Trade offs and opportunity costs

The Law of Supply states

Producers supply more as price increases

A mixed economy combines

Free market and central planning

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Principles of Economics 1

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Questions 14

Answers

1
Inductive reasoning involves
Mathematical modelling
Testing a theory using data
Developing assumptions
Predicting behaviour
2
An increase in income causes demand for inferior goods to
Increase
Become unit elastic
Remain constant
Decrease
3
Price ceilings result in
Allocative efficiency
Consumer surplus maximisation
Shortages and Inefficiency
Perfect Competition
4
If the price of a complement good rises, demand for the original good
Decreases
Increases
Remains constant
Becomes perfectly elastic
5
If Qd = 100 - 8p and Qs = 20 + 2p the equilibrium price is
8
20
12
15
6
The PPF represents
No trade offs
Trade offs and opportunity costs
Unlimited Resources
Unchanging resources
7
A resource is not scarce if
It has zero opportunity cost
Demand exceeds supply
There is no trade off
It is exhaustible
8
Producer surplus increases when
Cost of production increases
Equilibrium price increases
Demand decreases
Supply decreases
9
What causes a change in supply
Population changes
Government subsdies
B and D
Production costs
10
The Law of Supply states
Producers supply more as price increases
Producers supply less as price increases
Price does not affect supply
Demand determines supply
11
A command economy allocates resources based on
Consumer Preferences
Competition
Market Prices
Central Planning
12
A mixed economy combines
Scarcity and abundance
Free market and central planning
Perfect competition and command systems
Monopoly and perfect competition
13
What causes a movement along the demand curve
Change in price of substitutes
Change in consumer income
Change in preferences
Change in price of the good
14
Scarcity requires
Unlimited Resources
Trade offs between goods
Limited Wants
Perfect information

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