Question 1

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income, the equation which summarizes this relationship is:

Accepted Answer

A)  C = 80 + 100Y.
B)  C = 100 + .8Y.
C)  C = 100 + 80Y.
D)  C = 80 + .1Y.E) A) and B)
F) B) and C)

Question 2

The marginal benefit curve is:

Accepted Answer

A)  upward sloping because of increasing marginal opportunity costs.
B)  upward sloping because successive units of a specific product yield less and less extra utility.
C)  downward sloping because of increasing marginal opportunity costs.
D)  downward sloping because successive units of a specific product yield less and less extra utility.E) A) and B)
F) A) and C)

Question 3

Assume that a tradeoff exists in the short run between inflation and unemployment.This relationship means that:

Accepted Answer

A)  a low rate of unemployment causes a low rate of inflation.
B)  the unemployment rate always equals the inflation rate.
C)  less unemployment can be achieved with more inflation.
D)  less unemployment can be achieved with less inflation.E) B) and D)
F) A) and D)

Question 4

Opportunity cost is best defined as:

Accepted Answer

A)  the monetary price of any productive resource.
B)  the amount of labour which must be used to produce one unit of any product.
C)  the ratio of the prices of imported goods to the prices of exported goods.
D)  the amount of one product which must be given up to produce one more unit of another product.E) A) and C)
F) B) and C)

Question 5

In drawing a production possibilities curve we hold constant:

Accepted Answer

A)  the money supply.
B)  the consumer price index.
C)  both technology and resource supplies
D)  resource supplies only.E) A) and B)
F) None of the above

Question 6

If a positive relationship exists between x and y:

Accepted Answer

A)  an increase in x will cause y to decrease.
B)  a decrease in x will cause y to increase.
C)  the relationship will graph as an upsloping line.
D)  the vertical intercept must be positive.E) A) and D)
F) C) and D)

Question 7

Production possibilities (alternatives)   Refer to the above table.For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:

Accepted Answer

A)  achieve economic growth.
B)  use its resources more efficiently than the data in the table now indicate.
C)  allocate its available resources most efficiently among alternative uses.
D)  achieve the full employment of available resources.E) B) and D)
F) B) and C)

Question 8

If we are considering the relationship between two variables and release the "other things equal" assumption, we would expect:

Accepted Answer

A)  the relationship to change from direct to inverse.
B)  the line representing that relationship on a graph to change locations.
C)  the data points representing the relationship to become more randomly scattered.
D)  the relationship to change from inverse to direct.E) All of the above
F) A) and C)

Question 9

Any combination of goods lying outside of the budget line:

Accepted Answer

A)  implies that the consumer is not spending all of his income.
B)  yields less utility than any point on the budget line.
C)  yields less utility than any point inside the budget line.
D)  is unattainable, given the consumer's income.E) A) and B)
F) B) and C)

Question 10

If country A has been investing a larger proportion of its domestic output than Canada has, then, we would expect:

Accepted Answer

A)  a higher rate of growth of domestic output in country A than in Canada.
B)  greater rightward shifts in country A's production possibilities curve as compared to Canada.
C)  that in the long run living standards would rise more rapidly in country A than in Canada.
D)  all of the above to happen.E) A) and B)
F) None of the above

Question 11

The fact that economic generalizations are abstract renders them impractical and useless.

Accepted Answer

A) True 
 B)False

Question 12

The measured slope of a line:

Accepted Answer

A)  is independent of how the two variables are denominated.
B)  will be affected by how the two variables are denominated.
C)  necessarily diminishes as one moves rightward on the line.
D)  necessarily increases as one moves rightward on the line.E) A) and B)
F) None of the above

Question 13

An economy cannot produce at a point outside of its production possibilities curve because human material wants are insatiable.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the graph.The movement from line A to line A' represents a change in:

Accepted Answer

A)  the slope only.
B)  the intercept only.
C)  both the slope and the intercept.
D)  neither the slope nor the intercept.E) A) and B)
F) All of the above

Question 15

Any point inside the production possibilities curve indicates:

Accepted Answer

A)  the realization of allocative efficiency.
B)  that resources are imperfectly shiftable among alternative uses.
C)  the presence of inflationary pressures.
D)  that more output could be produced with available resources.E) A) and B)
F) A) and C)

Question 16

If two variables are inversely related, then as the value of one variable:

Accepted Answer

A)  increases, the value of the other may either increase or decrease.
B)  decreases, the value of the other decreases.
C)  increases, the value of the other decreases.
D)  increases, the value of the other increases.E) All of the above
F) B) and C)

Question 17

Macroeconomics can best be described as the:

Accepted Answer

A)  analysis of how a consumer tries to spend income.
B)  study of the large aggregates of the economy or the economy as a whole.
C)  analysis of how firms attempt to maximize their profits.
D)  study of how supply and demand determine prices in individual markets.E) All of the above
F) C) and D)

Question 18

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase.This is a reflection of:

Accepted Answer

A)  resource scarcity and the necessity of choice.
B)  purposeful behaviour.
C)  marginal costs which exceed marginal benefits.
D)  the tradeoff problem which exists between competing goals.E) None of the above
F) A) and B)

Question 19

A "hypothesis" is:

Accepted Answer

A)  a fundamental truth which all economists accept.
B)  a tentative, untested principle.
C)  the same as a normative statement.
D)  always the result of induction.E) A) and B)
F) A) and C)

Question 20

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.  Refer to the above table.What is the opportunity cost of producing the fourth unit of capital goods?

Accepted Answer

A)  6 units of consumer goods
B)  7 units of consumer goods
C)  15 units of consumer goods
D)  22 units of consumer goodsE) C) and D)
F) B) and D)

Exam 1: Part B: Limits, Alternatives, and Choices

Opportunity cost is best defined as:

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If a positive relationship exists between x and y:

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Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase.This is a reflection of:

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The fact that economic generalizations are abstract renders them impractical and useless.

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If we are considering the relationship between two variables and release the "other things equal" assumption, we would expect:

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The measured slope of a line:

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Any combination of goods lying outside of the budget line:

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Refer to the graph.The movement from line A to line A' represents a change in:

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In drawing a production possibilities curve we hold constant:

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The marginal benefit curve is:

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Any point inside the production possibilities curve indicates:

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An economy cannot produce at a point outside of its production possibilities curve because human material wants are insatiable.

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The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. Refer to the above table.What is the opportunity cost of producing the fourth unit of capital goods?

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Macroeconomics can best be described as the:

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Assume that a tradeoff exists in the short run between inflation and unemployment.This relationship means that:

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Production possibilities (alternatives) Refer to the above table.For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:

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If country A has been investing a larger proportion of its domestic output than Canada has, then, we would expect:

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A "hypothesis" is:

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If two variables are inversely related, then as the value of one variable:

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Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income, the equation which summarizes this relationship is:

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