Name:

ID:
Course: EMB 502/DEV 501:
In-class MT Exam
203 EMB 502/DEV 501
Total Points: 100
• Answer all the questions.
• Date and Time: 10 December Thursday 9 PM-10
PM
• Venue: Online
• Submission Method: Online via google classroom. No
email submission, please.
• Do not change the answer sheet. Do not change the or-
der of the questions.
• You must turn on your video for the whole
exam time.

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 True/False
Indicate whether the sentence or statement is True (T) or False
(F).

____ 1. If two variables are inversely related, then they change in the same direction.
____ 2. The slope of a line is calculated as the ratio of the "rise" over the "run".
____ 3. A straight line or curve can shift when a factor not included on the vertical axis or horizontal axis
changes.
____ 4. All human wants cannot be satisfied because of the problem of scarcity.
____ 5. The opportunity cost of producing a good or service is the good or service that is forgone by choosing to
produce another good with the same resources in a given period of time.
____ 6. Equilibrium in a market exists when there is neither a surplus nor a shortage of the item.
____ 7. If a good gives rise to substantial external benefits to society that are associated with its production and/or
consumption, then the good likely has too many resources devoted to its production.
____ 8. If the managers of the bus system found that revenues increase when fares are raised, they would conclude
that price elasticity demand for subway service is inelastic.
____ 9. If a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent, demand is
elastic.
____ 10. If a firm's marginal cost exceeds its average cost, then its average cost must be rising.

Multiple Choice

Identify the letter of the choice that best completes the statement or
answers the question.

____ 11. When an inverse relationship is graphed, the resulting line or curve is:
a. horizontal.
b. vertical.
c. upward-sloping.
d. downward-sloping.
____ 12. In Exhibit 1A-2, the slope for straight line AB is:
a. 3.
b. 1.
c. -1.
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 d. -5.
____ 13. Straight line A-D in Exhibit 1A-3 shows that:
a. increasing value for X will increase the value of Y.
b. increasing value for X will decrease the value of Y.
c. increasing values for X do not affect the value of Y.
d. all of the above.
____ 14. Scarcity:
a. exists because resources are unlimited while human wants are limited.
b. means we are unable to have as much as we would like to have.
c. will likely be eliminated as technology continues to expand.
d. is not an issue addressed in economics?
____ 15. Which of the following is not a resource?
a. Land.
b. Labor.
c. Money.
d. Capital.
____ 16. Entrepreneurs can delegate every one of the following tasks to labor except:
a. hiring and training new employees.
b. assuming business risk and uncertainty.
c. supervision of the production process.
d. researching ideas for new products.
e. marketing the goods and services produced.
____ 17. Microeconomics approaches the study of economics from the viewpoint of:
a. inflation, unemployment, and economic growth.
b. the federal government.
c. individual economic units, such as consumers, firms, and units of government.
d. the economy as a whole.
____ 18. The term "ceteris paribus" means that:
a. the model includes all important variables occurring in the real world.
b. all factors which influence the event are changing at the same time.
c. one influence is changing and everything else is being held constant.
d. everything, except one influence, is changing.
e. the consumer is king.
____ 19. Which of the following is a statement of positive economics?
a. Government control of rent is a fair way to help poor people afford housing.
b. Government control of rent keeps landlords from charging too much rent.
c. Government control of rent decreases the number of new apartments constructed.
d. Government control of rent is an injustice.
____ 20. Any point on the production possibilities curve illustrates:
a. minimum production combinations.
b. maximum production combinations.
c. economic growth.
d. a non-feasible production combination.

Exhibit 2-3 Production possibilities curve data

A B C D E
Capital goods 0 10 20 30
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 Consumer goods 200 180 140 80 0

____ 21. According to the data in Exhibit 2-3, a total output of 140 units of consumer goods and 10 units of capital
goods would:
a. be unobtainable in this economy.
b. be an efficient way of using the economy's scarce resources.
c. result in the maximum use of the economy's labor force.
d. result in a less than maximum rate of growth for this economy.

Exhibit 2-6 Production possibilities curve

C
400
A
Cars 300
(millions
B
per year) 200
D

100

0 100 200 300 400

Grain
(millions of tons per year)
____ 22. For the economy shown in Exhibit 2-6, which of the following is true when the economy is at point A?
a. More cars are being produced than are needed.
b. There must be resources that are not being used fully.
c. Some car production must be forgone in order to produce more grain in the same period.
d. Increased grain production would be impossible.
____ 23. Given a production possibilities curve, a point:
a. inside the curve represents unemployment.
b. on the curve represents full employment.
c. outside the curve is currently unattainable.
d. all of the above.

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 Exhibit 2-7 Production possibilities curve

A
B H

C
Consumption
D
goods

Capital goods
____ 24. In Exhibit 2-7, which of the following is not true regarding point H? Point H:
a. cannot be achieved by this economy today.
b. could be achieved today if the economy only achieved full employment.
c. could be achieved in the future by an enlargement of the economy's resource base.
d. could be achieved in the future by an advancement in technology.
e. could be achieved in the future by growth in the economy.
____ 25. What shape is the production possibilities curve expected to usually exhibit?
a. Upward-sloping.
b. Bowed out.
c. Bowed in.
d. Straight line.
e. U-shaped.
____ 26. A country's decision to produce more capital goods and fewer consumer goods in a
given period causes:
a. a decrease in the resources available in its economy.
b. an increase in economic growth.
c. a decrease in economic growth.
d. a decrease in the ability to produce goods in the next period.
____ 27. Which would be least likely to cause the production possibilities curve to shift to the right?
a. An increase in the labor force.
b. Improved methods of production.
c. An increase in the education and training of the labor force.
d. A decrease in unemployment.
____ 28. Which of the following will not shift the demand curve for televisions?

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 a. An increase in the price of televisions.
b. An increase in consumer income.
c. An increase in the price of radios (a substitute).
d. An increase in the price of cable service (a complement).
____ 29. Assuming that hamburgers and hot dogs are substitutes, an increase in the price of hamburgers, other things
being equal, results in a:
a. rightward shift in the demand curve for hot dogs.
b. leftward shift in the demand curve for hamburgers.
c. rightward shift in the demand curve for hamburgers.
d. leftward shift in the demand curve for hot dogs.
____ 30. Assuming that bus travel is an inferior good, a decrease in consumer income, other things being equal, will
cause:
a. a downward movement along the demand curve for bus travel.
b. no change in the demand curve for bus travel.
c. an upward movement along the demand curve for air travel.
d. a rightward shift in the demand curve for bus travel.
____ 31. A supply schedule shows the relationship between:
a. demand and supply.
b. supply and income.
c. price and income.
d. quantity supplied and price.
e. income and quantity supplied.
____ 32. A decrease in supply means that:
a. demand will increase by the same amount.
b. the quantity demanded will increase.
c. there is a movement down and to the left along the supply curve.
d. the quantity supplied at every price will decrease.
e. the supply curve will shift out and to the right.
____ 33. Market equilibrium is defined as:
a. the condition in which there is neither a shortage nor a surplus.
b. the condition under which the separately formulated plans of buyers and sellers exactly
mesh when tested in the market.
c. represented graphically by the intersection of the supply and demand curves.
d. all of the above.
____ 34. When the price of a good in a market is above equilibrium,
a. the quantity supplied exceeds the quantity demanded.
b. a surplus is observed.
c. the price will fall in the near future.
d. all of the above.

Exhibit 3-8 Supply and demand data

Quantity Quantity
Price Demanded Supplied
$1.00 250 150
1.50 200 200
2.00 150 250
2.50 100 300

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____ 35. In Exhibit 3-8, the equilibrium price and quantity in the market are:
a. $1.00, 200.
b. $1.50, 400.
c. $2.00, 100.
d. $1.50, 200.

Exhibit 3-9 Supply and demand curves

Diagram A Diagram B Diagram C

S S
Price Price Price
(dollars) (dollars) (dollars)
p* p* p*

D D
D

Q* Qd Qs Qs Qd
Quantity Quantity Quantity
(units per time period) (units per time period) (units per time period)

____ 36. Which of the graphs in Exhibit 3-9 illustrates a surplus exists at the indicated market price?
a. Diagram A.
b. Diagram B.
c. Diagram C.
d. Diagrams A and C.

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 Exhibit 4-1 Supply and demand curves for computers

S1 S2
4
E1
Price per
3
computer
(thousands E2
of dollars) 2
D
1

0 10 20 30 40
Quantity of computers
(hundreds per week)
____ 37. Which of the following changes could cause the computer market to change as shown in Exhibit 4-1?
a. Lower costs for computer chips and motherboards.
b. The failure of several computer manufacturers.
c. Higher prices for computer software.
d. More features and greater ease of use.
____ 38. Price ceilings set below the equilibrium create:
a. externalities.
b. unemployment.
c. shortages.
d. surpluses.
____ 39. A price floor is:
a. the lowest price a producer will accept.
b. the lowest price a consumer will pay.
c. a minimum price set by the government above equilibrium price.
d. a maximum price set by the government above equilibrium price
e. usually set equal to equilibrium price.
____ 40. An externality is:
a. always a benefit to the recipient.
b. always a detriment to the recipient.
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 c. an activity that occurs in a business which is unknown to management.
d. unintended benefits or costs imposed on third parties as a result of economic activity.
e. an act, caused by a firm located in this country, which has an effect on a person in a
foreign country.
____ 41. If demand is price elastic, a decrease in price causes:
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue.
d. an increase in quantity, but anything can happen to revenue.
____ 42. If the percentage change in the quantity demanded of a good is less than the percentage change in price, price
elasticity of demand is:
a. elastic.
b. inelastic.
c. perfectly inelastic.
d. unitary elastic.
____ 43. If the price elasticity of demand for a product measure 0.45,
a. this good has many available substitutes.
b. this good must be a nonessential good.
c. this good is a high-priced good.
d. a decrease in price will increase total revenue.
____ 44. If demand for a good is price elastic, then the price elasticity will be:
a. equal to one.
b. equal to zero.
c. greater than one.
d. less than one.
e. less than zero.

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 Exhibit 5-2 Demand curves for silver

Graph A Graph B
Perfectly Elastic Demand Perfectly Inelastic Demand

200 200

Price 150 Price 150

per per
ounce D ounce
(dollars) 100 (dollars) 100

50 50

0 10 20 30 40 0 10 20 30 40
Quantity of silver Quantity of silver
(millions of ounces) (millions of ounces)

Graph C Graph D
Elastic Demand Inelastic Demand
D

200 200
D
Price 150 Price 150
per per
ounce ounce
(dollars) 100 (dollars) 100

D
50 50

D
0 10 20 30 40 0 10 20 30 40
Quantity of silver Quantity of silver
(millions of ounces) (millions of ounces)

____ 45. Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125
an ounce. In Exhibit 5-2, which graph illustrates the shape of his demand curve for silver?
a. Graph A.
b. Graph B.
c. Graph C.
d. Graph D.

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____ 46. A product would be more demand price inelastic:
a. the shorter the time the consumer has to adjust to price changes.
b. the higher the price of the good.
c. the more the number of good substitutes.
d. the less the essential nature of the good.
____ 47. Demand sensitivity depends on all of the following except:
a. how low is the price of the good?
b. the sensitivity of firms' output to changes in its price.
c. the consumer's income.
d. the availability and closeness of substitutes.
e. the amount of time a consumer has to adjust to price changes.
____ 48. If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected
to be:
a. greater than .27.
b. greater than 1.
c. less than .27.
d. equal to .27.
e. less than 0.
____ 49. In the long run, price elasticities of demand are usually:
a. less than they are in the short run because people can adjust.
b. the same as they are in the short run because tastes don't change.
c. greater than they are in the short run because prices rise over time.
d. less than they are in the short run because real prices fall over time.
e. greater than they are in the short run because consumers have time to adjust.
____ 50. The price elasticity of demand coefficient for a good will be greater:
a. if close substitutes exist.
b. if minor complements exist.
c. in the short-run.
d. if a small portion of the budget will be spent on it.
____ 51. Unlike implicit costs, explicit costs:
a. reflect opportunity costs.
b. include the value of the owner's time.
c. are not included in the accounting statement of the firm.
d. are actual cash payments.
e. do not change with the output rate of the firm.
____ 52. Economic profit is:
a. always less than zero.
b. never less than accounting profit.
c. less than accounting profit if implicit costs are zero.
d. less than accounting profit if implicit costs are greater than zero.
____ 53. Economic profit equals accounting profit minus:
a. explicit costs.
b. implicit costs.
c. fixed costs.
d. variable costs.
____ 54. Variable inputs are defined as any resource that:
a. varies with the size of the firm's plant.
b. cannot be changed as output changes.
c. can be changed as output changes.
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 d. can be increased or decreased hourly.
____ 55. The long run is a planning period:
a. during which the firm can vary all inputs including its plant size.
b. less than six months.
c. less than one year.
d. less than five years.
____ 56. If the units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs
are 30, 34, 37, 39, and 40, respectively, the marginal product of the fourth unit is:
a. 2.
b. 1.
c. 37.
d. 39.
____ 57. If both the marginal cost and the average variable cost curves are U-shaped, at the point of minimum average
variable cost, the marginal cost must be:
a. greater than the average variable cost.
b. less than the average variable cost.
c. equal to the average variable cost.
d. at its minimum.

Exhibit 6-6 Cost schedule for firm X

Output Total Fixed Total Variable

Quantity Cost Cost
0 $100 $ 0
1 100 50
2 100 84
3 100 108
4 100 127
5 100 150

____ 58. As shown in Exhibit 6-6, the marginal cost of producing the third unit is:
a. $50.
b. $16.
c. $24.
d. $23.

Exhibit 6-7 Short-run cost schedule for book publisher's hourly production

Total Total Total

Output Variable Cost Cost
0 cases of books $0 $200
1 100 300
2 150 350
3 250 450
4 450 650

____ 59. In Exhibit 6-7, the publisher's fixed cost is equal to:
a. $50.

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 b. $100.
c. $200.
d. $300.
____ 60. In Exhibit 6-7, the marginal cost of increasing production from 2 to 3 cases of books is:
a. $100.
b. $150.
c. $450.
d. $800.

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