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Microeconomics I Homework#1 Answer Key Fall 2009 I. Multiple choice question 1 2 3 4 5 6 7 8 9 10 D C C A A D D B A C 11 12 13 14 15 C C A B C 1) Who or what is responsible for the allocation of scarce resources into the production of most goods in the U.S.? A) the American government B) the UN C) the Federal Reserve Bank D) markets and prices Answer: B 2) Which of the following is an example of a normative statement? A) A higher price for a good causes people to want to buy less of that good. B) A lower price for a good causes people to want to buy more of that good. C) To make the good available to more people, a lower price should be set. D) If you consume this good, you will be better off. Answer: C 3) Which of the following is an example of a positive statement? A) Since this good is bad for you, you should not consume it. B) If this good is bad for you, you should not consume it. C) If you consume this good, you will get sick. D) None of the above. Answer: C 4) Suppose the demand for Digital Video Recorders (DVRs) is given by Q=250 - .25p + 4pc, where Q is the quantity of DVRs demanded (in 1000s), p is the price of a DVR, and pc is the price of cable television. How much does demand for DVRs change if the p rises by $40? A) drops by 10,000 DVRs B) increases by 16,000 DVRs C) drops by 2,500 DVRs D) increases by 4,000 DVRs Answer: A 5) Consider the demand function Qd = 150 - 2P. The effects of other determinants of Qd is reflected in A) the intercept of the function. B) the slope of the function. C) neither the slope nor the intercept of the function. D) in both the slope and the intercept of the function. Answer: D 6) As the price of a good increases, the change in the quantity demanded can be shown by A) shifting the demand curve leftward. B) shifting the demand curve rightward. C) moving down along the same demand curve. D) moving up along the same demand curve. Answer: D