Question

5)The price of a taco was $0.29 in 1970 and $1.09 in 2017. The CPI was 38.8 in 1970 and 172.2 in 2017.The 2017 price of a taco in 1970 dollars is:

A)$0.25.

B)$0.29.

C)$1.09.

D)$4.84.

6)Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the realprice of 1987 gasoline in 2017 dollars, we should:

A)multiply by the 1987 CPI and divide by the 2017 CPI.

B)multiply by the 2017 CPI and divide by the 1987 CPI.

C)not do anything because this is the real price in 2017 dollars.

D)none of the above

7)The nominal price of industrial red paint was $12 per gallon in 1993. To convert this value to the realprice of paint in 2017 dollars, we should use the:

A)Consumer Price Index.

B)Producer Price Index

C)Fed funds rate.

D)30-day T-bill rate.

8)The problem of scarcity means that people face trade-offs. Which of the following trade-offs are theconcern of microeconomics?

A)Trade-offs faced by consumers in the purchase of goods

B)Trade-offs faced by workers between work and leisure

C)Trade-offs faced by firms in what goods to produce

D)all of the above

9)Which of the following is a positive statement?

A)The President of the United States ought to be elected by a direct vote of the American people ratherthan the Electoral College.

B)When a country imports more than it exports, its balance of trade is negative.

C)Because many adults cannot afford to go to college, tax credits for tuition should be introduced.

D)The price of drugs in the United States is too high.

10)Which of the following is a normative statement?

A)The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S.

B)State governments should not subsidize corporations by training welfare recipients.

C)Presidential candidates should not be given funds from the federal government to run campaigns.

D)all of the above

16)The price of good A goes up. As a result, the demand for good B shifts to the left. From this we caninfer that:

A)good A is used to produce good B.

B)good B is used to produce good A.

C)goods A and B are substitutes.

D)goods A and B are complements.

17)Elasticity measures:

A)the slope of a demand curve.

B)the inverse of the slope of a demand curve.

C)the percentage change in one variable in response to a one percent increase in another variable.

D)sensitivity of price to a change in quantity.

Answer 1

5)The price of a taco was $0.29 in 1970 and $1.09 in 2017. The CPI was 38.8 in 1970 and 172.2 in 2017.The 2017 price of a taco in 1970 dollars is:

D)$4.84.

Reason: P = 1.09 x 172.2 / 38.8 = 4.84

6)Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the real price of 1987 gasoline in 2017 dollars, we should:

A)multiply by the 1987 CPI and divide by the 2017 CPI.

Reason: This is the formula to be used to find 1987 price in 2017 dollars

7)The nominal price of industrial red paint was $12 per gallon in 1993. To convert this value to the real price of paint in 2017 dollars, we should use the:

B)Producer Price Index

Reason: This is because this product is used by factories as inputs and not consumers as final good. This means PPI must be used instead of CPI

8)The problem of scarcity means that people face trade-offs. Which of the following trade-offs are the concern of microeconomics?

D)all of the above

Reason: All the given statements express trade offs faced by individuals at different levels

9)Which of the following is a positive statement?

B)When a country imports more than it exports, its balance of trade is negative.

Reason: since it represents a fact and not a view, it is a positive statement

10)Which of the following is a normative statement?

D)all of the above

Reason: This is because all the statements express judgements and not facts, making them normative statements

16)The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that:

D)goods A and B are complements.

Reason: This is because as price of A increases, demand for A will fall. When A and B are complements and consumed together, fall in demand for A will also reduce demand for B

17)Elasticity measures:

C)the percentage change in one variable in response to a one percent increase in another variable.

Reason: It represents the change in demand for a good as price changes