1. The problem of scarcity

Chapter 1

• The problem of scarcity
• arises only in poor countries.
• exists because the price of goods is too high.
• exists because of limited resources.
• will eventually be solved by better planning.

ANSWER: c

POINTS: 1

• If society is producing a combination of goods on its production possibilities frontier
• it must be employing all available resources.
• it must be growing.
• it is using all the available natural resources but may not be using all available labor resources.
• Both a and b.

ANSWER: a

POINTS: 1

• The slope of the production possibility frontier shows
• how inputs must be changed to keep them fully employed.
• the technically efficient combinations of the two goods.
• how demanders are willing to trade one good for another.
• the opportunity cost of one good in terms of the other.

ANSWER: d

POINTS: 1

• If the prevailing price of shirts is $10 and at this price demanders demand 100 shirts while suppliers are willing to

supply 110 shirts, there is a(n)

• shortage at the $10 price.
• surplus at the $10 price.
• equilibrium in this market.
• shortage if price were to rise above $10.

ANSWER: b

POINTS: 1

• Positive economic analysis
• involves the study of firms with positive profits.
• involves how resources are actually used in an economy.
• involves judgments on how resources should be used in an economy.
• is usually thought to be a waste of time.

ANSWER: b

POINTS: 1

• Normative economic analysis
• involves the study of what comprises a normal firm.
• involves how resources are actually used in an economy.

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• involves judgments on how resources should be used in an economy.
• is usually thought to be a waste of time.

ANSWER: c

POINTS: 1

• A major problem that may occur with models that predict the values of economic variables in the future is that
• researchers are pessimistic about the future.
• the model may fail to acknowledge that economic actors will change their behavior in response to changing

situations.

• the model may make predictions that conflict with widely held opinions.
• no one cares about these predictions.

ANSWER: b

POINTS: 1

• In the equation where Y is a function of X
• Y is the independent variable.
• 38 is a variable.
• the slope of the line is 38.
• None of the above.

ANSWER: d

POINTS: 1

• The Y-intercept of is
• 3/8.
• 3.
• 8.
• –8/3.

ANSWER: c

POINTS: 1

• The X-intercept of is
• −3.
• 3.
• −1/3
• 12.

ANSWER: a

POINTS: 1

• If the Y-intercept of a linear function increases while the slope remains unchanged
• the graph must shift down in a parallel way.
• the graph must rotate to the left about the X intercept.
• the graph must shift up in a parallel.
• the graph remains unchanged.

ANSWER: c

POINTS: 1

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• If the slope of a linear function changes with no change in the Y-intercept
• the graph shifts either up or down in a parallel way.
• the graph remains unchanged.
• the graph rotates about its X-intercept.
• the graph rotates about its Y-intercept.

ANSWER: d

POINTS: 1

• The slope of a nonlinear function at some particular point
• is the slope of the straight line that is tangent to the function at that point.
• is the slope of the straight line connecting the origin and the point.
• cannot be determined.
• is constant for the entire function.

ANSWER: a

POINTS: 1

• Given which of the following are necessarily true?
• Y is a linear function.
• X, Z are dependent variables.
• A contour line of this function would keep Y constant.
• An increase in X would increase Y.

ANSWER: c

POINTS: 1

• For the function , the equation represents
• the X-intercept.
• the Y-intercept.
• a contour line.
• a tangent line.

ANSWER: c

POINTS: 1

• For the equation , which of the following points lie on the contour line?
• , .
• . .
• , .
• Both a and c.

ANSWER: c

POINTS: 1

• For the equation the point ,

• yields a value of .
• lies below the contour line that includes the point , 3 / 4

.

• lies on the same contour line as the point , .
• Both a and b.

ANSWER: d

POINTS: 1

• If , the contour lines
• are concentric circles.
• are parabolas.
• are hyperbolas.
• intersect whenever either X or Z is zero.

ANSWER: a

POINTS: 1

• The solution to the simultaneous equations and is
• , .
• , .
• , .
• None of the above.

ANSWER: b

POINTS: 1

• Graphically, the solution to a system of two independent linear equations is usually
• the average of the slopes.
• the average of the intercepts.
• a single point.
• None of the above.

ANSWER: c

POINTS: 1

• Let and . Here equilibrium price and quantity are
• ;
• ;
• ;

d.;

ANSWER: a

POINTS: 1

• If the production possibilities frontier can be expressed as then the point ; is
• outside the production possibilities frontier
• on the production possibilities frontier
• inside the production possibilities frontier
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