Question 1

Which of the following statements is true?

Accepted Answer

A)  Endogenous changes to demand and supply curves cause them to shift. 
B)  Exogenous changes can never affect both the demand and supply curves. 
C)  Exogenous changes can sometimes affect both the demand and supply curves. 
D)  Movement along a demand curve means that only an endogenous factor is changing. 
A)  Endogenous changes to demand and supply curves cause them to shift. 
B)  Exogenous changes can never affect both the demand and supply curves. 
C)  Exogenous changes can sometimes affect both the demand and supply curves. 
D)  Movement along a demand curve means that only an endogenous factor is changing.

Question 2

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many units of A and B should he/she purchase?

Accepted Answer

A)  2 units of A and 4 units of B. 
B)  4 units of A and 3 units of B. 
C)  6 units of A and 2 units of B. 
D)  0 units of A and 5 units of B. 
A)  2 units of A and 4 units of B. 
B)  4 units of A and 3 units of B. 
C)  6 units of A and 2 units of B. 
D)  0 units of A and 5 units of B.

Question 3

Suppose that market demand for a good slopes downward and market supply slopes upward. Equilibrium price is now $10 and 500,000 units of the good are traded at this price. Suppose now that the cost at which each unit of the good is produced falls. What is the likely effect of this change on the market equilibrium?

Accepted Answer

A)  Excess supply. 
B)  A fall in price. 
C)  A shift in demand to the right. 
D)  An increase in price. 
A)  Excess supply. 
B)  A fall in price. 
C)  A shift in demand to the right. 
D)  An increase in price.

Question 4

A good example of marginal reasoning would be

Accepted Answer

A)  the addition to total sales from spending an additional dollar on advertising. 
B)  the sales resulting from total spending on advertising. 
C)  the decision to shut down production. 
D)  the decision to maximize profits rather than sales. 
A)  the addition to total sales from spending an additional dollar on advertising. 
B)  the sales resulting from total spending on advertising. 
C)  the decision to shut down production. 
D)  the decision to maximize profits rather than sales.

Question 5

An example of constrained optimization would be

Accepted Answer

A)  a firm trying to maximize its profits subject to its budget constraint. 
B)  a ball coming to rest at the bottom of a cup. 
C)  an analysis of how market prices change when supply conditions change. 
D)  An analysis of the effect of facilitating internet trading on market price. 
A)  a firm trying to maximize its profits subject to its budget constraint. 
B)  a ball coming to rest at the bottom of a cup. 
C)  an analysis of how market prices change when supply conditions change. 
D)  An analysis of the effect of facilitating internet trading on market price.

Question 6

Another term for equilibrium would be

Accepted Answer

A)  a point of infinite supply. 
B)  a point of insatiable wants. 
C)  a point of stability. 
D)  a point of scarcity. 
A)  a point of infinite supply. 
B)  a point of insatiable wants. 
C)  a point of stability. 
D)  a point of scarcity.

Question 7

Constrained optimization occurs when:

Accepted Answer

A)  An individual makes choices that are influenced by his/her parents and family. 
B)  An individual makes choices that best suit his/her preferences. 
C)  Firms choose the best products to meet their client's needs. 
D)  An individual is forced to choose between competing alternatives subject to some limitation such as budgetary considerations. 
A)  An individual makes choices that are influenced by his/her parents and family. 
B)  An individual makes choices that best suit his/her preferences. 
C)  Firms choose the best products to meet their client's needs. 
D)  An individual is forced to choose between competing alternatives subject to some limitation such as budgetary considerations.

Question 8

Currently, 100,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will:

Accepted Answer

A)  create excess supply. 
B)  create excess demand. 
C)  raise price 
D)  have no effect on the market. 
A)  create excess supply. 
B)  create excess demand. 
C)  raise price 
D)  have no effect on the market.

Question 9

Which of the following statements regarding exogenous and endogenous variables is correct?

Accepted Answer

A)  The set of exogenous variables in any economic model should take into account the rich detail of the world and so should be limitless. 
B)  Endogenous variables will always be determined within the model. 
C)  Exogenous variables change as a result of changes in endogenous variables. 
D)  The only variables that are relevant to the market equilibrium are the endogenous variables, as they are determined within the model. 
A)  The set of exogenous variables in any economic model should take into account the rich detail of the world and so should be limitless. 
B)  Endogenous variables will always be determined within the model. 
C)  Exogenous variables change as a result of changes in endogenous variables. 
D)  The only variables that are relevant to the market equilibrium are the endogenous variables, as they are determined within the model.

Question 10

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Accepted Answer

A)  A change in income will cause a shift in the supply curve. 
B)  A change in income level is represented by a movement along the demand curve. 
C)  Income is not represented on one of the axes, and so is treated as an exogenous variable in the graphical analysis. 
D)  Price and income together must change in order to create a shift in the demand curve. 
A)  A change in income will cause a shift in the supply curve. 
B)  A change in income level is represented by a movement along the demand curve. 
C)  Income is not represented on one of the axes, and so is treated as an exogenous variable in the graphical analysis. 
D)  Price and income together must change in order to create a shift in the demand curve.

Question 11

Economics is often described as

Accepted Answer

A)  The science of choice 
B)  The science of constrained choice 
C)  The science of supply and demand 
D)  The science of market forces 
A)  The science of choice 
B)  The science of constrained choice 
C)  The science of supply and demand 
D)  The science of market forces

Question 12

An equilibrium

Accepted Answer

A)  is a condition that is reached eventually in any market. 
B)  is a state that will continue indefinitely as long as exogenous factors remain unchanged. 
C)  is a concept that is often meaningless because most markets never reach equilibrium. 
D)  is a temporary state. 
A)  is a condition that is reached eventually in any market. 
B)  is a state that will continue indefinitely as long as exogenous factors remain unchanged. 
C)  is a concept that is often meaningless because most markets never reach equilibrium. 
D)  is a temporary state.

Question 13

Which of the following statements about positive analysis is correct?

Accepted Answer

A)  Positive analysis prescribes the best solution to an economic problem. 
B)  Positive analysis predicts how an economic system will change over time. 
C)  While normative analysis can be wrong, since it is often based on someone's opinion, positive analysis is always accurate. 
D)  Since positive analysis is based on a model, and not the real world, it is mostly irrelevant. 
A)  Positive analysis prescribes the best solution to an economic problem. 
B)  Positive analysis predicts how an economic system will change over time. 
C)  While normative analysis can be wrong, since it is often based on someone's opinion, positive analysis is always accurate. 
D)  Since positive analysis is based on a model, and not the real world, it is mostly irrelevant.

Question 14

Suppose the price of $A$ is $3, the price of $B$ is $5, the consumer's income is $30, and the consumer's level of satisfaction is measured by $A + B$ . The consumer's income constraint is

Accepted Answer

A)  $\max 3 A + 5 B$ 
B)  $\max A + B$ 
C)  $A + B \leq 30$ 
D)  $3 A + 5 B \leq 30$ 
A)  $\max 3 A + 5 B$ 
B)  $\max A + B$ 
C)  $A + B \leq 30$ 
D)  $3 A + 5 B \leq 30$

Question 15

An exogenous variable in a consumer's choice problem would typically be:

Accepted Answer

A)  satisfaction level. 
B)  consumption level. 
C)  price level. 
D)  quantity consumed. 
A)  satisfaction level. 
B)  consumption level. 
C)  price level. 
D)  quantity consumed.

Question 16

Movements along a demand curve caused by a change in price probably means that:

Accepted Answer

A)  There has been an endogenous shift in the demand curve. 
B)  There has been an exogenous shift in the demand curve. 
C)  There has been a shift in an exogenous factor that affects supply. 
D)  The supply curve is not shifting. 
A)  There has been an endogenous shift in the demand curve. 
B)  There has been an exogenous shift in the demand curve. 
C)  There has been a shift in an exogenous factor that affects supply. 
D)  The supply curve is not shifting.

Question 17

Which of the following represents an example of positive analysis?

Accepted Answer

A)  How will the equilibrium price of corn be affected by a government subsidy? 
B)  What is the best way to assist low-income families with affordable housing? 
C)  Would taxes on emissions be the best way to reduce pollution? 
D)  How can the government best design a tax cut? 
A)  How will the equilibrium price of corn be affected by a government subsidy? 
B)  What is the best way to assist low-income families with affordable housing? 
C)  Would taxes on emissions be the best way to reduce pollution? 
D)  How can the government best design a tax cut?

Question 18

Which of the following is the best example of a consumer's objective function?

Accepted Answer

A)  profits. 
B)  consumption. 
C)  satisfaction 
D)  budget constraint. 
A)  profits. 
B)  consumption. 
C)  satisfaction 
D)  budget constraint.

Question 19

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Accepted Answer

A)  A change in income will cause a shift in the demand curve. 
B)  A change in income level is represented by a movement along the demand curve. 
C)  Income is treated as an exogenous variable in the graphical analysis. 
D)  Price and income together must change in order to create a shift in the demand curve. 
A)  A change in income will cause a shift in the demand curve. 
B)  A change in income level is represented by a movement along the demand curve. 
C)  Income is treated as an exogenous variable in the graphical analysis. 
D)  Price and income together must change in order to create a shift in the demand curve.

Question 20

Which of the following statements has neither positive nor normative aspects to it?

Accepted Answer

A)  On hot days, people drink more water. 
B)  Hot weather leads to greater numbers of heat exhaustion cases. 
C)  Providing free space heaters to poor people can reduce certain types of respiratory illness. 
D)  Hot weather is desirable. 
A)  On hot days, people drink more water. 
B)  Hot weather leads to greater numbers of heat exhaustion cases. 
C)  Providing free space heaters to poor people can reduce certain types of respiratory illness. 
D)  Hot weather is desirable.

Which of the following statements is true?

Suppose a consumer's level of satisfaction is given by AB² and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many units of A and B should he/she purchase?

A good example of marginal reasoning would be

An example of constrained optimization would be

Another term for equilibrium would be

Constrained optimization occurs when:

Currently, 100,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will:

Which of the following statements regarding exogenous and endogenous variables is correct?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Q^d (P, I). Which of the following statements is true?

Economics is often described as

An equilibrium

Which of the following statements about positive analysis is correct?

Suppose the price of $A$ is $3, the price of $B$ is $5, the consumer's income is $30, and the consumer's level of satisfaction is measured by $A + B$ . The consumer's income constraint is

An exogenous variable in a consumer's choice problem would typically be:

Movements along a demand curve caused by a change in price probably means that:

Which of the following represents an example of positive analysis?

Which of the following is the best example of a consumer's objective function?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Q^d (P, I). Which of the following statements is true?

Which of the following statements has neither positive nor normative aspects to it?

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 1: Analyzing Economic Problems

Which of the following statements is true?

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many units of A and B should he/she purchase?

A good example of marginal reasoning would be

An example of constrained optimization would be

Another term for equilibrium would be

Constrained optimization occurs when:

Currently, 100,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will:

Which of the following statements regarding exogenous and endogenous variables is correct?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Economics is often described as

An equilibrium

Which of the following statements about positive analysis is correct?

Suppose the price of AAA is $3, the price of BBB is $5, the consumer's income is $30, and the consumer's level of satisfaction is measured by A+BA + BA+B . The consumer's income constraint is

An exogenous variable in a consumer's choice problem would typically be:

Movements along a demand curve caused by a change in price probably means that:

Which of the following represents an example of positive analysis?

Which of the following is the best example of a consumer's objective function?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Which of the following statements has neither positive nor normative aspects to it?

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Suppose a consumer's level of satisfaction is given by AB² and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many units of A and B should he/she purchase?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Q^d (P, I). Which of the following statements is true?

Suppose the price of $A$ is $3, the price of $B$ is $5, the consumer's income is $30, and the consumer's level of satisfaction is measured by $A + B$ . The consumer's income constraint is

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Q^d (P, I). Which of the following statements is true?