Overall Practice Test-2 on Economics: Solutions
Question 1: A market structure with only a few sellers, each offering similar or identical products, is known as .....
- perfect competition
- monopolistic competition
Question 2: A distinguishing feature of an oligopolistic industry is the tension between .....
- short-run decisions and long-run decisions.
- producing a small amount of output and charging a price above marginal cost.
- profit maximization and cost minimization.
- cooperation and self interest.
Question 3: Goods with many close substitutes tend to have .....
- more elastic demands.
- income elasticities of demand that are negative.
- price elasticities of demand that are unit elastic.
- less elastic demands.
Question 4: The adage, "There is no such thing as a free lunch," means .....
- send people gifts during their annual anniversary.
- people face tradeoffs.
- the cost of living is always decreasing.
- Some costs are not included in the price of a product.
Question 5: The law of demand states that, other things equal,
- when the price of a good falls, the quantity demanded of the good rises.
- when the price of a good rises, the demand for the good falls.
- when the price of a good rises, the quantity demanded of the good rises.
- when the price of a good falls, the demand for the good rises.
Question 6: Rational people make decisions at the margin by
- following old traditions.
- having a tough attitute.
- comparing marginal costs and marginal benefits.
- be politically correct.
Question 7: A surplus exists in a market if ......
Question 8: Clark rents 3 movies per month when the price is $2.00 per rental and 5 movies per month when the price is $1.50 per rental.
- there is an excess demand for the good.
- the situation is such that the law of supply and demand would predict an increase in the price of the good from its current level.
- the current price is above its equilibrium price.
- quantity demanded exceeds quantity supplied.
Clark'S demand demonstrates the law of ......
Question 9: A typical society strives to get the most it can from its scarce resources.
At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner.
In other ...
- efficiency and equality.
- guns and butter.
- inflation and unemployment.
- work and leisure.
Question 10: A rightward shift of a supply curve is called .....
- a decrease in supply.
- an increase in supply.
- an increase in quantity supplied.
- a decrease in quantity supplied.
Question 11: As new firms enter a monopolistically competitive market, profits of exisiting firms .....
- rise, and product diversity in the market increases.
- rise, and product diversity in the market decreased.
- decline, and product diversity in the market decreases.
- decline, and product diversity in the market increases.
Question 12: law of supply states that, other things equal,
- an increase in price causes quantity supplied to increase.
- an increase in price causes quantity supplied to decrease.
- an increase in quantity supplied causes price to increase.
- an increase in quantity supplied causes price to decrease.
Question 13: At the equilibrium price, the quantity of the good that buyers are willing and able to
buy exactly equals the quantity that sellers are willing and able to sell.
- is greater than the quantity that sellers are willing and able to sell.
- is less than the quantity that sellers are willing and able to sell.
- exactly equals the quantity that sellers are willing and able to sell.
- all of the above.
Question 14: Economists assume that the typical person who starts his own business does so with the intention of....
- become a leader in his country.
- obtaining the highest number of "Likes" in his industry.
- maximizing profits.
- minimizing costs.
Question 15: Elasticity is ....
- the study of how the allocation of resources affects economic well-being.
- a measure of how much buyers and sellers respond to changes in market conditions.
- the maximum number of buyers who will pay for a good.
- the maximum number of sellers who will sell the good.
- the value of everything a seller must give up to produce a good.
Question 16: The price elasticity of demand measures how much ....
- quantity demanded responds to a change in price.
- demand responds to a change in supply.
- price responds to a change in demand.
- quantity demanded responds to a change in income.
Question 17: ABC company produced 500 units of output but sold only 450 of the units it produced.
The average cost of production for each unit of output produced was $150.
Each of the 450 units sold was sold for a price of $130. Total profit for the ABC company would be ....
TC = 500 Ļ $150 = $75,000; Revenues = 450 × $130 = $58,500 and hence Total Profit = $58,500 − $75,000 = −$16,500
Question 18:Which of the following statements is correct? ...
- Opportunity costs equal total minus implicit costs.
- Economists consider opportunity costs to be included in a firm's costs of production.
- Economists consider opportunity costs to be included in a firm's total profits.
- None of the above
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Date of last modification: 2019