Question

Please Check the wrong ones!

1. Which of the following best describes scarce resources?

a. Resources for which the quantity that people want exceeds the quantity that is freely available

b. Resources that most people cannot afford to buy

c. Resources for which the quantity demanded is the same for all economic agents

d. Resources that can only be distributed efficiently by the government

2. Which of the following statements is true of models?

a. It is more important for a model to be simple and useful than to be precisely accurate.

b. The predictions of a model are referred to as data.

c. A model is formulated after developing a hypothesis.

d. Models are always based on assumptions that are known to be true.

3. Optimization can be achieved using either of two techniques of cost-benefit analysis. Which of the following correctly identifies the techniques?

a. Optimization using total value and optimization using marginal analysis

b. Optimization using total value and optimization using profits

c. Optimization using marginal analysis and optimization using costs

d. Optimization in revenues and optimization using costs

4. Optimization using marginal analysis analyzes ________.

a. the change in the net benefits resulting from a shift from one alternative to another

b. the total net benefits of the alternative that looks the most attractive

c. the total net benefits of different alternatives

d. only the costs of an alternative and not the benefits

5. The willingness to pay for a commodity ________.

a. increases as consumption of the commodity increases

b. decreases as consumption of the commodity increases

c. is always greater than the market price of the commodity

d. is always less than the market price of the commodity

6. Other things remaining the same, a leftward shift in the supply curve will lead to a(n) ________.

a. decrease in the equilibrium price and the equilibrium quantity

b. decrease in the equilibrium price and an increase in the equilibrium quantity

c. increase in the equilibrium price and the equilibrium quantity

d. increase in the equilibrium price and a decrease in the equilibrium quantity

7. In a perfectly competitive market, situations of surplus or shortage of a good ________.

a. can exist simultaneously

b. self-correct due to the competitive nature of the market

c. are permanent phenomena

d. exist until the government or any ruling authority intervenes

8. In a perfectly competitive market, the market clearing price is ________ the equilibrium price.

a. always higher than

b. always equal to

c. always lower than

d. unrelated to

9. Which of the following was an effect of the price ceiling placed on gasoline in the United States in the 1970s?

a. Car owners started buying luxury cars that were less fuel efficient as the price of gas was very low.

b. Gas stations ran out of gas as the quantity of gas demanded exceeded the quantity supplied.

c. Those who valued gas the most were able to buy gas under the price ceiling.

d. The inventory of unsold gas increased, and gas stations incurred losses.

10. If a consumer purchases any combination of goods on her budget constraint ________.

a. she will maximize her marginal benefit obtained from the consumption of each additional amount of both goods

b. she will maximize her marginal utility obtained from the consumption of each additional amount of both goods

c. she will minimize total utility

d. she will exhaust her entire income

11. Assume that a consumer can spend $20 on two goods–pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumer's budget constraint?

a. 2 pens and 5 pencils

b. 2 pens and 3 pencils

c. 1 pen and 10 pencils

d. 3 pens and 2 pencils

12. A buyer has $20 to spend on rice and beans. Rice costs $2 and beans cost $3 per pound. The buyer is buying the combination of 4 pounds of rice and 4 pounds of beans. At this combination, her marginal benefit from rice is $14 and her marginal benefit from beans is $18. This buyer should ________.

a. buy more rice and less beans

b. buy more of both rice and beans

c. buy less beans and more rice

d. not change his consumption

13. The following table shows the marginal benefit that Marcus derives by consuming different quantities of hotdog and soda. The price of a hotdog is $3, and the price of a soda is $1.

Quantity ​	Soda	Hotdog
​	Marginal Benefits ($)	Marginal Benefits ($)
1	10	18
2	8	12
3	6	6
4	4	3
5	2	1
6	1	0.6

Refer to the table above. What is the optimal combination of Soda and Hotdog for Marcus, if his weekly budget for hotdog and soda is $10?

a. 3 sodas, and 3 hotdogs

b. 6 sodas, and 5 hotdogs

c. 2 sodas, and 4 hotdogs

d. 4 sodas, and 2 hotdogs

14. A change in the slope of a consumer's budget constraint indicates a change in the ________.

a. level of consumer satisfaction obtained from the consumption of both goods

b. price of either good purchased by the consumer

c. consumer's tastes and preferences

d. consumer's income

15. From a firm's point of view, when the demand for a good has a price elasticity of 0.5, then, all things remaining the same, a(n) ________.

a. change in the price of the good will not affect the quantity demanded of the good by consumers

b. increase in the price of the good will increase the firm's revenue

c. increase in the price of the good will decrease the firm's revenue

d. change in the price of the good will not affect the firm's revenue

16. In a perfectly competitive market, an individual seller sells only a negligible fraction of the total amount of the good produced. This is why ________.

a. his individual choices do not affect market price

b. he can independently determine the market price

c. he always earns positive profits

d. he can charge prices above the equilibrium price

17. Which of the following business is most likely to have the largest amount (or value) of fixed input?

a. An airline company

b. A law firm

c. A barber shop

d. A lawn-care service

18. Marginal cost is the ________.

a. change in total cost from producing one more unit of output

b. cost(s) a firm must pay even if it produces zero output

c. total cost of producing a given level of output

d. average cost of producing a given level of output

19. A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is $1,000. What is the best decision for this firm in the short run?

a. This firm should shut down production.

b. This firm should produce more than what it is currently producing.

c. This firm should not shut down production.

d. There is not enough information provided to answer.

Answer 1

Answer 1:

Option A. Scarce Resource are the resources for which quantity that people demand is higher than the quantity that is freely available. There is shortage of scarce resources.

Answer 2:

Option D. Models are always based on assumptions that are known to be true. Model can be developed only on the basis of set of assumptions.

Answer 3:

Option A. Optimization technique involves optimization using total value and also optimization using marginal analysis.

Answer 4:

Option a. Optimization using marginal analysis analyses the change in the net benefits resulting from a shift from one alternative to another alternative.