Answer Key to Sample MC questions for Test !

Here is the key to the sample test and a few comments below.

1-C, 2-D, 3-A, 4-B, 5-B, 6-B,
7-C, 8-C, 9-B, 10-A, 11-D,
12-D. 13-B, 14-B, 15-B, 16-D, 17-A,
18-B, 19-D, 20-B, 21-A, 22-B, 23-B, 24-C,
25-B, 26-A, 27-A, 28-B, 29-D, 30-C,
31-A, 32-C, 33-B, 34-B, 35-D.



On 3: goods are scarce in supply, but we would not call them resources

On 7: Trade between countries is based on the same principle as trade among individuals: exploiting different opportunity costs.

On 8: I did not discuss this in class but it should be clear from the readings. In a nutshell: Positive economics seeks to explain economic phenomena and to draw inferences based on these relationships (e.g., the price is $5, or if the supply decreases we can expect higher prices and lower quantities). However, values, morals, and other personal preferences can come into play, often in policy situations. (Taxes on cigarettes should be raised. We should build a highway directly from Pittsburgh to Indiana. We should subsidize farmers.) In class, we aim to be positive.

On 12: The production of football helments decreases at an increasing rate. But given that is not an alternative, decreasing would be the answer. But decreasing at an decreasing rate means "decreasing opportunity cost".

On 22: Keep in mind, demand curves slope down

On 24: B is not true because as the price of getwids decreases, there is an increase in quantity demanded--but not an increase in demand.

Changes in demand are when the demand curve shifts. Changes in quantities demanded are due to changes in the price of the good. Since price is on the vertical axis, we merely find movement along the existing demand curve.

On 31: Sorry, that is a tough one.

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