Answer the following multiple choice questions, and try to explain what you did

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Answer the following multiple choice questions, and try to explain what you did to get the answer please :)




Suppose a society produces only two goods - guns and butter. Three alternative combinations on its PPF are given in Table 1 below:

Table 1: Production Possibilities

POSSIBILITY ----> a, b, c,

UNITS OF ---------> 8, 6, 0,
BUTTER

UNITS OF ---------> 0, 1, 3,
GUNS

QUESTION 1 ----> Refer to table 1 above. In moving from combination b to combination c, the opportunity cost of producing one additional unit of guns is:
a) 2 units of butter
b)1/2 unit of butter
c) 6 units of butter
d)1/6 unit of butter
e) 3 units of butter


QUESTION 2-----> Refer to Table 1 above. According to this PPF
a) a combination of 6 butter and 1 gun would no employ all resources
b) a combination of 0 butter and 4 guns is attainable
c) resources are homogeneous
d) the opportunity cost of producing guns increases as more guns are produced
e) the opportunity cost of producing guns decreases as more guns are produced



QUESTION 3-----> In deriving the market demand curve for a commodity we assume all of the following EXCEPT that:
a) the prices of related commodities are held constant
b) the income of consumers is held constant
c) the tastes of consumers are held constant
d) the price of the commodity is held constant
e) the distribution of income of the consumers is held constant

QUESTION 4-------> When economists say that some commodity is an inferior or normal good they are referring to the impact of:
a) a change in price on the quantity demanded
b) an increase in the quantity consumed on total utility
c) an increase in the quantity consumed on the marginal utility
d) a change in income on the quantity demanded

QUESTION 5-----> If a demand curve is linear, then: a
a) it is unitarily elastic throughout
b) it is elastic if its slope is greater than 1
c) it is elastic if its slope is equal to 1
d) its elasticity varies throughout
e) it is inelastic throughout

QUESTION 6------> A binding price floor is a:
a) maximum price, below equilibrium, which price is not allowed to fall below
b) maximum price, above equilibrium, which price is not allowed to exceed
c) maximum price, below equilibrium, which price is not allowed to exceed
d) any minimum price which price is not allowed to fall below
e) minimum price, above equilibrium, which price is not allowed to fall below

QUESTION 7-------> Suppose that the demand and supply curves in the market for carrots have the following functional forms: Q(D) = 250 - 4p and Q(S) = 10 + p. The equilibrium quantity and price would then be:
a) Q = 92 , p = 48
b) Q = 48 , p = 58
c) Q = 68 , p = 108
d) Q = 68 , p = 98
e) Q = 58 , p = 48

Explanation / Answer

1. E (making 2 more guns is losing 6 butters, so 1 gun is losing 3 butters) 2. D (the first gun costs two butters, the second two guns cost 3 butters each) 3. E (the demand curve for commodities doesn't have to do with the income inequality of a society) 4. D (normal goods are when demand increases as income level decreases) 5. D (most demand curves studied in introductory economics are simplified to be linear, yet their elasticities are still different throughout as you can calculate it) 6. E (by definition. The reason it is not D is because if the price floor is below the equilibrium price, it means nothing because no one is going to charge below the equilibrium price anyway) 7. E (250-4p=10+p. 240=5p. p=48. Q(s) = 10+48 = 58.)

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