 1)
stay open an extra hour each evening. The owner's marginal benefit
A) is the benefit the owner receives from staying open from 8 a.m. to 5 pm.
B) is the benefit the owner receives from staying open from 8 a.m. to 6 pm.
C) must be greater than or equal to the owner's marginal cost if the owner decides to stay open.
D) depends on the revenues the owner makes during the day.

2) "Governments should act to reduce poverty levels." 2)

A) This statement is an example of the fallacy of composition.
B) This statement is an example of the post hoc fallacy.
C) This statement is a positive statement.
D) This statement is a normative statement.

3) Ockham's razor is another term for abstraction in economics. This term stands for the ______ 3)
A) alternative we must forego when making a decision.
B) principle that irrelevant details could be excluded in an economic model.
C) the principle that costs which have been incurred cannot be avoided.
D) the principle that firms must cut costs to maximize profits.
E) razor that Ockham gave as a gift to Adam Smith to shave his beard.

4) Whenever I take an exam in the morning I do well; whenever I take an exam in the evening I fail. 4)
This statement is an example of
A) ceteris paribus fallacy.
B) fallacy of inductive reasoning.
C) post hoc, ergo prompter hoc fallacy.
D) fallacy of composition.
E) positive statement.

5) The fallacy of composition is the error of______ 5)

A) not writing a title when writing a composition.
B) assuming what is true for one is true for all.
C) not knowing how to start a composition.
D) assuming what is true for all is true for one.
E) Adam Smith when he composed the principle of the "invisible hand".

6) Which of the following is NOT illustrated by a production possibilities frontier? 6)

A) necessity for choice
B) who gets what
C) scarcity
D) opportunity cost
E) what to produce

7) The president of Brazil promises to produce more consumption goods without any decreases in the 7)
production of other goods, ceteris paribus. This promise can be valid
A) only if the production possibilities frontier shifts rightward.
B) if Brazil is producing at a point beyond its production possibilities frontier.
C) if Brazil is producing at a point on its production possibilities frontier.
D) if Brazil is producing at a point inside its production possibilities frontier.
E) only if Brazil makes huge profits from the World Cup.

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 8) A tradeoff is illustrated by 8)
A) a point outside the PPF.
B) a point inside the PPF.
C) the increasing slope of the PPF.
D) the negative slope of the PPF.
E) all the above.

Production of grain Production of cars

Point
(tons) (cars)
A 0 30
B 2 28
C 4 24
D 6 18
E 8 10
F 10 0

9) The table above lists six points on the production possibilities frontier for grain and cars. Given this 9)
information, which of the following combinations is unattainable?
A) 4 tons of grain and 26 cars B) 6 tons of grain and 18 cars
C) 2 tons of grain and 27 cars D) 7 tons of grain and 10 cars

10) The table above lists six points on the production possibilities frontier for grain and cars. From this 10)
information you can conclude that production is inefficient if this economy produces
A) 4 tons of grain and 26 cars. B) 6 tons of grain and 18 cars.
C) 2 tons of grain and 27 cars. D) 8 tons of grain and 10 cars.

11) The table above lists six points on the production possibilities frontier for grain and cars. What is 11)
the opportunity cost of producing the 5th ton of grain?
A) 2 cars per ton of grain B) 16 cars per ton of grain
C) 6 cars per ton of grain D) 3 cars per ton of grain

12) The table above lists six points on the production possibilities frontier for grain and cars. What is 12)
the opportunity cost of producing the 26th car?
A) 4 tons of grain per car B) 0.25 tons of grain per car
C) 0.5 tons of grain per car D) 2 tons of grain per car

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13) The opportunity cost of moving from point a to point b in the above figure is ________. 13)
A) zero
B) 2 sweaters
C) 3/2 pairs of socks per sweater
D) 3 pairs of socks
E) 1 sweater and 1 pair of socks

14) The opportunity cost at point b in the figure ________ point a. 14)
A) is the same as
B) is greater than at
C) cannot be compared with
D) is less than at
E) zero at point b and at point a

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15) Abe can catch 10 pounds of fish an hour or pick 10 pounds of fruit. Zeb can catch 30 pounds of fish 15)
an hour or pick 20 pounds of fruit. The opportunity cost of fish is ________ for Abe than for Zeb,
and the opportunity cost of fruit is ________ for Abe than for Zeb.
A) higher, lower B) higher, higher C) lower, lower D) lower, higher

16) In the figure above, suppose that Mac and Izzie trade and reach point c. Then 16)
A) neither Mac nor Izzie produce outside their production possibilities frontiers.
B) Izzie produces outside her production possibilities frontier.
C) Mac produces outside his production possibilities frontier.
D) Mac and Izzie both produce outside their production possibilities frontiers.

17) In the figure above, if Mac and Izzie both completely specialized and traded with one another, 17)
their joint output would be
A) 12 computers and 12 TV sets per month. B) 3 computers and 3 TV sets per month.
C) 6 computers and 6 TV sets per month. D) 24 computers and 24 TV sets per month.

18) In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends 18)
Izzie
A) 12 computers in exchange for 12 TVs.
B) 12 computers in exchange for 6 TVs.
C) 6 computers in exchange for 6 TVs.
D) 6 computers in exchange for 12 TVs.
E) 6 TVs in exchange for 6 computers.

19) For consumers, goods A and B are complementary goods. The cost of a resource used in the 19)
production of A decreases. As a result,
A) the equilibrium prices of both A and B will fall.
B) the equilibrium price of B will fall and the equilibrium price of A will rise.
C) the equilibrium prices of both A and B will rise.
D) the equilibrium price of B will rise and the equilibrium price of A will fall.

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20) Coffee and sugar are complements. If a poor sugar harvest leads to an increase in the price of 20)
sugar, there will also be
A) a rightward shift in the demand curve for coffee.
B) a leftward shift of the supply curve of coffee.
C) an increase in the price of coffee.
D) a decrease in the price of coffee.

21) Until 2007, the price of sport utility vehicles (SUVs) rose although dealers were selling more . This 21)
experience suggests that
A) there must have been a rightward shift of the demand curve for SUVs.
B) there must have been technological advances in the way SUVs are produced.
C) there must have movement leftward along the supply curve for SUVs.
D) the "law of demand" does not hold true in this market.

22) Beef and leather belts are complements in production. If people's concern about health shifts the 22)
demand curve for beef leftward, the result in the market for leather belts will be a
A) lower equilibrium price for a leather belt because there is an increase in the supply of leather
belts.
B) higher equilibrium price for a leather belt because there is a decrease in the supply of leather
belts.
C) lower equilibrium price for a leather belt because there is a decrease in the demand for
leather belts.
D) higher equilibrium price for a leather belt because there is an increase in the demand for
leather belts.

23) The equilibrium quantity of a good will decrease and its equilibrium price might rise, fall, or stay 23)
the same when
A) its demand and supply both decrease.
B) its demand and supply both increase.
C) its demand decreases and supply increases.
D) its demand increases and supply decreases.
E) none of the above.

24) Between 2000 and 2010, the price of a PC fell and the quantity of PCs sold increased. Which of the 24)
explanations below is consistent with these facts?
A) Both the supply of PCs and the demand for PCs decreased.
B) The demand for PCs decreased by more than the supply of PCs increased.
C) The demand for PCs increased by more then the supply of PCs increased.
D) The supply of PCs increased by more than the demand for PCs increased.

25) Flights to Paris are a normal good and people's incomes rise. At the same time, the price of jet fuel 25)
rises. The equilibrium price of a flight to Paris ________ and the equilibrium quantity of flights to
Paris ________.
A) might rise, fall, or not change; increases
B) rises; might increase, decrease, or not change
C) falls; decreases.
D) rises; increases

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26) Which of the following always raises the equilibrium price? 26)
A) an increase in demand combined with a decrease in supply
B) a decrease in both demand and supply
C) an increase in both demand and supply
D) a decrease in demand combined with an increase in supply

27) A kilogram = 2.2 pounds. When the quantity of coal is measured in kilograms instead of pounds, 27)
the demand for coal becomes
A) less elastic. B) more elastic.
C) neither more nor less elastic. D) undefined.

28) A dollar = 100 cents. Suppose the quantity of gasoline is measured in gallons and the price of 28)
gasoline is measured in dollars. The price elasticity of demand is 0.67. If the price of gasoline was
now measured in cents rather than dollars, the price elasticity of demand would now be
A) 0.67. B) 0.0067. C) 6.7. D) 67.0.

29) A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg 29)
purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens;
in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price
elasticity of demand is therefore
A) the same in Philadelphia as in Dover.
B) lower in the smaller city as would be expected.
C) greater in the smaller city as would be expected.
D) certainly affected by population differences in different markets.

30) To maximize its revenue, 30)

A) a firm facing elastic demand should always raise its price.
B) a firm should always charge the highest price possible regardless of the elasticity of demand.
C) a firm facing inelastic demand should always raise its price.
D) None of the above answers is correct.

31) If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it 31)
lowered price from $350.00 to $300.00, then its demand for season tickets must be ________
because total revenue ________ when the price was lowered.
A) inelastic; increased B) elastic; decreased
C) inelastic; decreased D) elastic; increased

32) The demand for midsize automobiles is probably 32)

A) elastic, and more elastic than the demand for automobiles.
B) elastic, but less elastic than the demand for automobiles.
C) inelastic, but more elastic than the demand for automobiles.
D) inelastic, and less elastic than the demand for automobiles.

33) The ________ the portion of your income spent on a good, the ________ is your demand for the 33)
good.
A) smaller; less price elastic B) larger; more income elastic
C) larger; more price inelastic D) smaller; more income elastic

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34) The elasticity of demand along the demand curve shown in the above figure is constant and equal 34)
to 1. Thus,
A) area 0BCF equals area 0AGF.
B) area 0BCF equals area FGDE.
C) area ABCG equals area 0AGF.
D) area ABCG equals area FGDE.
E) none of the above because the area is irrelevant.

35) If a price hike of 5 percent increases the quantity demanded of another good by 2 percent, the 35)
goods must be ________ and the cross elasticity of demand equals ________.
A) substitutes; 2.5 B) complements; 2.5
C) complements; 0.40 D) substitutes; 0.40

36) Based on the following pieces of information, which fast food product do consumers see as the 36)
closest substitute for Wendy's Hamburgers?
A) McDonalds hamburgers, which have a cross elasticity of 1.01 with Wendy's
B) Taco Bell tacos, which have a cross elasticity of -1.25 with Wendy's
C) Kentucky Fried Chicken, which has a cross elasticity of 1.70 with Wendy's
D) Pizza Hut pizza, which has a cross elasticity of zero with Wendy's
E) I don't know, I have never heard of these fast foods, I am a vegetarian.

37) If there is an increase in the price of broccoli because of disastrous weather that destroys about half 37)
of this year's spinach crop, which of the following could be true?
A) The demand curve for broccoli has shifted rightward and the cross elasticity of demand
between spinach and broccoli is positive.
B) The cross elasticity of demand between spinach and broccoli is negative 1.25.
C) The demand curves for spinach and broccoli have become more cross inelastic.
D) The demand curve for spinach has shifted to the leftward and the cross elasticity of demand
between spinach and broccoli is positive.

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38) The figure shows the relationship between Moira's income and the quantity of macaroni that she 38)
demands. Hence, macaroni ________.
A) is superior before $350, and inferior above $350.
B) is inferior before $350, and superior above $350.
C) has many substitutes.
D) is always a normal good because whatever her income, she still consumes macaroni.
E) none of the above.

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39) In the above figure, the price elasticity of supply at any given price is 39)
A) highest along S1 , next highest along S2, and lowest along S3 .
B) equal to zero on each of the three supply curves.
C) equal to one on each of the three supply curves.
D) highest along S3 , next highest along S2, and lowest along S1 .

40) At a price of $4, quantity supplied is 100; and at a price of $6, quantity supplied is 120. Using the 40)
midpoint formula, the price elasticity of supply is ________ and supply is ________.
A) 2.2; elastic B) 10; elastic C) 0.1; inelastic D) 0.45; inelastic

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Answer Key
Testname: 211 MT SUMMER 16

1) C
2) D
3) B
4) C
5) B
6) B
7) D
8) D
9) A
10) C
11) D
12) C
13) A
14) D
15) A
16) A
17) A
18) C
19) D
20) D
21) A
22) B
23) A
24) D
25) B
26) A
27) C
28) A
29) A
30) C
31) C
32) A
33) A
34) D
35) D
36) C
37) A
38) A
39) C
40) D

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