Business Economics: Coursework Quiz 1 (Lecture Sessions 1 & 2)

The correct answers are in yellow

Please note: the order of the questions and answers in the online quiz were randomized so
they will not have necessarily appeared in the following order:
Quiz Instructions
Choose what you think is the best answer from the alternatives provided
You score 2 points for each correct answer
You score zero for each blank answer
Only record one answer per question

Suppose that Albania can produce 1 unit of machinery using 3 hours of labour and 1
unit of cloth using 9 hours of labour. It follows that the opportunity cost of producing
1 unit of cloth in Albania is:
a) 27 units of machinery
b) 3 units of machinery
c) 9 units of machinery
d) 1 unit of machinery
e) of a unit of machinery

If market supply is perfectly inelastic with respect to price, we would expect an

increase in market demand to generate:
a) a fall in the market price
b) a fall in the market price and an increase in market output
c) a rise in the market price
d) a rise in the market price and a fall in output
e) a rise in output with no change in market price

Price elasticity of demand is calculated as:

a) (dQ/Q) / (dP/P)
b) (dQ/dP) (Q/P)
c) (dQ/Q) / (P/Q)

d) (dQ/Q) (Q/P)
e) none of the above

Suppose you observe that the demand for product X rises by 10% in response to a
20% fall in household incomes. From this information we can deduce that:
a)

X is a luxury good

b)

the income elasticity of demand for X is 2

c)

X is a necessity

d)

the income elasticity of demand for X is 20

e)

X is an inferior good

A firm is considering whether to increase price. It estimates that the price elasticity
of demand for its product is approximately -0.87. If this estimate is accurate, the
increase in price will generate:
a) higher sales, but lower total revenue
b) higher sales and higher total revenue
c) lower sales, but higher total revenue
d) lower sales and lower total revenue
e) lower sales, but no change in total revenue

A perfectly elastic demand curve is represented by:

a) a shallowly sloped demand curve
b) a vertical demand curve
c) a steeply sloped demand curve
d) a horizontal demand curve
e) a rectangular hyperbola

Suppose that conditions in the market for wheat are such that consumers wish to
buy 140 tons of wheat per period and 165 tons are actually supplied by farmers.
From this information, we can deduce that:
a) the market price is currently above its equilibrium level
b) farmers are incurring losses

c) the market price is currently below its equilibrium level

d) farmers are earning above normal profits
e) the market price is fixed

Suppose you observe a fall in the price of apples relative to the prices of other
competing fruits. Which of the following would cause an unambiguous decrease in
the relative price of apples?
a) a shift to the right in the supply curve for apples and a shift to the right in the
demand curve for apples
b) a shift to the right in the supply curve for apples and a shift to the left in the
demand curve for apples
c) a shift to the left in the supply curve for apples and a shift to the right in the
demand curve for apples
d) a shift to the left in the supply curve for apples and a shift to the left in the
demand curve for apples
e) none of the above

A rightward shift in the economys production possibility frontier occurs when the
economy experiences
a) rising opportunity costs in production
b) a fall in resource utilization
c) falling opportunity costs in production
d) economic growth
e) a misallocation of productive resources

If two goods are substitutes, the cross-price elasticity of demand must be:
a) negative
b) positive
c) zero
d) infinite
e) one (unity)
End of Coursework Quiz 1