1.

Economics is best defined as the study of:

A：how rational people make choices in the face of scarcity and the implications of those choices for society as a
whole.

2. Economic scarcity arises from:

A:limited resources and unlimited wants
 
3. Which of the following statements about opportunity cost is TRUE?
I. Opportunity cost is equal to implicit costs plus explicit costs.
II. Opportunity cost only measures direct monetary costs.
III. Opportunity cost accounts for alternative uses of resources such as time and money.
A：  
I and III only.

4；  Suppose that you are willing to pay $50 to see a movie on Saturday night. A ticket costs $15, and the next-
best alternative use of your time would be to go to a concert which costs $80 and you value at $100. The
opportunity cost of seeing the movie is equal to: 
A：35

5；Suppose you play a round of golf costing $750. The golf takes four hours to play. If you were not playing golf
you could be working and earning $400 per hour. The opportunity cost of your golf game is:
A;2350

6: Arguing that what is true of the parts must be true of the whole is the fallacy of:
A: Comparison

7; The statement “Inflation in Hong Kong should not exceed the level of 5%” is:
A; a normative statement
 
8: The _____________ describes the mistake of reasoning that event X causes event Y just because event X occurs
prior to event Y.
A; post hoc fallacy
 
9: Data scientists looking at health care data have found a statistically significant positive correlation between
exercise and the cases of skin cancer – that is, people who exercise more tend to be the people who get skin cancer.
Based on this evidence, which of the following statements is correct?
A; We cannot accurately infer the direction of causality between exercise and skin cancer just based on a
statistically significant correlation.

10: Which of the following statements about demand curves is TRUE?

A; If price falls and quantity demanded increases, this is represented by a movement along a given demand curve.

11: After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a
cheaper brand of nail polish instead. This is called:
A;  
the substitution effect of a price change.

12; Which of the following is NOT a determinant of the market demand for good X?
A;  
The cost of labor used to produce good X.

13：To understand how the price of a good is determined in a free market, one must account for the desires of:
A; both buyers and sellers
 
14; When a market is in equilibrium:

A; When a market is in equilibrium:

15; When the current price of a good is below the equilibrium price:

A; buyers have an incentive to offer to pay sellers more than the current price.

16; When a market is not in equilibrium:

A;  
the economic motives of sellers and buyers will move the market to its equilibrium.

17; Suppose that when the price of kiwi fruit is $57 per kilo, the quantity demanded is 8500 kilos per day and the
quantity supplied is 6300 kilos per day. In this case:

A; excess demand will lead the price of kiwi fruit to rise.

18; The percentage change in quantity demanded that results from a 1 percent change in price is known as the:

A; price elasticity of demand.

19; If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then
demand for textbooks is:

A; inelastic.

 20; If a 15 percent increase in the price of a good leads to a 75 percent decrease in the quantity demanded, then
what is the (absolute value of the) price elasticity of demand?

A;5
21; If the demand for a good is highly elastic, that good is likely to have:

A; many close substitutes

22; Which of the following is likely to have the highest price elasticity of demand?

A; Nike Running Shoes

23; Demand tends to be ________ in the short run than in the long run.

A; less elastic

24; An economist estimated the cross-price elasticity for peanut butter and jelly to be +1.5. Based on this
information, we know the goods are

A; substitutes

25; Which of the following best explains why you are more likely to see a poor person than a wealthy person
picking up aluminum cans to sell?

A; The opportunity cost of picking up cans is higher for wealthy people than for poor people.

26; A rational seller will sell another unit of output:

A; if the cost of making another unit is less than the revenue gained from selling another unit.

27; John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which
pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He
makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he
can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.

Time cleaning windows

Total number of windows cleaned
(hours/day)

0 0

1 7
2 11

3 14

4 16

5 17

A; $7

28; John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which
pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He
makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he
can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.

Time cleaning windows

Total number of windows cleaned
(hours/day)

0 0

1 7

2 11

3 14

4 16

5 17

A; $14

29; John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which
pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He
makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he
can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.

Time cleaning windows

Total number of windows cleaned
(hours/day)

0 0

1 7

2 11

3 14

4 16

5 17

How many hours a day should John spend cleaning windows?

A; 2

30; John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which
pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He
makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he
can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.

Time cleaning windows

Total number of windows cleaned
(hours/day)

0 0

1 7

2 11

3 14
4 16

5 17

What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows?

A;1

31; A profit-maximizing perfectly competitive firm must decide:

A; only on how much to produce, taking price as fixed

32; The short run is best defined as:

A; a period of time sufficiently short that at least one factor of production is fixed.

33; Even when a firm produces the level of output at which price equals marginal cost, it should shut down if its
total revenue is less than its:

A; Variable Cost

34; In general, perfectly competitive firms maximize their profit by producing the level of output at which:

A; marginal cost equals price.

35; Economic theory assumes that a firm’s goal is to:

A; maximize its economic profit.

36; Generally, ______ motivates firms to enter an industry, while ______ motivates firms to exit an industry.

A; economic profit; economic loss

37；In traditional economic models, the decision maker is assumed to be:

A; perfectly rational

 
38; Suppose that John has many of the same characteristics as the
stereotypical mathematician. According to the representativeness bias, this
will tend to make people think that:

A; John is good at math.

 

39;Suppose Evan and Robert are each filling out a separate survey about
parking on campus. On Evan's survey, the first question asks about whether he
thinks the fine for parking illegally on campus should be $50, and on Robert's
survey the first question asks about whether he thinks the fine should be
$100. For both Evan and Robert, the second question asks how much each
thinks the fine currently is. If Evan and Robert know nothing about the parking
fines on campus, but each uses anchoring and adjustment to form his
assessment, then, all else equal, you would expect:

A; Robert's estimate of the current fine to be higher than Evan's.

40; Suppose Alyssa is willing to drive across town to save 50 percent on a

soccer ball with a list price of $40. If Alyssa is rational, this implies that she
should:

A; be willing to drive across town to save 5 percent on a bike with a list price of $400.

41; Loss aversion is the tendency to experience losses as:

A;  
more painful than the pleasures that result from gains of the same
magnitude.

42; Which of the following statements best describes how Milton Friedman
defended conventional economics against its critics?

A; One should not judge a theory by how realistic its assumptions are, but by the
accuracy of its predictions.

43; The three elements of a game are:

A; the players, the strategies, and the payoffs.

 44; A dominant strategy exists if:

A; a player has a strategy that yields the highest payoff regardless of the other player's
choice.

45; In a strategic game, if the other player has adopted a Nash equilibrium
strategy, you should

A; also adopt a Nash equilibrium strategy.

 46; Game theory provides tools that are used to model:

A; strategic interdependencies.

47; A payoff matrix shows:

A; the payoffs for each possible combination of strategies.

48; In a small village in the New Territories, there are only two doctors -- Dr.
Wong and Dr. Ching. If both set high prices for their services, they will each
earn $3 million per year.  If one of them charges a low price, while the other
charges a high price, the one who charges a low price will gain most of
customers and earn $5 million, whereas the one who charges a high price will
lose customers and earn $1 million.  If both charge low prices, they will earn
$1.5 million each.  What is the Nash equilibrium of this game?

A; Both doctors charge a low price.