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Lecture

ECN 104 Lecture Notes - Allocative Efficiency, Marginal Cost, Competitive Equilibrium


Department
Economics
Course Code
ECN 104
Professor
seyedayelzid

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CECN104Name:
SeydaYildizID#:
Assignment1(eachquestionisworthof3points)
(dueonTuesday,May8)
1. With allocative efficiency:
A. the state of technology, or methods used to produce output, do not change.
B. the available supplies of factors of production are fixed in both quantity and quality.
C. there is production of any particular mix of goods and services in the least costly way.
D. there is production of that particular mix of goods and services most wanted by society.
2. The law of increasing opportunity costs states that:
A. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other
goods to do so.
B. the sum of the costs of producing a particular good cannot rise above the current market price of that good.
C. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must
rise by a greater relative amount.
D. if the prices of all the resources devoted to the production of goods increase, the cost of producing any
particular good will increase at the same rate.
3. The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve
indicates that:
A. the principle of increasing opportunity costs is relevant.
B. society's resources are limited.
C. the opportunity cost of producing each product is constant.
D. resources are perfectly shiftable between alternative uses.
4. If an economy is operating inside its production possibilities curve for consumer goods and capital goods, this
means that it:
A. can only produce more consumer goods by producing fewer capital goods.
B. can only produce more capital goods by producing fewer consumer goods.
C. can produce more of both consumer goods and capital goods by using its resources more efficiently.
D. must improve its technology to produce more output.
5. The institution that coordinates actions of consumers and producers to establish prices for goods and services is
known as:
A. a market.
B. a monopoly.
C. an economic system.
D. consumer sovereignty.
6. The market system is an economic system that:
A. produces more consumer goods than capital goods.
B. produces more capital goods than consumer goods.
C. gives private individuals and institutions the right to own resources used in production.
D. gives the government the right to tax individuals and corporations for the production of capital goods.

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7. Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of
bananas purchased." This statement indicates that:
A. the quantity of bananas purchased determines the price of bananas.
B. all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be
constant.
C. economists can conduct controlled laboratory experiments.
D. one cannot generalize about the relationship between the price of bananas and the quantity purchased.
8. Refer to the above diagram. The combination of computers and bicycles shown by point G is:
A. attainable, but too costly.
B. unattainable, given currently available resources and technology.
C. attainable, but involves unemployment.
D. irrelevant because it is inconsistent with consumer preferences.
9. Refer to the circular flow model of the economy. In the diagram flow (2) represents:
A. wage, rent, interest, and profit income.
B. land, labour, capital, and entrepreneurial ability.
C. goods and services.
D. consumer expenditures.
10. Refer to the circular flow model of the economy. In the diagram flow (4) represents:
A. wage, rent, interest, and profit income.
B. land, labour, capital, and entrepreneurial ability.
C. goods and services.
D. consumer expenditures.
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