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chapters 1-4 Preactice Problems.pdf

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Economics (Arts)
ECON 208
Wendy Dickinson

Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose that, in a two-good world, the price of the first good has increased from $3.00 to $4.00 and the price of the second good has increased from $150 to $200. The relative price of the first good A) has fallen. B) has risen. C) remained constant. D) cannot be determined from the above data. E) is completely unrelated to the price of the second good. Topic: 3.3b. relative prices 2) Which of the following statements would you expect to be true about T -shirts and clothing? A) Clothing has a higher price elasticity of demand because it is a necessity. B) Compared with clothing, T-shirts have a lower price elasticity of demand because they are specifically defined. C) Because T-shirts are clothing, but not all clothing is T-shirts, T-shirts would have a lower price elasticity of demand than clothing. D) Clothing has a lower price elasticity of demand because it is more broadly defined. E) T-shirts would have the same price elasticity of demand as clothing. Topic: 4.1a. price elasticity of demand 3) One measure of market inefficiency is A) how far quantity exchanged deviates from equilibrium. B) the difference between total economic surplus and deadweight loss. C) the size of the economic surplus. D) how far market price deviates from equilibrium. E) the size of the deadweight loss. Topic: 5.4a. market efficiency and economic surplus 4) Which of the following statements is NOT correct? A) Economic statements cannot be tested because human decisions involve free will. B) Normative statements cannot be tested by the scientific method. C) Economists test their theories by confronting the predictions of their theories with the evidence drawn from the real world. D) Exposing them to empirical evidence can best test positive statements. E) Economic predictions will be fulfilled when their underlying hypotheses conform to actual human behaviour. Topic: 2.3. testing theories 5) In general (and in the absence of market failures), economic surplus will be maximized and economic efficiency will be achieved A) when the government is able to impose an equilibrium price. B) when consumers and producers can agree on the most advantageous division of economic surplus. C) when resources are allocated such that production of the good is maximized. D) when the government successfully determines what is best for society as a whole. E) in a competitive market where price is free to achieve its market-clearing equilibrium level. Topic: 5.4a. market efficiency and economic surplus 1 6) Which of the following illustrates elastic demand? A) a price elasticity of 1.0 B) A 10 percent increase in price causes a 10 percent reduction in quantity demanded. C) a price elasticity of 0.8 D) A 10 percent increase in price causes a 20 percent decrease in quantity demanded. E) A 10 percent increase in price causes a 5 percent decrease in quantity demanded. Topic: 4.1a. price elasticity of demand 7) Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is A) 4.0 B) 0.5 C) 2.0 D) 1.0 E) 1.5 Topic: 4.1a. price elasticity of demand 8) An economic hypothesis will be rejected when A) the possibility of error has been completely eliminated. B) one or more of the assumptions on which it is based fails to conform with reality. C) a single empirical observation is encountered in which its predictions fail. D) it is shown to be wrong with certainty by empirical observation. E) the probability that it is wrong, based on empirical observation, is judged to be unacceptably high. Topic: 2.3. testing theories 9) Specialization of labour led to greater efficiency in the allocation of resources because of A) the principle of comparative advantage. B) greater reliance on self-sufficiency. C) an increase in total work effort. D) the use of barter. E) the opportunity cost of labour increased. Topic: 1.3b. division of labour, specialization and trade 2 FIGURE 5-3 10)Refer to Figure 5-3.2P represents a price imposed by the government. What is the quantity of this good that would be exchanged in the market? A) Q4 B) Q3 C) Q 1 D) Q2 E) Q 0 Topic: 5.2b. price floors and ceilings 11) Economists build models that abstract from the complexities of reality because A) they believe they gain a greater understanding of reality. B) it is easier to do so. C) economists do not understand the real world. D) economists are not interested in reality. E) the complexities of reality are unimportant. Topic: 2.3. testing theories 12) To say that the supply curve is positively sloped means that A) households will want to buy less at higher prices. B) as price goes up,
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