REMEDIAL TEST APP ECON

WHEN DECIDING BETWEEN RENOVATING A WATER TREATMENT PLANT OR BUILD A NEW COMMUNITY POOL, WHAT IS THE GOVERNMENT MOST LIKELY TO CONSIDER?

• SCARCITY VERSUS RESOURCES

• WAGES VERSUS PRICES

• WANTS VERSUS NEEDS

• CONSUMERS VERSUS PRODUCERS

All of the following are examples of opportunity cost except:

• the leisure time sacrificed to study for an exam.

• the tuition fees paid to a university.

• the income which could have been earned by a college student had he or she worked full time instead of attending college.

• the building which could have been built with the construction materials and labor used to build a new university library.

• all of the above are examples of opportunity costs.

Which of the following is the best definition of opportunity costs?

• the amount of one good that must be given up in order to produce one more unit of another good.

• the amount of money that must be paid in order to purchase one more unit of a good.

• the amount of an input that must be used in order to produce one more unit of a good.

• the price of a good that must be charged in order for a merchant to sell one more unit.

• none of the above.

Microeconomics is NOT concerned with:

• the quantities of each good produced.

• the size of aggregate money flows in the economy.

• the distribution of goods among households.

• the allocative function of changes in relative prices.

Which of the following statements about quantity demanded is NOT true? Quantity demanded is:

• a desired quantity, not necessarily the quantity exchanged.

• effective demand, or the amount people are willing to buy at a particular price.

• expressed as a certain amount per period of time.

• the entire relation between price and quantity.

A fall in the price of raw milk, used in the production of ice cream, will:

• Have no effect on the price of ice cream.
• Increase the price of ice cream.
• Lower the price of ice cream.
• Decrease the demand for ice cream.

Suppose it is observed that initially increases in income cause consumption of hamburger to rise but that as income continues to rise consumption of hamburger begins to decline. This would imply that hamburger:

• Hamburger is a normal good at all income levels.
• Hamburger is an inferior good at higher income levels.
• Hamburger consumption is unaffected by income changes.
• Hamburger is a luxury good that increases with income.

Which one of the following would be most likely to cause the demand for firewood to increase?

• An increase in the price of natural gas or electricity.
• An increase in the availability of natural gas.
• A rise in the temperature during winter.
• A decrease in the price of firewood.

If it is observed that, in a particular market, price has risen and quantity exchanged has increased, it is likely that:

• Supply has decreased.
• Demand has increased.
• Price elasticity has increased.
• Consumer preferences have shifted negatively.

The quantity demanded will equal the quantity supplied at a free market equilibrium and also when:

• There are government regulations controlling prices.
• There are no external factors affecting supply and demand.
• Consumer preferences are irrelevant to market dynamics.
• The quantity demanded is always higher than the quantity supplied.