1.

____________ questions have to do with explanations and predictions,

____________ questions have to do with what ought to be.
(1) Positive; negative
(2) Negative; positive
(3) Affirmative; positive
(4) Positive; normative

2. Consider the following figure showing the production possibility

frontier of
Joylandia. What is the opportunity cost of producing one car in
Joylandia?

(1) 100 cars

(2) 4 computers
(3) 1⁄4 car
(4) None of the above

3. In making what of the following statements is an economist acting

more like a
scientist, as opposed to a policy adviser?
(1) Affirmative action in public universities should be illegal
(2) The Enron’s collapse is a sign that Corporate America is corrupted
and should be
the object of more public scrutiny
(3) Spending more public money in private schools would indeed raise
students’
scores on all standardized tests
(4) Creating a Department of Homeland Security is a political
move that has nothing to do with the war on terrorism

4. Economics models are

(1) useless if they are simple
(2) built with assumptions
(3) created to duplicate reality
(4) always right when predicting the future

5. Consider the graph in question 2. What is the opportunity cost of

producing a
computer in Joylandia?
(1) 25 computers
(2) 4 cars
(3) 1⁄4 car
(4) 124.666 cars

6. Suppose an economy is operating on its production possibility

frontier, then
(1) the scarcity problem is solved
(2) wants are no longer unlimited
(3) some resources are left unused
(4) None of the above

7. A simple circular flow diagram does not include

(1) the fact that businesses sell to each other
(2) a flow of money
(3) transactions between workers and employers
(4) a flow of goods and services

8. Consider the following figure showing the production possibility

frontier in
Sadlandia. What is the opportunity cost of producing a car in
Sadlandia?

(1) 0.34 computer

(2) 3.40 computers
(3) 4.30 computers
(4) 0.43 computer

9. What would happen to the equilibrium price and quantity of peanut

butter if the
price of peanut went up?
(1) Price would all and quantity would rise
(2) Price would rise and quantity would fall
(3) Both price and quantity would fall
(4) Both price and quantity would rise

10. In the circular-flow diagram,

(1) income from factors of production flows from firms to households
(2) goods and services flow from households to firms
(3) factors of production flow from firms to households
(4) spending on goods and services flows from firms to households

11. Robinson Crusoe can gather 10 coconuts or catch 1 fish per hour.
His friend
Friday can gather 30 coconuts or catch 2 fish per hour. Who should
specialize in
catching fish?
(1) Robinson Crusoe, because he has a comparative advantage in
catching fish
(2) Friday, because he has an absolute advantage in catching fish
(3) Both of them, because everyone is better off when they specialize
in everything
(4) None of them, because autarky is better than specialization and
trade

12. What would happen to the equilibrium price and quantity of corn
flakes if the
price of corn went down?
(1) Price would fall and quantity would rise
(2) Price would rise and quantity would fall
(3) Both price and quantity would rise
(4) Both price and quantity would fall

13. Absolute advantage refers to the comparison among producers of a

good
according to their
(1) opportunity cost
(2) market power
(3) location
(4) productivity

14. If a shortage exists in a market, we know that the actual price is

(1) above equilibrium price and quantity demanded is greater than
quantity supplied
(2) below equilibrium price and quantity demanded is greater than
quantity supplied
(3) below equilibrium price and quantity supplied is greater than
quantity demanded
(4) above equilibrium price and quantity supplied is greater than
quantity demanded

15. Which of the following concepts is not illustrated by the PPF?

(1) Efficiency
(2) Opportunity Cost
(3) Equity
(4) Tradeoffs

16. Frosted Flakes and Raisin Brand are substitutes. Therefore, we

know that an
increase in the price of Frosted Flakes will lead to
(1) a decrease in the demand for Frosted Flakes
(2) an increase in the demand for Raisin Brand
(3) a decrease in the demand for Raisin Brand
(4) an increase in the demand for Frosted Flakes

17. The supply of a good is negatively related to the

(1) price of inputs used to make the good
(2) demand for the good by consumers
(3) price of the good itself
(4) amount of profit a firm can expect to receive from sale of the good

18. To calculate price elasticity of demand we divide

(1) Percentage change in price by percentage in quantity demanded
(2) percentage change in quantity demanded by change in price
(3) change in quantity demanded by percentage change in price
(4) percentage change in quantity demanded by percentage change in
price

19. What will happen to the equilibrium price and quantity of new
textbooks if paper
becomes cheaper and more students attend college?
(1) Price will fall and the effect on quantity will be ambiguous
(2) Quantity will rise and the effect on price will be ambiguous
(3) Price will rise and the effect on quantity will be ambiguous
(4) Quantity will fall and the effect on price will be ambiguous

20. Peanut butter and jelly are complements. Therefore, as the price of
peanut butter
increases one would expect
(1) the demand for peanut butter to shift to the left
(2) the demand for peanut butter to shift to the right
(3) the demand for jelly to shift to the left
(4) the demand for jelly to shift to the right

21. When the going price is higher than the equilibrium price,
(1) a shortage will occur
(2) buyers will want to purchase more than is produced
(3) quantity demanded will be equal to quantity supplied
(4) sellers will want to produce and sell more than buyers wish to
purchase

22. Consider the graphs in questions 2 and 8. Which of the following

statements is
true?
(1) Joylandia has an absolute advantage in cars and Sadlandia has an
absolute
advantage in computers
(2) Joylandia has an absolute advantage in computers and Sadlandia
has an absolute
advantage in cars
(3) Joylandia has an absolute advantage in both cars and computers
(4) Sadlandia has an absolute advantage in both cars and computers
23. Suppose you are a wheat farmer. If you know that the demand for
wheat is
inelastic, what should you do to increase your total revenue?
(1) plant more wheat so that you would be able to sell more each year
(2) spend more on fertilizer in order to produce more on the acres you
farm
(3) reduce the number of acres you plant in wheat
(4) use better machinery

24. You lose your job and as a result you buy more Potatoes chips. This
shows that
you consider Potatoes chips to be a / an
(1) Normal good
(2) Inferior good
(3) Luxury good
(4) Complementary good

25. A car manufacturer is expected higher prices for cars in the near
future. We would
expect
(1) the car manufacturer to supply more cars now
(2) the car manufacturer to supply fewer cars now
(3) the demand for this manufacturer’s cars to fall
(4) no changes in the car manufacturer’s current supply

26. The income elasticity of demand for Brussels sprouts is equal to

5.5. From this,
we know that Brussels sprouts are
(1) normal goods
(2) inferior goods
(3) complimentary goods
(4) substitutes

27. Comparative advantage refers to the comparison among producers

of a good
according to their
(1) opportunity cost
(2) market power
(3) location
(4) productivity

28. Suppose Charley, Ivan, Frances, and Jeanne (these are hurricanes)
have destroyed
most of the tomatoes fields in Florida and, as a result, the total
revenue of
tomatoes producers increases. From this we know that the demand for
tomatoes is
(1) elastic
(2) inelastic
(3) unit elastic
(4) perfectly elastic

29. Consider the graphs in questions 2 and 8. Which of the following

statements is
true?
(1) Joylandia has a comparative advantage in cars and Sadlandia has a
comparative
advantage in computers
(2) Joylandia has a comparative advantage in computers and Sadlandia
has a
comparative advantage in cars
(3) Joylandia has a comparative advantage in both cars and computers
(4) Sadlandia has a comparative advantage in both cars and
computers

30. The following table provides information about Esmeralda and

Quasimodo’s
productivity in writing lyrics and novels. According to the principle of
comparative advantage, who should specialize in writing novels?

Lyrics in 0ne year Novels in one year

Esmeralda 25 3
Quasimodo 5 1

(1) Esmeralda
(2) Quasimodo
(3) Both
(4) We cannot tell. We need more information

31. Trade can __________ everyone in society because it allows people

to specialize
in activities in which they have ____________ advantage.
(1) hurt; comparative
(2) benefit; an absolute
(3) hurt; an absolute
(4) benefit; a comparative

32. According to the law of demand

(1) price and quantity demanded are positively related
(2) price and demand are negatively related
(3) Quantity demanded and demand are negatively related
(4) None of the above