You own a DVD of the film 'A Beautiful Mind'. The opportunity cost of watching the DVD the second time A) is one-half the cost of the DVD, since this is the second time you have watched it. B) the amount of money you could get from selling the DVD after watching it the first time. C) is the value of the best alternative use of the time you spend watching the DVD on this occasion. D) is zero as you already own the DVD.
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1) You own a DVD of the film 'A Beautiful Mind'. The
- A) is one-half the cost of the DVD, since this is the second time you have watched it.
- B) the amount of money you could get from selling the DVD after watching it the first time.
- C) is the value of the best alternative use of the time you spend watching the DVD on this occasion.
- D) is zero as you already own the DVD.
2) A retired individual decides to spend the day playing golf. The opportunity cost of this decision
- A) could be measured by using the wage rate this individual earned prior to retirement.
- B) is zero, since the individual is retired and is not forgoing any income to spend the day golfing.
- C) is equal to cost of the golf outing.
- D) equals the cost of the golf outing plus the value of the individual's alternative use of time
3) When the price of a good falls and customers tend to buy more of it instead of other goods, economists call this the ________ effect.
- A) substitution B) diminishing
marginal utility - C) income D) ceteris paribus
4) If a computer games addict became
- A) a substitute good. B) a normal good.
- C) a complementary good. D) an inferior good.
5) Which of the following might shift the demand curve for cinema tickets to the left?
- A) A decrease in the cost of the cinema car park, a complement.
- B) A decrease in income.
- C) A rise in the population.
- D) An increase in the price of DVDs, a substitute.
6) Which of the following correctly describes how price adjustments eliminate a shortage?
- A) As the price rises, the quantity demanded will increase while the quantity supplied will decrease.
- B) As the price falls, the quantity demanded will increase and the quantity supplied will also increase.
- C) As the price rises, the quantity demanded will decrease while the quantity supplied will increase.
- D) As the price falls, the quantity demanded will decrease while the quantity supplied will increase.
7) Reasons for supply curves being positively sloped include:
- A) typically, as output rises, unit costs rise, so price must also rise.
- B) firms always want to raise prices to boost profits.
- C) the higher the demand for a good the more firms can charge.
- D) all of the above.
8) If the cost of producing Good A falls, this will cause
- A) an increase in the market price of Good A. B) a shift in the demand for Good A.
- C) a shift in the supply of Good A. D) none of the above
9) Which one of the following correctly describes how price adjustments eliminate a shortage?
- A) As the price falls, the quantity demanded will increase while the quantity supplied will decrease.
- B) As the price rises, the quantity demanded will decrease while the quantity supplied will increase.
- C) As the price falls, the quantity demanded will decrease while the quantity supplied will increase.
- D) As the price rises, the quantity demanded will increase while the quantity supplied will decrease.
10) The following table shows the demand and supply schedules for good X.
Price (£) 1 2 3 4 5 6 7
Quantity demanded 120 100 80 60 40 20 0
Quantity supplied 0 20 40 60 80 100 120
Assume that supply increases by 40 units at all prices. What will be the effect on equilibrium output?
- A) Rise by 60 units.
- B) It's impossible to say because not enough information is given in the table.
- C) Rise by 40 units.
- D) Rise by 20 units.
11) Suppose that it is observed that the price of a commodity rises and that the quantity sold falls. From this we can deduce
- A) that the demand curve has shifted to the left, but we cannot deduce whether or not the supply curve has shifted.
- B) that the demand curve has shifted to the right, but we cannot deduce whether or not the supply curve has shifted.
- C) that the supply curve has shifted to the right, but we cannot deduce whether or not the demand curve has shifted.
- D) that the supply curve has shifted to the left, but we cannot deduce whether or not the demand curve has shifted
12) The price of cough medicine increases by 5% and quantity demanded remains unchanged. The demand for cough medicine over this price range is
- A) perfectly inelastic. B) unitarily elastic.
- C) perfectly elastic. D) income elastic
13) The price elasticity of demand for bottled water in Yorkshire is -2, while the price elasticity of demand for bottled water in London is -0.8. In other words, demand in Yorkshire is ________ and demand in London is ________.
- A) elastic, unitarily elastic B) elastic, inelastic
- C) inelastic, elastic D) highly inelastic, slightly inelastic
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