ECO 2013 EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026
The concept of scarcity, as used by economists, refers to - Answers A situation in which the available
resources are not enough to satisfy the wants of the people.
An important implication of scarcity is that - Answers People must make a choice.
The opportunity cost of a choice is the - Answers Value of the next best activity not chosen.
The opportunity cost of attending college - Answers Includes the lost wages that would have been
earned if the student had not attended college.
When the economy is in recession, jobs are generally harder to find and more people go to college.
We can conclude that the opportunity cost of - Answers Going to college decreases when the
economy is in recession.
According to the law of demand, if the price of compact disks decreased (ceteris paribus) the -
Answers Quantity demanded of compact disks would increase.
Suppose you observe that taxi fares per trip increased when more commuters took taxis. What is the
best possible explanation? - Answers The price of gasoline went up.
According to the law of demand, one way to reduce the amount of tobacco consumption is to -
Answers Raise the price of tobacco.
What will increase the demand for a normal good? - Answers An increase in consumer income.
Consider the market for pop music played on compact disks. If there is a decrease in the number if
pop music programs broadcast on radio, we can expect - Answers The demand for compact disks to
increase.
Suppose that Sunny D is an inferior good. What is true given an increase in consumer income? -
Answers A leftward shift in the demand curve of Sunny D.
Coffee and tea are substitutes so that if the price of tea increases, the - Answers Demand for coffee
increases.
If the price of product X falls and this causes the demand for product Y to shift to the right, then we
can conclude that X and Y are - Answers Complements.
If an increase in the price of product X causes an increase in the demand for product Y, we can
conclude that - Answers They are substitutes.
What will not cause the demand for ice cream to change? - Answers A change in the price of ice
cream.
According to the law of supply, if the price of personal computers increased, (ceteris paribus) -
Answers The quantity supplied of personal computers would increase.
What would not affect the supply of automobiles? - Answers An increase in the price of motor oil.
Suppose all blue collar workers receive a substantial pay increase. What will happen in the product
markets that employ these workers? - Answers Supply will decrease.
Market equilibrium occurs when the - Answers Quantity supplied equals quantity demanded.
If quantity supplied is less than quantity demanded, then - Answers There is a shortage in the market.
If there is a surplus of a product, we can conclude that - Answers The products prices is above
equilibrium.
If price is below equilibrium - Answers Quantity demanded exceeds quantity supplied, and a shortage
exists.
The U.S. surgeon general warns that animal fat in the diet is unhealthy. With the discovery that
longhorn beef cattle have little body fat, you would expect - Answers Ranchers to be more willing to
produce longhorn cattle as the price rises.
If it is discovered that using a smartphone regularly causes brain cancer, then in the market for
smartphones - Answers Equilibrium price and equilibrium quantity will fall.
What is the most likely reason for the increase in the price of roses on Valentines Day? - Answers An
increase in the demand for roses.
If a technological improvement took place in the computer industry, we should expect to see the
equilibrium price of computers to - Answers Decrease and the quantity of computers sold to increase.
Suppose it is observed in a market that price has fallen but more product is being produced and sold.
This could be caused by a(n) - Answers Increase in supply.
When both supply and demand shift right at the same time - Answers The change in equilibrium price
cannot be predicted, but the change in equilibrium quantity can be predicted.
Suppose in a financial crisis, major automakers reduce their production of autos while consumers
reduce their demand for autos. We can conclude with certainty that in the market of autos - Answers
, The equilibrium quantity will decrease but the equilibrium price will increase, decrease or remain
unchanged.
Suppose a war in the Middle East destroys many oil fields. This will cause a(n) - Answers Increase in
oil prices.
The high price of gasoline in the late-2000's was likely the result of - Answers A decrease in the supply
of gasoline along with an increase in the demand for gasoline.
A price ceiling would result in a(n) - Answers Shortage.
A price floor would result in a(n) - Answers Surplus.
If price changes from $8 to $12 and quantity demanded changes from 80 units to 40 units, the the
price elasticity of demand is - Answers 1.67.
A product with an inelastic demand means that - Answers Consumers are relatively insensitive to a
change in the price of the product.
A product with an elastic demand means that - Answers Consumers are relatively sensitive to a
change in the price of the product.
If a 3% change in price results in a 1.5% change in quantity demanded, then the price elasticity of
demand is ___ and demand is ___. - Answers 1/2, inelastic.
In the process of calculating the production of the economy in the U.S., what must be taken into
account? - Answers -The fact that some of the goods that people buy are shipped to the U.S. from
abroad.
-The fact that some of the goods produced in the economy are shipped to other countries.
-The fact that some goods are used as inputs in to the production of other goods, like hamburgers.
GDP is - Answers A measure of the value of all newly produced final goods and services in a country
during some period of time.
The numbers one finds when one measures the GDP of the U.S. are quite large, measured in trillions.
How many billions constitute a trillion? - Answers 1,000.
Sally has recently graduated from college and has bought a house that was built 50 years ago for
$100,000. She used a real estate agent to help her find and purchase the house, and the real estate
agent received 6% of the value of the sale, or $6,000, to be paid by the seller of the house. The value
of GDP in this case would - Answers Increase by $6,000.
What is the correct ordering if we want to rank the four spending components, as a share of U.S. GDP
in 2010, in descending (from highest to lowest) order? - Answers Consumption, government
purchases, investment, net exports.
Investment expenditures are the sum of - Answers Business fixed investment, inventory investment,
and residential investment.
Expenditure on ___ is spending that is not included in GDP. - Answers -Used goods.
-Intermediate goods.
-Financial assets.
Investment, as defined in the text, refers to - Answers Purchase of new capital, such as new factories
or equipment.
Inventory investment is included as a spending item when computing GDP because - Answers Not
everything produced in a given times period is sold during that time period.
Transfer payments - Answers Are excluded from government purchases and GDP.
In which spending category would you enter the following transaction if you were trying to calculate
U.S. GDP? People in France flock to see the latest Brad Pitt movie that was produced in Hollywood. -
Answers Net exports.
For a hypothetical economy in a given year, consumption equaled $372, investment equaled $126,
government purchases equaled $184, goods exported equaled $75, and goods imported equaled $84.
What was the value of GDP? - Answers $673.
For a hypothetical economy in a given year, GDP equaled $1,171, consumption equaled $482,
investment equaled $286, goods exported equaled $198, and goods imported equaled $57. What did
government spending equal? - Answers $262.
In calculating GDP as income, what best describes what net investment is? - Answers A measure of
how much new investment there is each year after depreciation has been subtracted.
The concept of value added refers to - Answers The increase in the value of a product that occurs at
each stage of production.
A base year is a year when - Answers Real and nominal GDP are equal to each other.
The concept of scarcity, as used by economists, refers to - Answers A situation in which the available
resources are not enough to satisfy the wants of the people.
An important implication of scarcity is that - Answers People must make a choice.
The opportunity cost of a choice is the - Answers Value of the next best activity not chosen.
The opportunity cost of attending college - Answers Includes the lost wages that would have been
earned if the student had not attended college.
When the economy is in recession, jobs are generally harder to find and more people go to college.
We can conclude that the opportunity cost of - Answers Going to college decreases when the
economy is in recession.
According to the law of demand, if the price of compact disks decreased (ceteris paribus) the -
Answers Quantity demanded of compact disks would increase.
Suppose you observe that taxi fares per trip increased when more commuters took taxis. What is the
best possible explanation? - Answers The price of gasoline went up.
According to the law of demand, one way to reduce the amount of tobacco consumption is to -
Answers Raise the price of tobacco.
What will increase the demand for a normal good? - Answers An increase in consumer income.
Consider the market for pop music played on compact disks. If there is a decrease in the number if
pop music programs broadcast on radio, we can expect - Answers The demand for compact disks to
increase.
Suppose that Sunny D is an inferior good. What is true given an increase in consumer income? -
Answers A leftward shift in the demand curve of Sunny D.
Coffee and tea are substitutes so that if the price of tea increases, the - Answers Demand for coffee
increases.
If the price of product X falls and this causes the demand for product Y to shift to the right, then we
can conclude that X and Y are - Answers Complements.
If an increase in the price of product X causes an increase in the demand for product Y, we can
conclude that - Answers They are substitutes.
What will not cause the demand for ice cream to change? - Answers A change in the price of ice
cream.
According to the law of supply, if the price of personal computers increased, (ceteris paribus) -
Answers The quantity supplied of personal computers would increase.
What would not affect the supply of automobiles? - Answers An increase in the price of motor oil.
Suppose all blue collar workers receive a substantial pay increase. What will happen in the product
markets that employ these workers? - Answers Supply will decrease.
Market equilibrium occurs when the - Answers Quantity supplied equals quantity demanded.
If quantity supplied is less than quantity demanded, then - Answers There is a shortage in the market.
If there is a surplus of a product, we can conclude that - Answers The products prices is above
equilibrium.
If price is below equilibrium - Answers Quantity demanded exceeds quantity supplied, and a shortage
exists.
The U.S. surgeon general warns that animal fat in the diet is unhealthy. With the discovery that
longhorn beef cattle have little body fat, you would expect - Answers Ranchers to be more willing to
produce longhorn cattle as the price rises.
If it is discovered that using a smartphone regularly causes brain cancer, then in the market for
smartphones - Answers Equilibrium price and equilibrium quantity will fall.
What is the most likely reason for the increase in the price of roses on Valentines Day? - Answers An
increase in the demand for roses.
If a technological improvement took place in the computer industry, we should expect to see the
equilibrium price of computers to - Answers Decrease and the quantity of computers sold to increase.
Suppose it is observed in a market that price has fallen but more product is being produced and sold.
This could be caused by a(n) - Answers Increase in supply.
When both supply and demand shift right at the same time - Answers The change in equilibrium price
cannot be predicted, but the change in equilibrium quantity can be predicted.
Suppose in a financial crisis, major automakers reduce their production of autos while consumers
reduce their demand for autos. We can conclude with certainty that in the market of autos - Answers
, The equilibrium quantity will decrease but the equilibrium price will increase, decrease or remain
unchanged.
Suppose a war in the Middle East destroys many oil fields. This will cause a(n) - Answers Increase in
oil prices.
The high price of gasoline in the late-2000's was likely the result of - Answers A decrease in the supply
of gasoline along with an increase in the demand for gasoline.
A price ceiling would result in a(n) - Answers Shortage.
A price floor would result in a(n) - Answers Surplus.
If price changes from $8 to $12 and quantity demanded changes from 80 units to 40 units, the the
price elasticity of demand is - Answers 1.67.
A product with an inelastic demand means that - Answers Consumers are relatively insensitive to a
change in the price of the product.
A product with an elastic demand means that - Answers Consumers are relatively sensitive to a
change in the price of the product.
If a 3% change in price results in a 1.5% change in quantity demanded, then the price elasticity of
demand is ___ and demand is ___. - Answers 1/2, inelastic.
In the process of calculating the production of the economy in the U.S., what must be taken into
account? - Answers -The fact that some of the goods that people buy are shipped to the U.S. from
abroad.
-The fact that some of the goods produced in the economy are shipped to other countries.
-The fact that some goods are used as inputs in to the production of other goods, like hamburgers.
GDP is - Answers A measure of the value of all newly produced final goods and services in a country
during some period of time.
The numbers one finds when one measures the GDP of the U.S. are quite large, measured in trillions.
How many billions constitute a trillion? - Answers 1,000.
Sally has recently graduated from college and has bought a house that was built 50 years ago for
$100,000. She used a real estate agent to help her find and purchase the house, and the real estate
agent received 6% of the value of the sale, or $6,000, to be paid by the seller of the house. The value
of GDP in this case would - Answers Increase by $6,000.
What is the correct ordering if we want to rank the four spending components, as a share of U.S. GDP
in 2010, in descending (from highest to lowest) order? - Answers Consumption, government
purchases, investment, net exports.
Investment expenditures are the sum of - Answers Business fixed investment, inventory investment,
and residential investment.
Expenditure on ___ is spending that is not included in GDP. - Answers -Used goods.
-Intermediate goods.
-Financial assets.
Investment, as defined in the text, refers to - Answers Purchase of new capital, such as new factories
or equipment.
Inventory investment is included as a spending item when computing GDP because - Answers Not
everything produced in a given times period is sold during that time period.
Transfer payments - Answers Are excluded from government purchases and GDP.
In which spending category would you enter the following transaction if you were trying to calculate
U.S. GDP? People in France flock to see the latest Brad Pitt movie that was produced in Hollywood. -
Answers Net exports.
For a hypothetical economy in a given year, consumption equaled $372, investment equaled $126,
government purchases equaled $184, goods exported equaled $75, and goods imported equaled $84.
What was the value of GDP? - Answers $673.
For a hypothetical economy in a given year, GDP equaled $1,171, consumption equaled $482,
investment equaled $286, goods exported equaled $198, and goods imported equaled $57. What did
government spending equal? - Answers $262.
In calculating GDP as income, what best describes what net investment is? - Answers A measure of
how much new investment there is each year after depreciation has been subtracted.
The concept of value added refers to - Answers The increase in the value of a product that occurs at
each stage of production.
A base year is a year when - Answers Real and nominal GDP are equal to each other.
