ECON 110 EXAM 1 KSU QUESTIONS
AND CORRECT ANSWERS
The opportunity cost of undertaking an activity includes any sunk cost ✅✅CORRECT ANSW-False
Only marginal costs, not sunk costs, affect economic decisions if individuals are rational
✅✅CORRECT ANSW-True
When quantity demanded is greater than quantity supplied, the resulting shortage causes the price
to fall ✅✅CORRECT ANSW-False
Deciding what the distribution of income should be is an example of normative economics
✅✅CORRECT ANSW-True
Two nations with differing comparative advantages will be able to consume more if each produces
the good for which the opportunity cost is highest and trades for the good for which opportunity
cost is the lowest ✅✅CORRECT ANSW-False
The law of supply states that more of a good will be supplied the lower its price, other things
constant ✅✅CORRECT ANSW-False
In a Market economy, Society relies on the self-interest of individuals to determine what, how, and
for whom to produce ✅✅CORRECT ANSW-True
Propositions that are logically true based on the assumptions of a model are known as:
✅✅CORRECT ANSW-Theorems
The production possibility model can be used to demonstrate the concept of opportunity cost
✅✅CORRECT ANSW-True
Governments establish the laws that regulate the interaction between businesses and households
but do not serve as actors in the economy themselves ✅✅CORRECT ANSW-False
, An increase in demand causes equilibrium price and quality to rise, other things constant
✅✅CORRECT ANSW-True
If you move from a point inside the productions possibility curve to a point on the productuon
possibility curve, it follows that efficiency is: ✅✅CORRECT ANSW-Increased because the economy
Is now on the production Possibility curve
If there is a direct relationship between two variables, the graph relating those two variables will be
✅✅CORRECT ANSW-Upward-sloping
Macroeconomics includes the study of ✅✅CORRECT ANSW-Inflation
Which of the following statements is correct ✅✅CORRECT ANSW-Both stocks and bonds are
financially assets
A public good is a good that ✅✅CORRECT ANSW-When consumed by one individual, can still be
consumes by others
Which of the shifts explains what will happen to the production possibility curve if political unrest
and strikes disrupt all sectors of an economy equally? (GRAPH PICTURED) ✅✅CORRECT ANSW-IV
Given the production possibility curve shown, the opportunity cost of listening to each additional CD
when moving from Point B to Point A is on average: (GRAPH PICTURED) ✅✅CORRECT ANSW-1/2
article
Corporate advertising: ✅✅CORRECT ANSW-May undermine consumer sovereignty
According to the law of demand, an increase in the price of baseball trading cards causes:
✅✅CORRECT ANSW-People to buy fewer trading cards
If the price of steel rises, the law of supply predicts that, other things constant the: ✅✅CORRECT
ANSW-quantity supplied of steel will increase
Which of the following is a characteristic of market economy ✅✅CORRECT ANSW-Private
property
AND CORRECT ANSWERS
The opportunity cost of undertaking an activity includes any sunk cost ✅✅CORRECT ANSW-False
Only marginal costs, not sunk costs, affect economic decisions if individuals are rational
✅✅CORRECT ANSW-True
When quantity demanded is greater than quantity supplied, the resulting shortage causes the price
to fall ✅✅CORRECT ANSW-False
Deciding what the distribution of income should be is an example of normative economics
✅✅CORRECT ANSW-True
Two nations with differing comparative advantages will be able to consume more if each produces
the good for which the opportunity cost is highest and trades for the good for which opportunity
cost is the lowest ✅✅CORRECT ANSW-False
The law of supply states that more of a good will be supplied the lower its price, other things
constant ✅✅CORRECT ANSW-False
In a Market economy, Society relies on the self-interest of individuals to determine what, how, and
for whom to produce ✅✅CORRECT ANSW-True
Propositions that are logically true based on the assumptions of a model are known as:
✅✅CORRECT ANSW-Theorems
The production possibility model can be used to demonstrate the concept of opportunity cost
✅✅CORRECT ANSW-True
Governments establish the laws that regulate the interaction between businesses and households
but do not serve as actors in the economy themselves ✅✅CORRECT ANSW-False
, An increase in demand causes equilibrium price and quality to rise, other things constant
✅✅CORRECT ANSW-True
If you move from a point inside the productions possibility curve to a point on the productuon
possibility curve, it follows that efficiency is: ✅✅CORRECT ANSW-Increased because the economy
Is now on the production Possibility curve
If there is a direct relationship between two variables, the graph relating those two variables will be
✅✅CORRECT ANSW-Upward-sloping
Macroeconomics includes the study of ✅✅CORRECT ANSW-Inflation
Which of the following statements is correct ✅✅CORRECT ANSW-Both stocks and bonds are
financially assets
A public good is a good that ✅✅CORRECT ANSW-When consumed by one individual, can still be
consumes by others
Which of the shifts explains what will happen to the production possibility curve if political unrest
and strikes disrupt all sectors of an economy equally? (GRAPH PICTURED) ✅✅CORRECT ANSW-IV
Given the production possibility curve shown, the opportunity cost of listening to each additional CD
when moving from Point B to Point A is on average: (GRAPH PICTURED) ✅✅CORRECT ANSW-1/2
article
Corporate advertising: ✅✅CORRECT ANSW-May undermine consumer sovereignty
According to the law of demand, an increase in the price of baseball trading cards causes:
✅✅CORRECT ANSW-People to buy fewer trading cards
If the price of steel rises, the law of supply predicts that, other things constant the: ✅✅CORRECT
ANSW-quantity supplied of steel will increase
Which of the following is a characteristic of market economy ✅✅CORRECT ANSW-Private
property
