Economic Questions

1. Which of the following provides the best evidence that economies of scale exist?

a. The per-unit costs on Excel Publishing Company's manuals fell following a large order from
the government.
b. Alpha-Beta Inc. raised its price 10% following a 5% increase in production costs.
c. Widget Manufacturing doubled its production by opening a new plant that was identical to its
old plant.
d. The XYZ Co. increased production 25% following a 30% increase in all inputs.

2. The substitution effect refers to the decision to :

a. work fewer hours when the wage rate goes down.
b. work fewer hours when the wage rate goes up.
c. look for a better job when the wage rate goes up.
d. look for a better job when the wage rate goes down.

3. The income effect refers to the decision to:

a. work more hours when the wage rate goes up.
b. work more hours when the wage rate goes down.
c. look for a better job when the wage rate goes up.
d. look for a better job when the wage rate goes down.

4. If the government chooses a stabilization price which is above a price trend line, the quantity supplied of agricultural goods will tend to be:

a. below the quantity demanded.
b. above the quantity demanded.
c. equal to the quantity demanded.
d. sometimes above and sometimes below the quantity demanded.

5. Economic models:

a. focus on every important aspect of economic reality.
b. focus only on some aspects of a problem.
c. do not involve value judgments because they are purely mathematical.
d. are close representations of real-world economic reality.

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...g units.

Answer 2:
a. work fewer hours when the wage rate goes down
Explanation: As wages rise, the opportunity cost of "not working for pay" rises. Therefore, people choose to work more hours.

Answer 3:
b. work more hours when the wage rate goes down.
Explanation: As wages rise, income rises. Because leisure ...