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Exam 1 Review
Supplemental Instruction
Iowa State University
1. Scarcity is a problem that
a) more efficient production would
eliminate
b) is nonexistent in wealthy economics
c) exists due to finite amounts of resources
and unlimited human wants
d) arises when productivity growth slow
down
e) exists in command economies but not
market economies
2. If a DVD costs $20 and VHS cost $10, then
the opportunity cost of five DVDs is
a) 50 VHSs
b) 10 VHSs
c) 5 VHSs
d) 2 VHSs
e) $25
3. Assuming that the alternative is
employment, the opportunity cost of a
university education is
a) tuition cost only
b) tuition and book costs only
c) forgone salary only
d) tuition costs plus book costs plus
forgone salary
e) all items in d plus university residence
fees and the cost of cafeteria meals
4. Which of the following causes an outward
shift in the production possibilities
boundary?
a) An increase in unemployment
b) A loss in the productive capacity of
agricultural acreage caused by a
prolonged drought
c) An increase in the productivity of all
factors of production
d) Shifting resources away from the
production of the good toward another
e) all of the above
5. Specialization of labor leads to a more
efficient allocation resources because of
a) more self-sufficiency
b) the use of barter
c) the principle of comparative advantage
Leader: Maddie
Course: Econ 101
Instructor: Kreider
Date: September 20, 2015
d) a decrease in scarcity
e) all of above
6. The term quantity demanded refers to the
a) amount of a good that consumers are
willing to purchase at some price during
some given time period
b) amount of some good that consumers
would purchase if they only had the
income to afford it
c) amount of a good that is actually
purchased during a given time period
d) minimum amount of a good that
consumers require and demand for
survival
e) amount of a good that consumers are
willing to purchase regardless of price
7. Which of the following shifts the demand
curve?
a) Change in price of a good
b) Number of buyers increases
c) Buyers income goes down
d) All the above
e) B and C
8. A shift in the supply curve may be caused
by any of the following except
a) an improvement in technology
b) an increase in the wage paid to labor
c) an increase in average consumer
income
d) an increase in the number of firms in
the industry
e) both b and c are correct
9. The law of supply is:
a) The higher the price, the higher the
quantity supplied
b) The lower the price, the higher the
quantity supplied
c) The higher the price, the lower the
quantity supplied
10. The law of demand is
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a) The lower the price, the lower the
quantity demanded
b) The higher the price, the lower the
quantity demanded
c) The higher the price, the higher the
quantity demanded
11. A nation has a comparative advantage in
producing some good if
a) Its workers have a lower wage than
workers in other countries
b) It can produce the good with less
resources than other countries
c) It can produce the good with a lower
opportunity cost than other countries
12. A country has a/an
_____________________ in a good when
it can produce the good with fewer
resources than some other country.
a) Absolute advantage
b) Comparative advantage
c) Complete advantage
i. ½ coconut
ii. 2 coconuts
iii. 1 coconut
f) Which country has the comparative
advantage in coconuts?
i. Country T
ii. Country H
iii. Neither country
g) The country specializing in
coconuts would produce how
many?
i. 20
ii. 30
iii. 40
h) The country specializing in fish
would produce how many?
i. 40
ii. 30
iii. 10
14. Refer to the graph below to for the
following questions (a-d):
13. Give the following information answer
questions below (a-h):
B
Production (in thousands)
Coconuts
Fish
Country T
30
40
Country H
20
10
a) What is the opportunity cost of one
fish in Country T?
i. ¾ coconut
ii. 4 coconuts
iii. 4/3 coconuts
b) What is the opportunity cost of one
fish in Country H?
i. ½ coconut
ii. 2 coconuts
iii. 1 coconut
c) Which country has the comparative
advantage in fish?
i. Country T
ii. Country H
iii. Neither country
d) What is the opportunity cost of one
coconut in Country T?
i. ¾ fish
ii. 4 fish
iii. 4/3 fish
e) What is the opportunity cost of one
coconut in Country H?
C
A
a) What does this graph represent?
i. Supply and Demand
ii. Production Possibility
Frontier
iii. Production Potential
Frontier
b) Which area of this graph is
unfeasible?
i. A
ii. B
iii. C
c) Which area of the graph is feasible
and efficient?
i. A
ii. B
iii. C
d) Which area of the graph is feasible
and not efficient?
i. A
ii. B
iii. C
15. Refer to the graph below to answer the
following questions (a-e):
D
B
A
C
a. What does this graph represent?
i. Supply and Demand
ii. Production Possibility
Frontier
iii. Neither
b. Which of the following represents
supply?
i. A
ii. B
iii. C
iv. D
c. Which of the following represents
demand?
i. A
ii. B
iii. C
iv. D
d. Which of the following represents
quantity?
i. A
ii. B
iii. C
iv. D
e. Which of the following represents
price?
i. A
ii. B
iii. C
iv. D
16. Which of the following would cause a
rightward shift of the demand curve in the
market for fresh eggs in St. Louis?
a) An increase in the price of powdered
eggs, a substitute for fresh eggs
b) An increase in the number or firms in
the egg-producing industry
c) CNN comes out with an article saying
that scientists have found that fresh
eggs cause lung cancer
d) A terrible tornado in St. Louis causes
major destruction and causes many
consumers to leave the area
e) None of the above
17. Which of the following would shift the
supply curve for a good leftward?
a) A rise in the price of a complement
b) A rise in the price of an input used in
producing the good
c) Suppliers leaving a given area
d) All of the above
18. If there is excess supply of a good, we can
generally expect
a) The demand curve to shift leftward
b) A surplus
c) A shortage
d) The demand curve to shift rightward
19. If used books are an inferior good, then a
decrease in income will cause a
a) Rightward shift of the demand curve for
used books
b) Leftward shift of the demand curve for
used books
c) Shift in both the demand and supply
curves for used books
d) Rightward shift in the supply curve for
used books
20. Who has the absolute advantage for making burgers, fries?
McDonald’s - Fries & Burger King - Burgers
21. Who has the comparative advantage for each output?
McDonald’s – Fries & Burger King - Burgers
One Hour
McDonald’s
Burger King
Burgers
4
5
Fries
16
15
22. The market for pizza is the following table.
Price
2
3
4
5
6
Quantity Demanded
80
65
50
35
20
Supplied
10
30
50
70
90
a). What is market equilibrium for price and how much is demanded? $4 and 50 for Quantity
b). If the Price was $2 would there be a surplus or shortage? Shortage
c). If the price of hamburgers went up, how would that affect the market for pizza? Pizza
would increase in demand
23. The price of t-shirts rises from $8 to $12. The quantity demanded falls from 110 to 90. What
is the elasticity of this good?
a) .2
b) .5
c) 2
d) 5
24. What does it mean if a goods price elasticity for demand is 3?
a) It is elastic
b) The price sensitivity is high
c) It is a necessity
d) all the above
e) just a and b
25. What does a supply curve that’s inelastic look like?
a) It is steeper with price being more sensitive than quantity supplied.
b) It is more flat with price being more sensitive than quantity supplied.
c) It is steeper with quantity supplied being more sensitive than price.
d) It is more flat with quantity supplied being more sensitive than price.
26. What does a negative cross-price elasticity mean?
a) The good is inferior
b) The good is normal
c) The good is a compliment.
d) The good is a substitute