Application 4

Problems and Exercises

Price $ John Liz Alex
You are given the following individual demand 2 4 36 24
tables for books 4 4 32 20

a. Determine the market demand table 6 0 28 16

8 0 24 12
b. Graph the individual and market demand 10 0 20 8
curves. 12 0 16 4

c. If the current market price is $4, what is the 14 0 12 0

16 0 8 0
total market demand if price rise to $8?
Choose the best answer for each of the following questions:
1. All economic questions arise because we
a. want more than we can get. Right answer
b. want more than we need.
c. have an abundance of resources.
d have limited wants that need to be satisfied
2. Fundamental economic problems basically arise from
a. the fact that society has more than it needs.
b. turmoil in the stock market.
c. the unequal distribution of income.
d our wants exceeding our scarce resources. Right answer
3. As an economic concept, scarcity applies to
a. both money and time. Right answer
b. money but not time.
c. time but not money.
4. Scarcity requires that people must
a. cooperate.
b. compete.
c. trade.
d make choices Right answer
5. An example of a question that might be explored in microeconomics is to determine
a. the number of workers employed by Intel. Right answer
b. savings by the household sector.
c. why the U.S. economy has grown more rapidly than the Japanese economy.
d the total employment within the U.S. economy.

6. The term human capital refers to

A) labor resources used to make capital equipment.
B) buildings and machinery.
C) worker's knowledge and skill. Right answer
D) entrepreneurship and risk-taking
7. The economic resource that organizes the use of other economic resources is called
A) labor.
B) capital.
C) entrepreneurship.
D) land

8. In economics, the term "capital" refers to

A) the money in one's pocket.
B) buildings and equipment. Right answer
C) mineral resources.
D) consumer goods

9. The "gifts of nature" are included as part of which factor of production?

A) labor
B) land Right answer
C) capital
D) entrepreneurship
10. Which factor of production earns profit?
a. A) land
b. B) human capital
c. C) money
d D) entrepreneurship Right answer
11. Factors of production include all of the following EXCEPT
A) machines made in past years.
B) money. Right answer
C) entrepreneurship.
D) a wheat field that is not irrigated
12. In every economic system, choices must be made because resources are ________ and our wants
are ________.
A) unlimited; limited
B) limited; unlimited Right answer
C) unlimited; unlimited
13. The law of demand states that the quantity demanded of a good is inversely related to the
price of that good. Therefore, as the price of a good goes:
A. up, the quantity demanded also goes up.
B. up, the quantity demanded goes down. Right answer
C. down, the quantity demanded goes down.
D. down,
14. Human theis quantity demanded stays the same
capital
A) all capital owned by individuals, but not by corporations or governments.
B) all capital owned by individuals or corporations, but not by governments.
C) machinery that meets or exceeds federal safety standards for use by humans.
D) the skill and knowledge of workers. Right answer

15. Which of the following is consistent with the law of demand?

Answer: B
A) An increase in the price of a DVD causes an increase in the quantity of DVDs demanded.
B) An increase in the price of a soda causes a decrease in the quantity of soda demanded. Right answer
C) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded.
D) A decrease in the price of juice causes no change in the quantity of juice demanded.
16. Which of the following is not held constant as you move along the demand curve?
A. The price of that good Right answer
B. The price of other goods
C. The incomes of consumers
D. The preferences of consumers for the good

17. Which of the following would cause quantity demanded to change without shifting the demand
curve?
A. A change in income
B. A change in the price of the good Right answer
C. A change in tastes and preferences
D. A change in the price of a substitute good