IVY SOFTWARE MBA PREPWORKS
FUNDAMENTALS OF ECONOMICS
EXAMINATION TEST 2026
◉ When country A has a lower opportunity cost of producing sugar
relative to country B, then country A is said to have. Answer:
Comparative Advantage
◉ A graph that shows the combinations of two goods that the
economy can produce given the available scarce resources and
available technology is called a. Answer: Production Possibilities
Frontier
◉ Assume a production possibilities frontier for pickup trucks and
big Mac hamburgers. The economy is producing 20 big Mac
hamburgers and 65 pickup trucks (point 20, 65). What is the
opportunity cost of producing an additional 20 Big Mac hamburgers
(point 40, 60)?. Answer: Five Pickup Trucks
◉ The opportunity cost of an item is. Answer: whatever must be
given up to obtain the item.
,◉ Consider market for pork, suppose that price of beef, a substitute
for pork, increases. Because of the change in price of beef, the
equilibrium price of pork...?. Answer: Increases
◉ Consider the market for pork, suppose that the price of beef, a
substitute for pork, increases. Because of this change in the price of
beef, the equilibrium quantity of pork will...?. Answer: Increase
because increase in price of beef causes demand curve for pork to
shift North East. B/c of this shift, the equilibrium quantity of pork
will increase.
◉ Consider the market for pork. Suppose that the price of hog feed,
an input to the production of pork, increases. Because of that change
in the price of hog feed, the equilibrium quantity of pork ...?. Answer:
Decreases because the increase in price of hog feed causes the
supply curve for pork to shift NW. B/c of this shift, the quantity of
pork decreases.
◉ Consider the market for pork. Suppose that disposable income
increases and pork is an inferior good. Because of that change in
income, the equilibrium price of pork...?. Answer: Decreases because
the increase in disposable income causes the demand curve for pork
to shift south west, because pork is an inferior good. because of this
shift, the equilibrium price of pork decreases.
◉ Consider the market for pork. Suppose that 1) disposable income
increases and pork is a normal good, And 2) the price of hog feed
,decreases. Because of these changes, the equilibrium price of pork
is.... Answer: Indeterminate because the increase in disposable
income causes the demand curve for pork to shift north east because
pork is a normal good. The decrease in price of hog feed causes the
supply curve to shift to the south east. The net effect of these shifts
leaves us unable to say waht will happen to the equilibrium price of
pork.
◉ Consider the market for pork. Suppose that disposable income
increases and pork is a normal good and the price of hog feed
decreases. The equilibrium quantity of pork...?. Answer: Increases.
◉ Suppose the price elasticity for demand for retail phone service in
the US is 0.95. If the # of retail substitutes for retail telephone
service increases, will the price elasticity of demand become more
elastic or more inelastic?. Answer: Elastic. When the number of
substitute products increases, the price elasticity of demand will
become more elastic. consumers become more sensitive to price
when they have more options to chose among.
◉ True or False: the law of demand states that if the price of a good
increases, CP, then the quantity demanded of that good will
increase.. Answer: False. quantity demanded of that good will
decrease.
◉ Suppose the cross-price elasticity of demand for home heating oil
with respect to the price of natural gas is +0.6. This number tells us
, that home heating oil and natural gas are substitute or compliment
goods?. Answer: Substitute goods. When the cross price elasticity is
positive then they are substitutes.
◉ Consider the market for mustard which is a complement to hot
dogs. Suppose the price of hot dogs increase. What happens to the
equilibrium price and equilibrium quantity of the mustard market?.
Answer: Equilibrium price decreases and equilibrium quantity
decreases. The price of hot dogs is an independent variable in the
demand function for mustard. This is because hot dogs and mustard
are complementary goods. Therefore, if the price of hot dogs
increases, then the demand curve for mustard shifts to the south-
west. People demand less mustard at every price when hot dogs are
more expensive. In the mustard market, the equilibrium price
decreases and equilibrium quantity decreases.
◉ profit maximizing rule. Answer: a business maximizes profits
when it produces where the marginal revenue from selling another
unit equals the marginal cost of producing another unit.
Marginal Revenue=Marginal Cost
◉ Marginal cost. Answer: is equal to the change in the total cost that
arises from an extra unit of production. It is calculated by taking the
change in total cost and dividing it by the change in the quantity
produced
FUNDAMENTALS OF ECONOMICS
EXAMINATION TEST 2026
◉ When country A has a lower opportunity cost of producing sugar
relative to country B, then country A is said to have. Answer:
Comparative Advantage
◉ A graph that shows the combinations of two goods that the
economy can produce given the available scarce resources and
available technology is called a. Answer: Production Possibilities
Frontier
◉ Assume a production possibilities frontier for pickup trucks and
big Mac hamburgers. The economy is producing 20 big Mac
hamburgers and 65 pickup trucks (point 20, 65). What is the
opportunity cost of producing an additional 20 Big Mac hamburgers
(point 40, 60)?. Answer: Five Pickup Trucks
◉ The opportunity cost of an item is. Answer: whatever must be
given up to obtain the item.
,◉ Consider market for pork, suppose that price of beef, a substitute
for pork, increases. Because of the change in price of beef, the
equilibrium price of pork...?. Answer: Increases
◉ Consider the market for pork, suppose that the price of beef, a
substitute for pork, increases. Because of this change in the price of
beef, the equilibrium quantity of pork will...?. Answer: Increase
because increase in price of beef causes demand curve for pork to
shift North East. B/c of this shift, the equilibrium quantity of pork
will increase.
◉ Consider the market for pork. Suppose that the price of hog feed,
an input to the production of pork, increases. Because of that change
in the price of hog feed, the equilibrium quantity of pork ...?. Answer:
Decreases because the increase in price of hog feed causes the
supply curve for pork to shift NW. B/c of this shift, the quantity of
pork decreases.
◉ Consider the market for pork. Suppose that disposable income
increases and pork is an inferior good. Because of that change in
income, the equilibrium price of pork...?. Answer: Decreases because
the increase in disposable income causes the demand curve for pork
to shift south west, because pork is an inferior good. because of this
shift, the equilibrium price of pork decreases.
◉ Consider the market for pork. Suppose that 1) disposable income
increases and pork is a normal good, And 2) the price of hog feed
,decreases. Because of these changes, the equilibrium price of pork
is.... Answer: Indeterminate because the increase in disposable
income causes the demand curve for pork to shift north east because
pork is a normal good. The decrease in price of hog feed causes the
supply curve to shift to the south east. The net effect of these shifts
leaves us unable to say waht will happen to the equilibrium price of
pork.
◉ Consider the market for pork. Suppose that disposable income
increases and pork is a normal good and the price of hog feed
decreases. The equilibrium quantity of pork...?. Answer: Increases.
◉ Suppose the price elasticity for demand for retail phone service in
the US is 0.95. If the # of retail substitutes for retail telephone
service increases, will the price elasticity of demand become more
elastic or more inelastic?. Answer: Elastic. When the number of
substitute products increases, the price elasticity of demand will
become more elastic. consumers become more sensitive to price
when they have more options to chose among.
◉ True or False: the law of demand states that if the price of a good
increases, CP, then the quantity demanded of that good will
increase.. Answer: False. quantity demanded of that good will
decrease.
◉ Suppose the cross-price elasticity of demand for home heating oil
with respect to the price of natural gas is +0.6. This number tells us
, that home heating oil and natural gas are substitute or compliment
goods?. Answer: Substitute goods. When the cross price elasticity is
positive then they are substitutes.
◉ Consider the market for mustard which is a complement to hot
dogs. Suppose the price of hot dogs increase. What happens to the
equilibrium price and equilibrium quantity of the mustard market?.
Answer: Equilibrium price decreases and equilibrium quantity
decreases. The price of hot dogs is an independent variable in the
demand function for mustard. This is because hot dogs and mustard
are complementary goods. Therefore, if the price of hot dogs
increases, then the demand curve for mustard shifts to the south-
west. People demand less mustard at every price when hot dogs are
more expensive. In the mustard market, the equilibrium price
decreases and equilibrium quantity decreases.
◉ profit maximizing rule. Answer: a business maximizes profits
when it produces where the marginal revenue from selling another
unit equals the marginal cost of producing another unit.
Marginal Revenue=Marginal Cost
◉ Marginal cost. Answer: is equal to the change in the total cost that
arises from an extra unit of production. It is calculated by taking the
change in total cost and dividing it by the change in the quantity
produced
