Question

2. Which of the following is true if trades are possible between consumers and if no one is worse off from such trades?

a. Enhanced efficiency in distribution is possible.

b. All goods must be traded.

c. The terms of trade vary.

d. Enhanced efficiency in production is possible.

3. Ben can produce a banana split in ten minutes or a strawberry sundae in five minutes, whereas Jerry can produce a banana split in eight minutes or a strawberry sundae in three minutes. What can we correctly conclude?

a. Jerry has a comparative disadvantage in sundaes and a comparative advantage in splits.

b. Jerry has a comparative advantage in both sundaes and splits.

c. Ben has a comparative advantage in sundaes, but an absolute disadvantage in both goods.

d. Jerry has an absolute advantage in both goods, and a comparative advantage in sundaes.

4. Which of the following is a normative economic statement?

a. The national unemployment rate in January of this year was 5.5 percent.

b. The inflation rate next year will be less than 3 percent.

c. A reduction in the government deficit will make interest rates decrease.

d. The government should commit to reducing income inequality.

5.  A demand curve is drawn holding each of the following constant except which of the following?

a. The price of the good

b. Tastes and preferences

c. The price of substitute goods

e. Income level

6.  Which of the following is not a determinant of price elasticity of demand?

a. Number of substitutes

b. Time

c. Price

d. Supply

7. What is a movement down along a given demand curve called?

a. An increase in demand

b. A decrease in demand

c. An increase in quantity demanded

d. A decrease in quantity demanded

Answer 1

The answer to Q.4 is b.

Q.5 answer is c.

Q.6 answer is(d) because supply is not the determinant of demand.

Q.7 answer is (d )because a demand curve illustrates how much the quantity demanded changes when the price changes. A change in quantity demanded represents as a movement along a demand curve.