1
IVY SOFTWARE MBA PREPWORKS
FUNDAMENTALS OF ECONOMICS
TEST BANK EXAM NEWEST 2025/
2026 QUESTIONS AND CORRECT
DETAILED ANSWERS (EXPERT
VERIFIED ANSWERS) GRADED A+
FOR GUARANTEED PASS UPDATES
The main concept demonstrated in the production possibilities frontier is
- ............ANSWER..........Opportunity cost
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
,2
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.
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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
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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
IVY SOFTWARE MBA PREPWORKS
FUNDAMENTALS OF ECONOMICS
TEST BANK EXAM NEWEST 2025/
2026 QUESTIONS AND CORRECT
DETAILED ANSWERS (EXPERT
VERIFIED ANSWERS) GRADED A+
FOR GUARANTEED PASS UPDATES
The main concept demonstrated in the production possibilities frontier is
- ............ANSWER..........Opportunity cost
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
,2
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.
,3
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
, 4
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
