Economics 2008 (Pre Test 1)

What is meant by opportunity cost?

• The total cost of production minus profit

• Total fixed costs of a business

• The cost of the good foregone when an alternative good is chosen

• The cheapest cost of production

Under what circumstances could consumer sovereignty be reduced in a market?

• A high level of persuasive advertising

• A high demand for a product

• A highly competitive market

• A larger amount of informative advertising

Which of the following has the same effect on the circular flow as an injection of investment?

• Government taxation

• Government expenditure

• Imports

• Savings

This question refers to the following production possibility schedule: Plasma TVs and Digital Cameras with quantities listed under columns A to F. What is the opportunity cost of producing the first 200 digital cameras?

• 100 plasma TVs

• 300 plasma TVs

• 150 plasma TVs

• 250 plasma TVs

Which of the following would assist a company manufacturing mobile phones to reduce its average costs as it increases its output?

• The government applies a carbon tax to reduce pollution

• The cash rate increases impacting on investment loans

• The government increases the minimum wage for workers

• The government increases funds spent on research in the communications industry

Which of the following is most likely to lead to a shift to the right of the position of the demand curve?

• A decrease in production costs

• An increase in the price of a complement

• A fall in the price of a substitute

• A decrease in personal income tax rates

The following diagram shows the market for petrol. If the government intervenes in the market for petrol by setting a maximum price of P1 that is below the equilibrium price, which of the following is likely to occur?

• A reduction in the demand for petrol from Q2 to Q1

• An increase in the supply of petrol from Q to Q1

• A shortage of petrol available for sale equal to Q0Q2

• An increase in both the demand and supply of petrol from Q to Q2

If the price of a good increased from $4 to $5 and the quantity demanded fell from 50 units to 40 units, what is the price elasticity of demand?

• Perfectly elastic demand

• Unit elastic demand

• Inelastic demand

• Elastic demand

The following diagram shows the market for tomatoes. Which factor is most likely to cause a shift to the right of the supply curve for tomatoes from SS to S1S1?

• A decrease in production costs

• A rise in the price of a complementary good

• A fall in the price of a substitute good

• An increase in interest rates