Question

11. If a country allows free trade and its domestic price for a given good is lower than the world price, then it will import that good.

a. True
b. False

12. If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the

a. consumer has consumer surplus of $5 if he buys the good.

b. consumer does not purchase the good.

c. price of the good will rise due to market forces.

d. market is out of equilibrium

13.  If the price elasticity of demand is equal to 1, then demand is unit elastic.

a. True
b. False

15. Suppose a gardener produces both tomatoes and squash in his garden. If the opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity cost of 1 bushel of tomatoes is

a. 2/5 bushel of squash.

b. 5/2 bushels of squash.

c. 2 bushels of squash.

d. 5 bushels of squash.

16. Rational people make decisions at the margin by

a. following marginal traditions.

b. behaving in a random fashion.

c. thinking in black-and-white terms.

d. comparing marginal costs and marginal benefits.

Answer 1

11- False

If domestic price is lower than world price for a good, then country will export that good.

12- (B)

If consumer's willingness to pay ($20) exceeds the price that he has to pay ($25) then he won't purchase that good.

13- True

15- (B)

opportunity cost of one bushel of squash = 2/5 bushel of tomatoes

opportunity cost of one bushel of tomatoes = 5/2 bushel of squash

Ans.16- (D)

Marginal costs and marginal benefits are compared in order to make decisions.