3. If the price of an inferior good rises, the income effect on purchases is
(A) equal to the price effect. (B) zero. (C) negative. (D) positive.
4. A tradeoff is
(A) a constraint that requires giving up one thing to get another.
(B) a transaction at a price either above or below the equilibrium price.
(C) represented by a point outside a PPF.
(D) represented by a point inside a PPF.
5. Which of the following factors is NOT part of the budget equation?
(A) preferences (B) real income
(C) quantities of goods (D) relative prices
6. In general, resources are used efficiently when the
(A) marginal benefit from a good exceeds its marginal cost by as much as possible.
(B) goods produced are those valued most highly.
(C) opportunity cost of the goods being produced is as low as possible.
(D) none of the above
7. The opportunity cost of economic growth is
(A) investment that a nation gives up to increase its economic growth.
(B) present consumption that a nation gives up to accumulate capital.
(C) future consumption that a nation gets if it gives up some present consumption.
(D) future consumption that a nation gives up to consume more today.
8. A market structure in which many firms compete by making similar but slightly different products is called
(A) monopolistic competition. (B) monopoly.
(C) perfect competition. (D) oligopoly
46. In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is
(A) a shift to AD2.
(B) a shift to AD1.
(C) a movement to point C.
(D) a movement to point A.
47. In the quantity theory of money, the velocity of circulation is assumed to
(A) fall during recessions.
(B) be unrelated to the equation of exchange.
(C) be not influenced by the quantity of money.
(D) rise during recessions.
48. The Latin term ceteris paribus means
(A) "false for the whole, false for the parts."
(B) "other things the same."
(C) "buyer beware."
(D) "true for the parts not necessarily true for the whole."