ECON 304 STUDY GUIDE 2025/2026 QUESTIONS WITH
ANSWERS GRADED A+
✔✔The opportunity cost of 1 unit of weapon for the U.S. worker is: - ✔✔4 units of food.
✔✔In a trade model with two countries and two goods, can one country have absolute
advantage in the production of both goods? - ✔✔yes.
✔✔According to Schumer and Roberts' article, the comparative advantage principle of
free trade: - ✔✔might not be applicable to the modern economy.
✔✔According to Douglas A. Irwin's article: - ✔✔outsourcing benefits both U.S.'
consumers and exporters.
✔✔A competitive market is a market where - ✔✔there are many sellers and buyers so
that each has negligible impact on price.
✔✔In a free market, who determine the amounts and prices of goods to be sold? -
✔✔both sellers and buyers.
✔✔Which of the following is a factor affecting (determinant) demand for ice cream? -
✔✔price of ice cream.
price of related goods such as soda, bottled water, lemonade, ...
income and taste.
all of the above.
✔✔A gasoline demand schedule is a - ✔✔table showing the relationship between the
price of gasoline and the number of gallons of gasoline buyers are willing and able to
purchase.
✔✔A gasoline demand curve is - ✔✔the downward-sloping curve relating gasoline price
with the quantity of gasoline demanded.
✔✔The law of demand states that - ✔✔as price increases, the quantity demanded
decreases.
✔✔A hypothetical weekly gasoline demand function of a consumer is expressed by the
equation:
Qd = 10 - 1P + 2I - 2MPG
Where
P is gasoline price in $/gallon,
, Qd is quantity of gasoline demanded in gallons,
I is income in $1000, and
MPG is the fuel efficiency of the car in miles per gallon.
Based on this equation, what is the weekly quantity of gasoline demanded of this
consumer given the following data:
Case 1: P=$2/gallon, I=$30k, and MPG=30 miles/gal? - ✔✔8 gallons.
✔✔Based on the same equation above, what is the weekly quantity of gasoline
demanded of this consumer when price increase to $5/gal, and other values stay the
same as in Case 1.
Case 2: P=$5/gallon, I=$30k, and MPG=30 miles/gal? - ✔✔5 gallons.
✔✔Based on the same equation above, what is the weekly quantity of gasoline
demanded of this consumer when income decreases to $29K, and other values stay the
same as in Case 1.
Case 3: P=$2/gallon, I=$29k, and MPG=30 miles/gal? - ✔✔6 gallons.
✔✔An inferior good is one that is - ✔✔consumed less when buyers' income is higher.
✔✔As income increase, consumers tend to eat less ramen noodle. Ramen noodle is an
example of: - ✔✔inferior good.
✔✔According to the required-reading article, "Oil Prices", the oil industry has been: -
✔✔suffering a deep downturn in recent years.
✔✔The price elasticity of demand measures how responsive - ✔✔buyers are to a
change in price.
✔✔Demand is said to be elastic if - ✔✔the quantity demanded responds substantially to
changes in the price of the good.
✔✔Demand is said to be inelastic if - ✔✔the quantity demanded changes only slightly
when the price of the good changes.
✔✔Most economists report the elasticity of demand as - ✔✔the absolute value of the
actual number.
ANSWERS GRADED A+
✔✔The opportunity cost of 1 unit of weapon for the U.S. worker is: - ✔✔4 units of food.
✔✔In a trade model with two countries and two goods, can one country have absolute
advantage in the production of both goods? - ✔✔yes.
✔✔According to Schumer and Roberts' article, the comparative advantage principle of
free trade: - ✔✔might not be applicable to the modern economy.
✔✔According to Douglas A. Irwin's article: - ✔✔outsourcing benefits both U.S.'
consumers and exporters.
✔✔A competitive market is a market where - ✔✔there are many sellers and buyers so
that each has negligible impact on price.
✔✔In a free market, who determine the amounts and prices of goods to be sold? -
✔✔both sellers and buyers.
✔✔Which of the following is a factor affecting (determinant) demand for ice cream? -
✔✔price of ice cream.
price of related goods such as soda, bottled water, lemonade, ...
income and taste.
all of the above.
✔✔A gasoline demand schedule is a - ✔✔table showing the relationship between the
price of gasoline and the number of gallons of gasoline buyers are willing and able to
purchase.
✔✔A gasoline demand curve is - ✔✔the downward-sloping curve relating gasoline price
with the quantity of gasoline demanded.
✔✔The law of demand states that - ✔✔as price increases, the quantity demanded
decreases.
✔✔A hypothetical weekly gasoline demand function of a consumer is expressed by the
equation:
Qd = 10 - 1P + 2I - 2MPG
Where
P is gasoline price in $/gallon,
, Qd is quantity of gasoline demanded in gallons,
I is income in $1000, and
MPG is the fuel efficiency of the car in miles per gallon.
Based on this equation, what is the weekly quantity of gasoline demanded of this
consumer given the following data:
Case 1: P=$2/gallon, I=$30k, and MPG=30 miles/gal? - ✔✔8 gallons.
✔✔Based on the same equation above, what is the weekly quantity of gasoline
demanded of this consumer when price increase to $5/gal, and other values stay the
same as in Case 1.
Case 2: P=$5/gallon, I=$30k, and MPG=30 miles/gal? - ✔✔5 gallons.
✔✔Based on the same equation above, what is the weekly quantity of gasoline
demanded of this consumer when income decreases to $29K, and other values stay the
same as in Case 1.
Case 3: P=$2/gallon, I=$29k, and MPG=30 miles/gal? - ✔✔6 gallons.
✔✔An inferior good is one that is - ✔✔consumed less when buyers' income is higher.
✔✔As income increase, consumers tend to eat less ramen noodle. Ramen noodle is an
example of: - ✔✔inferior good.
✔✔According to the required-reading article, "Oil Prices", the oil industry has been: -
✔✔suffering a deep downturn in recent years.
✔✔The price elasticity of demand measures how responsive - ✔✔buyers are to a
change in price.
✔✔Demand is said to be elastic if - ✔✔the quantity demanded responds substantially to
changes in the price of the good.
✔✔Demand is said to be inelastic if - ✔✔the quantity demanded changes only slightly
when the price of the good changes.
✔✔Most economists report the elasticity of demand as - ✔✔the absolute value of the
actual number.
