What is the consumption possibilities for an individual?

• The value of the best alternative that you have to give up in order to do something, is called the
• Opportunity cost
• Comparative advantage
• Alternative benefit
• Alternative cost
• An economy _________ if it has exploited all opportunity to benefit someone without making anyone else worse off.
• Wealthy
• Efficient
• Equitable
• Falling
• Economic theory asserts that people will behave in ways that;
• Will be unfair to others
• Will enhance their own overall well-being
• Will not take advantage of opportunities for self-improvement
• Will be motivated by fear
• Which one of the following statement is not true of a market economy?
• Every choice involves an opportunity cost
• People will respond to incentives
• Productive resources are scarce
• A central planning authority makes decisions about productions about production and consumption.
• In economics, a resource is
• An intangible aspect of a society, such as its culture.
• A physical attribute of land
• A sum of money used to start a business
• Anything that can be used to produce something else
• Economics is the study of
• Personnel management
• Resource allocation under conditions of scarcity
• IRSs and portfolio management
• How to run a business under conditions of profitability
• If market failures exist, the market can become efficient when:
• The government intervene to improve society’s welfare
• The government eliminates all market transaction
• All citizens immigrate to a country where the market failure does not exist
• People just ignore the problem
• When economist want to describe how much an economy can produce with a given amount of resources, they use a model known as:
• The production possibilities possible frontier
• The positive model
• Comparative advantage
• The normative model
• Assume that we have a PPF. Point A lies inside (to the left) of the frontier. Point B and C are located along the frontier and Point D is located outside (to the right) the frontier. Which points represent efficient production points?
• Point B, C and D are efficient.
• All points (A, B, C and D) are efficient.
• Point A, B and C are efficient.
• Points B and C are efficient.
• If a country specialized according to its own comparative advantage and then trades with other nations:
• It will operate at a point inside its production possible frontier.
• Its production possibilities frontier will shift or rotate inward
• It can consume at the same level as the domestic production possibilities frontier
• It can consume at a higher level than the domestic production possible frontier.
• What are the two sectors represented in a simple circular-flow diagram of the economy?
• Unions and management
• Business and government
• Profit and not-for-profit
• Households and firms
• Suppose that one person working in Mexico can produce either 20 yards of cloth or 80 baskets, and that one person working in Turkey for the same length of time can produce either 15 yards of cloth or 30 baskets. Which of the following statements is then true?
• Between these two countries, turkey has the absolute advantage in both goods
• Turkey has a comparative advantage in baskets; Mexico has a comparative advantage in cloth.
• In both countries, the opportunity costs of producing cloth and baskets are the same
• Turkey has a comparative advantage in cloth; Mexico has a comparative advantage in baskets
• Those points lying beyond the PPF:
• Represent outcome in which resources would be unemployed.
• Represent outcome that are attainable with the current level of technology and resources, but are less desirable than those on the frontier.
• Represent outcome unattainable with the current level of technology and resources
• Are inefficient
• Economist typically depict the PPF as a bowed-out curve rather than as a straight line in order to show that:
• The opportunity cost is always present
• The opportunity cost of producing cost of producing a good rises as more is produced
• The opportunity cost is producing a good declines as more is produced
• Resources used in the production of one good cannot be used in the production of another
• If the price of pound of Kenyan coffee increase from $10 a pound to $12 a pound, we can expect an:
• Increase in the quantity demanded of Kenyan coffee
• Inward shift in the supply curve of Kenyan coffee
• Inward shift in the demand curve for Kenyan coffee
• Increase in the quantity supplied of Kenyan coffee
• If coffee sold at Starbucks is a normal good, then an increase in income will:
• Increase the supply of Starbucks coffee
• Increase the demand of Starbucks coffee
• Decrease in the demand for Starbucks coffee
• Decrease the supply of Starbucks coffee
• If air travel to Hawaii becomes less expensive, what is likely to happen in the market for hotel rooms in Hawaii?
• The supply curve for hotel rooms will shift outward
• The demand curve for hotel rooms will shift outward
• The demand curve for hotel rooms will shift inward
• The supply curve for hotel rooms will shift inward
• A price above the equilibrium price will:
• Cause the demand curve to shift to the left
• Result in quantity supplied being greater than quantity demanded
• Create pressure for price to rise further
• Result in a shortage
• At a price $3 per pound the quantity supplied of coffee beans equals the quantity demanded of coffee beans. Which of the following must be true at the price ($3 per pound)?
• The market is in equilibrium
• A surplus exists, and the market will cause the price to fall towards equilibrium
• Entrepreneurship is maximized
• A shortage exists, and the market will cause the price to rise towards equilibrium
• If the supply curve shifts to the left, and the demand curve does not change then the equilibrium price
• And quantity both will increase
• And quantity both will increase
• Will increase, and the quantity will decrease
• Will decrease, and the quantity will increase
• The cost of raw material used to produce “hot Pizza” decrease. Holding everything else constant, this will result
• In the supply curve shifting to the left
• In a movement along the supply curve to a greater quantity supplied
• In the supply curve shifting to the right
• In a movement along the supply curve to a smaller quantity supplied
• Federal Express and UPS are two firms that compete in proving overnight delivery services. How is the market for ups affected by an increase in the rates charged by Federal Express?
• The demand for UPS service will increase
• The demand for UPS services will decrease
• UPS will decrease the supply of its services
• UPS will increase the supply of its services
• The downward slope of the demand curve indicates that, all else equal:
• A decrease in the equilibrium price of a good will cause a shortage
• Producers will supply more of a good when its price increases
• Consumers will buy more of a good when its price decreases
• Producers will supply more of a good when its price decreases
• Consumer surplus is
• The difference between the quantity of a good demanded and the quantity supplied
• The quantity of a good that remains on the market in instances of market failure.
• The amount of revenue collected from a tax
• The difference between the price that consumers are willing to pay for a good and the amount they actually pay
• Ahmed, Boris, Roberto, and Sunil all want to attend a football game. The admission price is $48. Ahmed is willing to pay $59 for the ticket. Boris is willing to pay $39. Roberto is willing to pay $55. Based on this information, who will go to the game?
• Ahmed, Boris, Roberto, and Sunil
• Boris and Roberto
• Ahmed and Sunil
• Boris, Roberto, and Sunil
• Which area on a graph showing a firm’s supply curve represents producer surplus?
• The area above the supply curve up to a line indicating price
• The area under the demand curve down to a line indicating price
• The area between the supply and demand curves to the left of the equilibrium point
• The area between the supply and demand curves to the right of the equilibrium point
• Producer surplus is positive when
• The price the producer is willing to charge is less than the market price
• There is no tax applied to the good
• The price the producer is willing to charge is greater than the market price
• The price the producer is willing to charge equals the market price
• Suppose that an increase in the supply of rental properties causes the market price (to rent property) to fall. Consumer surplus will increase because
• There is always someone who needs a place to live
• Quantity supplied exceeds quantity demanded
• More people will rent, and existing renters will get a better price
• Fewer people will rent, and some existing renters will get prices out of the market
• Suppose that an increase in the demand for bio fuels increases the demand for corn causing the price of corn to rise. As a result,
• Consumer surplus increase
• A wedge develops between the demand price and supply price
• The equilibrium quantity of corn falls due to the higher price
• Producer surplus increase

	Lowest Price Fast Eddy is willing to accept
First Dinner	$3
Second Dinner	$6
Third Dinner	$10
Forth Dinner	$12
Fifth Dinner	$15

If the price of a dinner at fast Eddy’s tonight is $9. How many dinners will Fast Eddy sell?

• 2 dinners
• 1 dinner
• 3 dinners
• 6 dinners
• Which of the following is not a predictable result of a price ceiling?
• Development of an illegal black market
• Exorbitant profits for producers of the good
• A persistent shortage
• An inefficiently low quality of the good provided
• A quota (that is quantity control)
• Limits the price that suppliers can charge for the good or service in the regulated market
• Limits the price that demanders must pay for the good or services in the regulated market
• Increase the amount of the good or services available in the regulated market to an amount that exceeds the equilibrium quantity
• Limits the amount of the good or services available in the regulated market
• What is the name given to the wedge that occurs between the supply price and the demand price of the transacted quantity when a good is subject to quantity restrictions?
• Quota rent
• Surplus
• Shortage
• Incidence
• A binding minimum wage is a type of
• Quota
• Price floor
• Price ceiling
• Tax incidence
• Which of the following could give rise to a surplus, such as an oversupply of an agricultural good?
• A price ceiling below the equilibrium price
• A quota system in a related good
• A government budget surplus
• A price floor above the equilibrium price
• Which of the following results in deadweight loss?
• Medical marijuana and Doritos
• A price ceiling below equilibrium
• Aerobic exercise
• Equilibrium
• Suppose a price floor of $40 is implemented in the market. this result in

Price ($)	Quantity Demanded	Quantity Supplied
20	200	0
40	150	50
60	100	100
80	50	150
100	0	200

• No effect in this market, since the price floor is set below the equilibrium price
• An excess demand of 100 units
• No effect in this market, since the price floor is set above the equilibrium price
• An excess supply of 100 units
• The sign (negative or positive) on the cross-price elasticity of demand for wine and chocolate tells us:
• Whether wine is normal good
• Whether chocolate is a normal good
• How the burden of an excise tax on either good would be split between consumers and producers
• Whether wine and chocolate are substitutes or complements
• When demand is perfectly elastic:
• The demand curve is horizontal
• The demand curve is vertical
• Suppliers do not respond to price changes
• Consumers do not respond to price change
• Suppose the southern states, which grow most of the oranges for the US market, experience an unexpected cold snap. This cause a small crop yield. This decrease in supply cause the market price of oranges to rise. If the price elasticity of demand for oranges is greater than one (elastic), what is the effect on the total revenues of orange growers?
• No change
• Increased revenues
• Decreased revenues’
• Indeterminate effect
• Assume that a good such as mac and cheese in an inferior good. in that case, the income elasticity of demand will be
• Zero
• Positive
• Negative
• The result of price floor
• Which of the following statement is false?
• The demand for luxury goods is more elastic that the demand for goods that are necessities.
• The longer the time period of adjustment to a change in the price of the good, the more elastic the demand for that good
• The higher the storage cost for producers are, the more elastic the demand or that good
• Goods have many close substitutes typically have price elastic demand
• This year Joe’s income increased by 16% while the quantity of bananas he purchased increased by 8% and the quantity of orange juice he demanded increased by 16%. Which of the following statements is true for Joe?
• Bananas and orange juice are both inferior goods
• Bananas and orange juice are both normal goods
• Bananas are a normal good and orange juice is an inferior good
• Bananas are an inferior good and orange juice is a normal good
• The optimal consumption rule asserts that consumers will consumer at the point where the:
• Marginal utility derived from the last unit of all goods is the same
• Utility derived from each good is the same
• Marginal utility derived from the last dollar spent on each good is the same across all goods
• Total amount spent on each good is the same
• What is the consumption possibilities for an individual?
• Those goods that are characterized by diminishing marginal utility
• All those goods that could provide some utility
• Those goods she would like to have if her income were higher
• The set of goods are affordable, given her income and the current prices of the goods
• You are graphing the budget line for an individual who consumes coffee and bread. How is the budget line affected when the consumer’s income increases?
• Only the vertical intercept increases
• Both the horizontal and vertical intercept decreases
• Both the horizontal and vertical intercepts increases
• Only the horizontal intercept increases
• Suppose that a person drinks a second cup of coffee in the morning, and the additionally utility (or satisfaction) resulting from it is less than it was for the first cup. This is an example of which of the following principles?
• Diminishing returns to labor
• Economics of scale
• Scarcity
• Diminishing marginal utility
• According to the optimal consumption bundle rule, if the marginal utility per dollar spent on good X is higher than the marginal utility per dollar spent on good Y , the consumer should do which of the following?
• Buy more X and less Y
• Buy more X and more Y
• Buy less X and less Y
• Buy less X and more y
• A consumption bundle that lies beyond the individual’s budget line is a consumption bundle the individual
• Does not maximize the individual’s utility given their tastes, income, and the price of the goods.
• Cannot afford given their income and the prices of the goods
• Does not exhaust the individual’s income
• Does not prefer because of their particular tastes and preferences
• Use the following information about Jane’s total utility from consuming cookies to answer the following question:

Number of Cookies	Jane’s Total Utility
1	150 utils
2	250 utils
3	330 utils
4	390 utils
5	430 utils
6	450 utils
7	460 utils

Based on the table, Jane’s total utility from consuming cookies

• Increase at an increasing rate as she consumes more and more cookies
• Initially increase at an increasing rate as she consumes more cookies, but her total utility eventually increases at a diminishing rate
• Increasing at a decreasing rate as she consumes more and more cookies
• Initially increases at a decreasing rate as she consumes more cookies, but her total utility eventually increases at a constant rate