Question

1. If the demand curve is linear and downward-sloping, which of the following would NOT be correct?

		(a) Elasticity and slope will both remain constant along the curve.
		(b) Elasticity will change with a movement down the curve.
		(c) Total revenue will increases before eventually decreasing as quantity demanded increases.
		(d) The upper part of the demand curve is more elastic than the lower section.
		(e) The lower part of the demand curve will be less elastic than the upper section

2. The scarcity principle applies:

		(a) only to market decisions; e.g. buying a car.
		(b) only to non-market decisions; e.g. swimming in the ocean.
		(c) only to those without access to the best resources.
		(d) to decision-making relating to wants and available resources.
		(e) wherever wants for goods and services can be satisfied without incurring opportunity costs.

3. A change in which of the following shifts the market supply curve of paperback books to the right?

		(a) An increase in the number of paperback book suppliers.
		(b) A disease that destroys many trees used for paper manufacture.
		(c) A decrease in the number of paperback book readers.
		(d) An increase in the price of paperback books.
		(e) An increase in the cost of ink used in paperback book production.

4. Accounting costs differ from opportunity costs because:

		(a) accounting costs include implicit costs, whereas opportunity costs do not.
		(b) opportunity costs include implicit costs, whereas accounting costs do not.
		(c) accounting costs include explicit costs, whereas opportunity costs do not.
		(d) opportunity costs include explicit costs, whereas accounting costs do not.
		(e) accounting costs reflect generally accepted accounting principles, whereas economic costs do not.

5. Opportunity cost is best defined as:

		(a) a measure of direct out of pocket expenditures.
		(b) the implicit cost of an action.
		(c) the total value foregone of all feasible alternative actions.
		(d) the highest valued alternative that is sacrificed in making a choice.
		(e) the cost of trade that occurs without specialisation.

Answer 1

1

(a) Elasticity changes from elastic to inelastic along the downward sloping linear demand curve. Slope of the linear demand curve i.e. rise/run will be constant.

2. d) Scarcity when there are limited resources and unlimited wants.

3)

a) An increase in the number of paperback suppliers will shift the supply curve of the paperback books to the right ( increase). This is correct answer.

b) c) and e) will cause the supply curve to shift to the left ( decrease) and are wrong.

d) is a movement along the supply curve as it is price related and is wrong.

4) b) Opportunity costs include explicit and implicit costs, whereas, accounting costs include only explicit costs.

5) d) the next best alternative that is foregone.