TEST BANK FOR CHAPTER 1: Economic Models
MULTIPLE CHOICE
1. The problem of scarcity
a. arises only in poor countries.
b. exists because the price of goods is too high.
c. exists because of limited resources.
d. will eventually be solved by better planning.
ANS: c
2. If society is producing a combination of goods on its production possibilities frontier
a. it must be employing all available resources.
b. it must be growing.
c. it is using all the available natural resources but may not be using all available
labor resources.
d. Both a and b.
ANS: a
3. The slope of the production possibility frontier shows
a. how inputs must be changed to keep them fully employed.
b. the technically efficient combinations of the two goods.
c. how demanders are willing to trade one good for another.
d. the opportunity cost of one good in terms of the other.
ANS: d
4. If the prevailing price of shirts is $10 and at this price demanders demand 100 shirts
while suppliers are willing to supply 110 shirts, there is a(n)
a. shortage at the $10 price.
, b. surplus at the $10 price.
c. equilibrium in this market.
d. shortage if price were to rise above $10.
ANS: b
5. Positive economic analysis
a. involves the study of firms with positive profits.
b. involves how resources are actually used in an economy.
c. involves judgments on how resources should be used in an economy.
d. is usually thought to be a waste of time.
ANS: b
6. Normative economic analysis
a. involves the study of what comprises a normal firm.
b. involves how resources are actually used in an economy.
c. involves judgments on how resources should be used in an economy.
d. is usually thought to be a waste of time.
ANS: c
7. A major problem that may occur with models that predict the values of economic
variables in the future is that
a. researchers are pessimistic about the future.
b. the model may fail to acknowledge that economic actors will change their
behavior in response to changing situations.
c. the model may make predictions that conflict with widely held opinions.
d. no one cares about these predictions.
ANS: b
, 8. In the equation Y = 13X + 38 where Y is a function of X
a. Y is the independent variable.
b. 38 is a variable.
c. the slope of the line is 38.
d. None of these.
ANS: d
9. The Y-intercept of Y = 3X + 8 is
a. 3/8.
b. 3.
c. 8.
d. −8/3.
ANS: c
10. The X-intercept of Y = 4X + 12 is
a. –3.
b. 3.
c. −1/3.
d. 12.
ANS: a
11. If the Y-intercept of a linear function increases while the slope remains unchanged
a. the graph must shift down.
b. the graph must rotate to the left about the X intercept.
c. the graph must shift up.
d. the graph remains unchanged.
ANS: c
, 12. If the slope of a linear function changes with no change in the Y-intercept
a. the graph shifts either up or down.
b. the graph remains unchanged.
c. the graph rotates about its X-intercept.
d. the graph rotates about its Y-intercept.
ANS: d
13. The slope of a nonlinear function at some particular point
a. is the slope of the straight line that is tangent to the function at that point.
b. is the slope of the straight line connecting the origin and the point.
c. cannot be determined.
d. is constant for the entire function.
ANS: a
14. Given Y = f(X,Z), which of the following are necessarily true?
a. Y is a linear function.
b. X, Z are dependent variables.
c. A contour line of this function would keep Y constant.
d. An increase in X would increase Y.
ANS: c
15. For the function , the equation represents
a. the X-intercept.
b. the Y-intercept.
c. a contour line.
d. a tangent line.
ANS: c
MULTIPLE CHOICE
1. The problem of scarcity
a. arises only in poor countries.
b. exists because the price of goods is too high.
c. exists because of limited resources.
d. will eventually be solved by better planning.
ANS: c
2. If society is producing a combination of goods on its production possibilities frontier
a. it must be employing all available resources.
b. it must be growing.
c. it is using all the available natural resources but may not be using all available
labor resources.
d. Both a and b.
ANS: a
3. The slope of the production possibility frontier shows
a. how inputs must be changed to keep them fully employed.
b. the technically efficient combinations of the two goods.
c. how demanders are willing to trade one good for another.
d. the opportunity cost of one good in terms of the other.
ANS: d
4. If the prevailing price of shirts is $10 and at this price demanders demand 100 shirts
while suppliers are willing to supply 110 shirts, there is a(n)
a. shortage at the $10 price.
, b. surplus at the $10 price.
c. equilibrium in this market.
d. shortage if price were to rise above $10.
ANS: b
5. Positive economic analysis
a. involves the study of firms with positive profits.
b. involves how resources are actually used in an economy.
c. involves judgments on how resources should be used in an economy.
d. is usually thought to be a waste of time.
ANS: b
6. Normative economic analysis
a. involves the study of what comprises a normal firm.
b. involves how resources are actually used in an economy.
c. involves judgments on how resources should be used in an economy.
d. is usually thought to be a waste of time.
ANS: c
7. A major problem that may occur with models that predict the values of economic
variables in the future is that
a. researchers are pessimistic about the future.
b. the model may fail to acknowledge that economic actors will change their
behavior in response to changing situations.
c. the model may make predictions that conflict with widely held opinions.
d. no one cares about these predictions.
ANS: b
, 8. In the equation Y = 13X + 38 where Y is a function of X
a. Y is the independent variable.
b. 38 is a variable.
c. the slope of the line is 38.
d. None of these.
ANS: d
9. The Y-intercept of Y = 3X + 8 is
a. 3/8.
b. 3.
c. 8.
d. −8/3.
ANS: c
10. The X-intercept of Y = 4X + 12 is
a. –3.
b. 3.
c. −1/3.
d. 12.
ANS: a
11. If the Y-intercept of a linear function increases while the slope remains unchanged
a. the graph must shift down.
b. the graph must rotate to the left about the X intercept.
c. the graph must shift up.
d. the graph remains unchanged.
ANS: c
, 12. If the slope of a linear function changes with no change in the Y-intercept
a. the graph shifts either up or down.
b. the graph remains unchanged.
c. the graph rotates about its X-intercept.
d. the graph rotates about its Y-intercept.
ANS: d
13. The slope of a nonlinear function at some particular point
a. is the slope of the straight line that is tangent to the function at that point.
b. is the slope of the straight line connecting the origin and the point.
c. cannot be determined.
d. is constant for the entire function.
ANS: a
14. Given Y = f(X,Z), which of the following are necessarily true?
a. Y is a linear function.
b. X, Z are dependent variables.
c. A contour line of this function would keep Y constant.
d. An increase in X would increase Y.
ANS: c
15. For the function , the equation represents
a. the X-intercept.
b. the Y-intercept.
c. a contour line.
d. a tangent line.
ANS: c
