1) The principle of diminishing returns implies that as one input increases while the other inputs are held fixed, output
A) increases at an increasing rate.
B) increases at a decreasing rate.
C) decreases at a decreasing rate.
D) decreases at an increasing rate.
Bracelets /hour Pendants /hour
Celia 10 2
Sondra 4 1

2) Consider two individuals, Celia and Sondra, who produce bracelets and pendants. Table 3.1 shows how much of each good Celia and Sondra can produce in one hour. Sondra's opportunity cost of one pendant is
A) 2 bracelets.
B) 4 bracelets.
C) 5 bracelets.
D) 10 bracelets.

 3) The Law of Demand can be explained as
A) a lot of people wanting the same thing.
B) the higher the price, the smaller the quantity demanded, ceteris paribus.
C) people are willing to make limited sacrifices to acquire products.
D) legal reasons people make purchases in the marketplace.

 

4) Figure 4.3 illustrates the demand for tacos. Assume tacos are an inferior good. An increase in income would bring about a movement from
A) point b to point c.
B) point b to point a.
C) D1 to D0.
D) D1 to D2.

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