Use the figure below to answer questions 1 and 2: D pounds of vegetables. A. 120 pounds of vegetables.

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1 Use the figure below to answer questions 1 and 2: The figure shows the production possibilities curve for Hamid, who can produce two goods, meat and vegetables. 1. Refer to the figure above. What is the opportunity cost of one pound of meat? A pound of vegetables. B. 1 pound of vegetables. C. 1.2 pounds of vegetables. D pounds of vegetables. 2. Refer to the figure above. Suppose Hamid is currently producing 30 pounds of meat per period. How much vegetables is he also producing, assuming that resources are fully utilized? A. 120 pounds of vegetables. B. 80 pounds of vegetables. C. 75 pounds of vegetables. D. 45 pounds of vegetables. Use the table below to answer questions 3 and 4: The table shows the output per day of two pet groomers, Harry and Hana. They can either devote their time to grooming dogs or bathing cats. Harry Hana Dogs Groomed Cats Bathed Refer to the table above. Which of the following statements is true? A. Hana has an absolute advantage in both tasks. B. Harry has an absolute advantage in both tasks. C. Hana has an absolute advantage in dog grooming and Harry in cat bathing. D. Hana has an absolute advantage in cat bathing and Harry in dog grooming. 4. Refer to the table above. Harry's opportunity cost of bathing a cat is grooming a dog and he has a comparative advantage in. A. 0.67; grooming dogs. B. 0.67; bathing cats. C. 1.5; grooming dogs. D. 1.5; bathing cats.

2 5. If the marginal costs of 1, 2, and 3 hours of talking on the phone are $40, $62, and $98, then the total costs are: A. $40, $31, and $49. B. $40, $51, and $ C. $40, $102, and $200. D. $40, $22, and $ What is the opportunity cost of living in a house that you already own? A. The rent you could receive if you rented the house out to someone else. B. Zero, because you already own it. C. That mostly depends on current mortgage rates. D. The taxes you pay your local government. Use the figure below to answer question 7: The figure shows the production possibilities curve for a country that produces two goods, hammers and wrenches. 7. Refer to the figure above. If the economy is currently producing at point B, what is the opportunity cost of moving to point C (producing 10,000 more wrenches)? A. 10 thousand wrenches. B. 10 thousand hammers. C. 13 thousand hammers. D. 40 thousand wrenches. 8. The cost of producing cigarettes has decreased, and at the same time, more people quit smoking cigarettes. What would happen to the supply and demand curves? A. The supply curve would shift to the right and the demand curve would shift to the left. B. Both the supply and demand curves would shift to the right. C. Both the supply and demand curves would shift to the left. D. The supply curve would shift to the left and the demand curve would shift to the right. 9. In February, market analysts predict that the price of titanium will fall in March. What happens in the titanium market in February, holding everything else constant?

3 A. The quantity demanded and the quantity supplied of titanium decrease. B. The demand curve shifts to the right. C. The supply curve shifts to the right. D. The supply curve shifts to the left. 10. The following equations represent the demand and supply curves: Q = 50 2P (1) Q = P (2) Which equation represents the supply curve and what is the equilibrium price? A. Equation (1) and P* = 10. B. Equation (1) and P* = 15. C. Equation (2) and P* = 10. D. Equation (2) and P* = 15. Use the figure below to answer questions 11 and 12: 11. Refer to the figure above. At a price of $15: A. There would be a surplus of 4 units. B. There would be a shortage of 2 units. C. There would be a surplus of 6 units. D. There would be a shortage of 4 units. 12. Refer to the figure above. Suppose the government sets a price ceiling at $15, how many units will be sold? A. 0. B. 2. C. 4. D Refer to the figure above. What is the price elasticity of supply when P = 5? A. Less than zero. B. Positive, but less than one. C. 1. D. Greater than 1.

4 14. If the supply curve is a vertical line, which statement is true? A. The price elasticity of supply is 0 and it is a perfectly elastic supply. B. The price elasticity of supply is infinite and it is a perfectly inelastic supply. C. The price elasticity of supply is infinite and it is a perfectly elastic supply. D. The price elasticity of supply is 0 and it is a perfectly inelastic supply. 15. An increase in the price of tennis racquets from $75 to $125 led to an increase in quantity supplied from 200 units to 300 units. Calculate the value of the price elasticity of supply using the midpoint formula. A B C D The cross-price elasticity between Gillette razors and a related good is What happens to the demand for the related good if the price of Gillette razors rises by 10 percent? A. The quantity demanded of the related good rises by 2.2 percent. B. The quantity demanded of the related good falls by 22 percent. C. The quantity demanded of the related good rises by 22 percent. D. The quantity demanded of the related good falls by 2.2 percent. 17. Suppose that the price elasticity of demand for movie ticket is elastic. What happens to the quantity demanded and the total expenditure when the price of the movie ticket is higher? A. The quantity demanded rises and the total expenditure rises. B. The quantity demanded rises and the total expenditure falls. C. The quantity demanded falls and the total expenditure rises. D. The quantity demanded falls and the total expenditure falls. 18. An increase in the number of fast-food restaurants: A. Raises the price of fast-food meals. B. Increases the demand for fast-food meals. C. Increases the supply of fast-food meals. D. Increases the demand for substitutes for fast-food meals. 19. You observe that the price of a good rises and the quantity decreases. These observations can be the result of A. The demand curve shifting rightward. B. The demand curve shifting leftward. C. The supply curve shifting rightward. D. The supply curve shifting leftward.

5 20. When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes A. More elastic. B. Less elastic. C. Neither more nor less elastic. D. Undefined. 21. Demand is perfectly inelastic when A. Shifts in the supply curve results in no change in price. B. The good in question has perfect substitutes. C. Shifts of the supply curve results in no change in quantity demanded. D. Shifts of the supply curve results in no change in the total revenue from sales. 22. Producers total revenues will increase if A. Income increases and the good is an inferior good. B. The price rises and demand is elastic. C. The price rises and demand is inelastic. D. Income falls and the good is a normal good. 23. A rise in the price of good A will shift the A. Demand curve for good B rightward if the cross elasticity of demand between A and B is negative. B. Demand curve for good B rightward if the cross elasticity of demand between A and B is positive. C. Supply curve of good B rightward if the cross elasticity of demand between A and B is negative. D. Supply curve of good B rightward if the cross elasticity of demand between A and B is positive. 24. If demand is elastic, a leftward shift of the supply curve will A. Decrease total revenue. B. Increase total revenue. C. Have no effect on total revenue. D. Decrease the demand for the good.

6 25. The figure above shows the demand for and supply of rental housing in Smalltown. If a rent ceiling is set at $400, how many apartment units are rented? A. 2,000. B. 3,000. C. 4,000. D. None of the above 26. The figure above shows the demand for and supply of rental housing in Smalltown. If a rent ceiling is set at $400, what is the rent? A. $800. B. $600. C. $400. D. None of the above 2

7 27. In the figure above, if the minimum wage is $4 per hour, then A. The quantity of labor supplied is less than the quantity of labor demanded. B. The quantity of labor supplied is 4 million hours and the quantity of labor demanded is 2 million hours. C. Unemployment is 1 million hours. D. The quantity of labor supplied is 3 million hours and the quantity of labor demanded is 3 million hours. 28. In the figure above, if the minimum wage is $2 per hour, then A. The quantity of labor supplied is 4 million hours and the quantity of labor demanded is 2 million hours. B. The quantity of labor demanded is 4 million hours and the quantity of labor supplied is 2 million hours. C. Unemployment is 1 million hours. D. The quantity of labor supplied is 3 million hours and the quantity of labor demanded is 3 million hours. 29. If George s Burger (the best burger in town!!) cuts prices on its burger to increase the total revenue, they know that the demand for burger in the market is A. Perfectly elastic B. Unit elastic C. Elastic D. Inelastic 30. Normal goods have A. Income elasticities of demand greater than 1.0. B. Price elasticities of demand greater than 1.0. C. Negative price elasticities of demand. D. Positive income elasticities of demand. 3

8 31. From the above figure, if the price is at $8, then A. There is a surplus of 100 B. There is a shortage of 100 C. There is a surplus of 200 D. There is a shortage of The above figure shows the market for pizza. Which figure shows the effect of a decrease in the price of a pizza substitute such as a shawarma sandwich? A. Figure A B. Figure B C. Figure D D. Figures B and C 33. If the price elasticity of demand is -5 then a 10% increase in the price results in a _ in the quantity demanded. A. 2%; decrease B. 2%; increase C. 50%; decrease D. 50%; increase 33. The more substitute available for a good or service: A. The larger is its price elasticity of demand B. The smaller is its income elasticity of demand C. The smaller is its price elasticity of demand D. The larger is its income elasticity of demand 34. If the cross elasticity of demand between products A and B is positive: A. The demand for A and B are both price elastic B. The demands for A and B are both price inelastic C. A and B are complements D. A and B are substitutes 4

9 35. A good with a vertical demand curve has a demand with: A. Unit elasticity B. Infinite elasticity C. Zero elasticity D. Varying elasticity 5

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