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Tutoring

E-103 Quiz

Chapter 1-4 (Both Micro and Macro will be applicable)

Chapter 1

The Slopes of Straight Lines
Slope= Change in the vertical distance/Increase in the horizontal distance.

Chapter 2

The Slopes of Curved Lines
To find the slope of a curved line at a particular point, draw a straight line that just touches the curve. Such a line is called a tangent to the curve at that point. The slope of the tangent gives the slope of the curve at that point.

Slope=2 for a line on a graph with x on the horizontal axis and y on the vertical axis. If
x decreases by 4, then y decreases by 8
x=-4, then y=-2
y decreases by 4, then x decreases by 8
x=-4, then y=-8
x increases by 4, then y decreases by 8



A straight line tangent to a curved line at a point
crosses the curved line at that point
crosses the curved line at many points
has the same slope as the curved line at that point
is steeper than the curve at all other points
has a smaller slope than all other points on the curve



Chapter 3

Law of comparative advantage-The individual, firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in that good.

Absolute advantage-The ability to make something using fewer resources than other producers use.

Comparative advantage-The ability to make something at a lower opportunity cost than other producers face.

John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?

Harry has a comparative advantage in ironing.
Harry has a comparative advantage in typing.
Harry has an absolute advantage in typing.
Harry has an absolute advantage in ironing.
Neither can gain from specialization and exchange.



Helen gives up the opportunity to bake 40 cakes for each room she paints; Josh can paint one room in the time it takes him to bake 60 cakes. The opportunity cost of a cake for Helen is
painting one room
painting 1/40 room
painting 1/60 room
painting 2/3 room
painting 3/2 room



Chapter 4

Opportunity cost-The value of the best alternative forgone when an item or activity is chosen.

Sunk cost-A cost that has already been incurred cannot be recovered, and thus is irrelevant for present and future economic decisions.

Suppose you have purchased a non-refundable plane ticket and, at the last moment, you cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket?
$700 because that is what the ticket cost.
$720 because that is the cost of the ticket and of getting it to the buyer.
$730 because that is the total cost of the ticket and getting it to the buyer.
More than $730, so that you can make a profit.
$30 because the $700 is a sunk cost.



Chapter 5

Types of Firms

Sole proprietorship-A firm with a single owner who has the right to all profits but who also bears unlimited liability for the firm's losses and debts.

Partnership-A firm with multiple owners who share the profits and bear unlimited liability for the firm's losses and debts.

Corporation-A legal entity owned by stockholders whose liability is limited to the value of their stock ownership.

Which of the following is a major advantage of the sole proprietorship?
separation of ownership and control
limited liability for business debt
transferability of ownership and firm continuity over time
ease of start-up
ease of obtaining financing



Brian is the sole proprietor owner of Long Voyage Software, which generates maps for wilderness trips. He started the business with an initial investment of $80,000. A faulty map caused one customer to get hopelessly lost. After her rescue and recuperation, she sued Lone Voyage for $5,000,000. Which of the following is true?
The customer can be awarded only $80,000-what the firm has available to pay.
The customer can be awarded $5,000,000 but can get only $80,000.
The customer can be awarded $5,000,000, but Brian personally won't have to pay more than $80,000.
If $5,000,000 is awarded, Brian will have to pay none of it.
If $5,000,000 is awarded, Brian is personally responsible for paying all of it.



Chapter 6

Normal good vs. Inferior good

Normal good is a good, such as new clothes, for which demand increases, or shifts rightward, as consumer income rises. As related to the income elasticity of demand, which means the percentage change in percentage change in consumer income; the value is positive for normal goods and negative for inferior goods, the income elasticity of demand of normal goods is positive. Normal goods with income elasticities less than 1 are called income inelastic, such as food, housing, and clothing. Goods with income elasticity greater than 1 are called income elastic, such as luxuries. Remember, the demand for food is income inelastic and the demand for food also tends to be price inelastic.

Inferior good is a good, such as used clothes, for which demand decreases, or shifts leftward, as consumer income rises. The income elasticity of demand of inferior goods in negative.

The difference between normal and inferior goods is that
normal goods are of better quality than inferior goods
an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward.
if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true.
an inferior good is something that will not be demanded until quantities of the normal good have been exhausted.
an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward.



Chapter 7

Substitutes-Goods, such as Coke and Pepsi, that relate in such a way that an increase in the price of one shifts the demand for the other rightward.

Complements-Goods, such as milk and cookies, that relate in such a way that an increase in the price of one shifts the demand for the other leftward.

If the price of potato chips increases, other things constant, demand for potato-chip dip will
not change, only quantity demanded will change
increase because the goods are substitutes
decrease because the goods are substitutes
decrease because the goods are complements
increase because the goods are complements



A decrease in the demand for peanut butter could be caused by a(n)
increase in the supply of peanut butter
increase in the price of peanut butter
doubling of the price of bread
drought in Georgina that destroyed 30 percent of the peanut crop
increase in consumer income



Chapter 8

Equilibrium and curve shifting

Assume that supply increase slightly and demand increases greatly. Which of the following will happen?
equilibrium price will fall and equilibrium quantity will rise
equilibrium price will rise and equilibrium quantity will fall
equilibrium price will rise and equilibrium quantity will rise
equilibrium price will fall and equilibrium quantity will fall.
neither equilibrium price nor equilibrium quantity will change.





Questions
If you have any questions, please email the center or stop by.

website last updated on April 6th, 2011 by Zachary Torstrick