ECO 100: BUSINESS ECONOMICS

MULTIPLE CHOICE QUESTIONS

1. The fact that human wants cannot be fully satisfied with the available resources is
called the problem of :

A. what to produce
B. opportunity cost
C. scarcity
D. choices

2. The economic problem of scarcity refers to

A. Unlimited wants and unlimited resources.

B. Limited wants and limited resources.
C. Limited wants and unlimited resources.
D. Limited resources and unlimited wants.

3. Which of the following is NOT one of economic resources ?

A. capital
B. land
C. Government
D. Labour

4. Which of the following would NOT be considered as an issue in macroeconomics?

A. The costs of inflation.

B. The causes of unemployment.
C. National income accounting.
D. The reasons for a decline in the price of sugar.

5. The best description of the study of economics is

A. For whom the resources are allocated to increase efficiency.

B. How society spends the income of individuals.
C. How resources are allocated to fulfill society’s goal.
D. What resources are used to produce goods and services.

6. The basic economic problems are :

A. what to produce, how much and for whom.

B. where to and when to produce.
C. what to produce and why.
D. what is the purpose of producing and for whom.

7. The fundamental problem of economics is

A. to achieve more equitable distribution of income in society.

B. that productive resources are scarce relative to material wants.
C. to establish prices which accurately reflect the opportunity costs of resources.
 D. that production of some goods also produces undesirable spill over effects
such as pollution.

8. A point inside a production possibilities curve may indicate

A. Unemployment
B. the inefficient allocation of resources.
C. Failure to use the best available technology
D. All of the above.

9. Improvements in technology will shift the production possibilities curve

A. either inward or outward
B. outward then inward.
C. outward.
D. inward.

10. A ‘change in demand’ means

A. the quantity demanded changes as price changes.

B. a movement along a given demand curve or schedule.
C. a shift in position of the demand curve.
D. a change in the shape of a demand curve.

11. Any point inside the production possibilities curve is a (an)

A. efficient point.
B. Non-feasible point.
C. inefficient point.
D. maximum output combination.

12. The law of demand hypothesizes that the lower the price charged for a product,

A. the greater will be the demand for the product.

B. the greater will be the quantity demanded per unit of time.
C. the lower will be the quantity demanded per unit of time.
D. the lower will be the demand for the product.

13. An increase in the demand for a good can be caused by

A. a decrease in individual’s taste for the good.

B. an increase in the price of a substitute good.
C. a decrease in the number of buyers in the market.
D. an increase in the price of a complementary good.

14. A decrease in the demand for a good would result from

A. an increase in the price of a substitute good.

B. an increase in the price f the good.
C. a decrease in the price of the good.
D. an increase in the price of a complementary good.

15. A normal good is defined as a good for which demand increases

A. as its own price decreases.

B. as the price of a substitutes increases.
C. as the income of consumers increases.
 D. as the number of consumers of the good increases.

16. If the income of a consumer decreases and she increases her demand for her good,
then the good is a

A. normal good.
B. inferior good.
C. substitute good.
D. complementary good.

17. A change in the expectation of consumers causes a

A. shift in the demand curve as does change in the current price of the goods.
B. shift in the demand curve, while a change in the current price of the goods
cause a movement along the demand curve.
C. movement along the curve, as does a change in the current price of the
goods.
D. movement along the demand curve, while a change in the current price
causes a shift of the demand curve.

18. Which of the following things is assumed to be constant along an individual’s demand
curve for good X?

A. the price of good X.

B. the quantity of X demanded per unit of time.
C. the price of all other goods.
D. the amount of X the individual wishes to purchase.

19. Assume that goods X and Y are substitutes for each other. If the price of Y rises, then

A. the demand curve for X will shift leftward.

B. the demand curve for X will shift rightward.
C. the demand curve for X will not shift.
D. any of the above is possible depending upon what goods are represented by
X and Y.

20. By definition an “inferior good” is one

A. whose demand curve will always shift leftward as income rises.

B. that an individual will demand only if its price is very low.
C. whose demand curve will not shift either leftward or rightward as income
changes.
D. whose quantity demanded will decrease as its price decreases.

21. Which of the following changes will certainly “not” shift the demand curve for apples?

A. an announcement that bananas are a better source of healthful nutrients than

apples.
B. an increase in the income of apple eaters.
C. a change in the hourly wage rate of apple harvesters.
D. an increase in the price of pears.

22. When two goods are strong complements,

A. they are consumed together.

B. a decrease in one’s price causes an increase in the demand for the other.
 C. an increase in one’s price causes the demand curve of he other to shift
toward the origin.
D. all of the above.

23. Which of the following could not cause an increase in the supply of wheat?

A. A decrease in the price of wheat.

B. A decrease in the price of corn.
C. A decrease in the price of machinery and equipment used in wheat farming.
D. Improvements in the techniques of growing wheat.

24. All of the following are held to be constant when the supply curve for a product is
drawn, except

A. the price of the product.

B. the state of the technology.
C. the number of the producers.
D. the price of inputs used to make the product.

25. According to the law of supply

A. more of a good is supplied as the price falls.

B. More of the good is supplied as the price rises.
C. More of a good is desired as the price falls.
D. More of a good is supplied as the price does not change.

26. The law of supply indicates that:

A. reflects the amounts which producers will want to offer at each price in a
series of prices.
B. is reflected in an upsloping supply curve.
C. shows that the relationship between price and quantity supplied is positive.
D. is reflected in all of the above.

27. A leftward shift of a product supply curve might be cause by:

A. an improvement in the relevant technique of production.

B. a decline in the prices of needed inputs.
C. an increase in consumer incomes.
D. some firms leaving an industry.
E.
28. At the point where the demand and supply curves for a product intersect:

A. the “selling price” and the “buying price” need not be equal.
B. The market may, or may not, be in equilibrium.
C. Either a shortage or a surplus of a product might exist, depending upon the
degree of competition.
D. The quantity, which the consumers want to purchase and the amount
producers choose to sell, are the same.

29. If there is a shortage of product X, we can predict that:

A. fewer resources will be allocated to the production of this good.

B. The price of the product will rise.
C. The price of the product will decline.
D. The supply curve will shift to the left and the demand curve to the right
thereby, eliminating the shortage.
 30. If the supply and demand curves for a product both decrease, we can say that equilibrium:

A. quantity must fall and equilibrium price must rise.

B. Price must fall, but equilibrium quantity may either rise, fall, or remain
unchanged.
C. Quantity must decline, but equilibrium price may either rise, fall, or remain
unchanged.
D. Quantity and equilibrium price must both decline.

31. The dumping of large quantity of rice from Thailand into the Malaysian rice market
will have the following result on the equilibrium price and quantity of rice in Malaysia:

A. an increase in quantity and a decrease in price.

B. An increase in price and a decrease in quantity.
C. An increase in both price and quantity.
D. A decrease in both price and quantity.

32. A price ceiling means that:

A. government is imposing a legal price which is less than the equilibrium price.
B. government is imposing a legal price which is greater than the equilibrium
price.
C. the relevant product is currently available in excess supply.
D. a price that must be charged in the market.

Answer the next two questions on the basis of the given SS and DD data
Quantity Price Quantity
Demanded per Supplied
chicken
($)
25 5 67
28 4 59
33 3 47
38 2 38
45 1 32
33. Equilibrium price will be:
A. $4.
B. $3.
C. $2.
D. $1.
34. If the price in this market was $4:
A. The amount of chicken sold and purchased are the same.
B. Buyers would want to purchase more chicken.
C. Sellers would not be able to sell all of their chickens.
D. There would be a shortage of chickens.

35. A maximum price results in

A. a shortage.
B. a surplus.
C. equilibrium.
D. none of the above.