It is assumed in economics that people make decisions based upon
A) altruism.
B) rational self-interest.
C) tradition.
D) governmental persuasion.
Ques. 2In economic terminology, a normal good is a good
A) on which a monetary value cannot be placed.
B) that is liked only by normal people.
C) for which demand increases when price increases.
D) for which demand increases when income increases.
Ques. 3Opportunity cost is illustrated on the production possibilities curve by a
A) bowed-out shape of the curve.
B) shift to the right of the curve.
C) shift to the left of the curve.
D) movement along the curve.
Ques. 4Suppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris paribus, which one of the following statements best explains this situation?
A) The supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price.
B) The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price.
C) The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase.
D) The demand for Florida oranges fell because of the freeze, and this led to a higher demand for California oranges.
Ques. 5In the above figure, the opportunity cost of moving from producing 75 guitars and 25 ukuleles to producing 25 guitars and 75 ukuleles is
A) 25 guitars.
B) 75 ukuleles.
C) 25 ukuleles.
D) 50 guitars.
Ques. 6Safe Bank has an outside display which has the time and temperature that is always correct. This is an example of
A) an interference in the workings of the price system.
B) a breakdown in communication between the bank and its customers.
C) a negative externality.
D) a positive externality.
Ques. 7Which of the following statements is correct?
I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP).
II. According to classical economists, only voluntary unemployment exists in the long run.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
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