PN4001 FINAL EXAM (UPDATED 2025/2026) –
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS – VERIFIED & GRADED
A market system relies on _____ to determine what will be produced, how it will be produced,
and who will get it. - ANSWERStastes and preferences
An exchange mechanism that allows buyers to trade with sellers is called _______. - ANSWERSa
market
A market system relies on the government to answer the three basic questions. - ANSWERSTrue
Every economic system must answer three basic questions. They are _____. - ANSWERSWhat?,
How?, and For Whom?
Because of scarcity, people have to make trade-offs. - ANSWERSTrue
The income threshold model describes the relationship between _____. - ANSWERSincome and
sales
Which of the following would be considered a normative statement? - ANSWERSWe should
reduce our consumption of fattening foods.
A description of the relationship between two or more variables is called a _____ - ANSWERSA
model
A rational decision maker ____. - ANSWERSmaximizes an objective subject to a constraint
,An economic model must be a realistic as possible to make good predictions. - ANSWERSFalse
An economic theory is a prediction about cause and effect. - ANSWERSTrue
To help simplify models, economists _____. - ANSWERSmake assumptions
Models are used to explain _____. - ANSWERShow much of a product is produced
A good model _____. - ANSWERSmakes clear predictions and makes predictions are consistent
with reality
Microeconomic models and predictions are used for making decisions by _____. -
ANSWERSIndividuals, firms, and governments
A market system relies on _____ to determine what will be produced, how it will be produced,
and who will get it. - ANSWERSPrices
The study of the individual choices about allocation of scarce resources is called _____. -
ANSWERSMicroeconomics
Because of scarcity, people have to make trade-offs. - ANSWERSTrue
A tariff is a tax on imported products. Assume that solar panels imported from China are a
substitute for solar panels produced in the U.S. If the U.S. government imposed a tariff on the
purchase of Chinese solar panels, the demand for U.S. solar panels would increase. -
ANSWERSTrue
A leftward shift in the demand for apartments near a college campus could be caused by an
increase in the rental price of those apartments. - ANSWERSFalse
, An increase in the price of a product will increase the supply of the product. - ANSWERSFalse
The supply for processed pork is given by Q = 178 + 40p - 60ph, where ph is the price of hogs.
An increase in the price of hogs from $1.50 to $3.00 will ____. - ANSWERSDecrease the supply
of pork
Suppose the supply of vitrium is from other sources is fixed at 12 billion bricks per year. Your
supply of vitrium is given by Q = 21.85 billion bricks + 0.023p. If the price of vitrium is $1,000
per brick, how many billion bricks of vitrium will be produced? - ANSWERS56.85
When there is a shortage or excess supply in a market, the price must rise to restore
equilibrium. - ANSWERSTrue
The supply function for tomatoes to be processed into tomato paste is given by Q = 0.2 + .55p,
where p is the price of tomatoes in dollars per ton and Q is millions of tons of tomatoes per
year. The demand function is given by Q = 2.6 - 0.2p + 0.15pst. Where pst is the price of tomato
paste in dollars per ton. If pst has a value of 110, the equilibrium quantity is ( ) and the
equilibrium price is ( ). round all answer to two decimal places. - ANSWERS14.06 and 25.20
The demand for copper is given by Q = 12.15 - 1.35p and the supply of copper is given by Q = -9
+ 9p. The equilibrium quantity is ( ) of copper is and the equilibrium price is ( ). - ANSWERS9.36
and 2.04
You observe that both the price of organically grown food and the the sales of organically grown
food are rising. You know this must be the result of an increase in the supply of organically
grown food. - ANSWERSFalse
The demand function for a product is given by Q = 220 - 2p, and the supply function is given by
Q = 20 + 3p - 20r, where r is the rental cost of capital. If the rental cost of capital falls from 5 to
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS – VERIFIED & GRADED
A market system relies on _____ to determine what will be produced, how it will be produced,
and who will get it. - ANSWERStastes and preferences
An exchange mechanism that allows buyers to trade with sellers is called _______. - ANSWERSa
market
A market system relies on the government to answer the three basic questions. - ANSWERSTrue
Every economic system must answer three basic questions. They are _____. - ANSWERSWhat?,
How?, and For Whom?
Because of scarcity, people have to make trade-offs. - ANSWERSTrue
The income threshold model describes the relationship between _____. - ANSWERSincome and
sales
Which of the following would be considered a normative statement? - ANSWERSWe should
reduce our consumption of fattening foods.
A description of the relationship between two or more variables is called a _____ - ANSWERSA
model
A rational decision maker ____. - ANSWERSmaximizes an objective subject to a constraint
,An economic model must be a realistic as possible to make good predictions. - ANSWERSFalse
An economic theory is a prediction about cause and effect. - ANSWERSTrue
To help simplify models, economists _____. - ANSWERSmake assumptions
Models are used to explain _____. - ANSWERShow much of a product is produced
A good model _____. - ANSWERSmakes clear predictions and makes predictions are consistent
with reality
Microeconomic models and predictions are used for making decisions by _____. -
ANSWERSIndividuals, firms, and governments
A market system relies on _____ to determine what will be produced, how it will be produced,
and who will get it. - ANSWERSPrices
The study of the individual choices about allocation of scarce resources is called _____. -
ANSWERSMicroeconomics
Because of scarcity, people have to make trade-offs. - ANSWERSTrue
A tariff is a tax on imported products. Assume that solar panels imported from China are a
substitute for solar panels produced in the U.S. If the U.S. government imposed a tariff on the
purchase of Chinese solar panels, the demand for U.S. solar panels would increase. -
ANSWERSTrue
A leftward shift in the demand for apartments near a college campus could be caused by an
increase in the rental price of those apartments. - ANSWERSFalse
, An increase in the price of a product will increase the supply of the product. - ANSWERSFalse
The supply for processed pork is given by Q = 178 + 40p - 60ph, where ph is the price of hogs.
An increase in the price of hogs from $1.50 to $3.00 will ____. - ANSWERSDecrease the supply
of pork
Suppose the supply of vitrium is from other sources is fixed at 12 billion bricks per year. Your
supply of vitrium is given by Q = 21.85 billion bricks + 0.023p. If the price of vitrium is $1,000
per brick, how many billion bricks of vitrium will be produced? - ANSWERS56.85
When there is a shortage or excess supply in a market, the price must rise to restore
equilibrium. - ANSWERSTrue
The supply function for tomatoes to be processed into tomato paste is given by Q = 0.2 + .55p,
where p is the price of tomatoes in dollars per ton and Q is millions of tons of tomatoes per
year. The demand function is given by Q = 2.6 - 0.2p + 0.15pst. Where pst is the price of tomato
paste in dollars per ton. If pst has a value of 110, the equilibrium quantity is ( ) and the
equilibrium price is ( ). round all answer to two decimal places. - ANSWERS14.06 and 25.20
The demand for copper is given by Q = 12.15 - 1.35p and the supply of copper is given by Q = -9
+ 9p. The equilibrium quantity is ( ) of copper is and the equilibrium price is ( ). - ANSWERS9.36
and 2.04
You observe that both the price of organically grown food and the the sales of organically grown
food are rising. You know this must be the result of an increase in the supply of organically
grown food. - ANSWERSFalse
The demand function for a product is given by Q = 220 - 2p, and the supply function is given by
Q = 20 + 3p - 20r, where r is the rental cost of capital. If the rental cost of capital falls from 5 to
