Econ 40 Final Practice Exam I.

The government will raise $8 million each week from the tax.

The explanation for the correct answer is that statement I is true because China's southern provinces have indeed become major exporters of consumer goods to various countries. However, statement II is false because China's economic system is still largely communist, although it has implemented some market-oriented reforms. Therefore, only statement I is true and statement II is false.

If the government sets the price at $4, it creates a price ceiling. This means that the price cannot go above $4. This would cause a shortage of 12 units, as the quantity demanded at that price would exceed the quantity supplied.

The equilibrium quantity refers to the quantity at which the demand and supply in a market are balanced. In this case, the correct answer is 15.5, which means that at this quantity, the demand for the product is equal to the supply. It indicates that the market is in a state of equilibrium, with neither a shortage nor a surplus of the product.

The correct answer is "The theory of the Communists may be summed up in the single sentence: Abolition of private property." This answer accurately reflects the main idea of Karl Marx and Friedrich Engels' theory of communism. They believed that in order to achieve a more equal society, private property should be abolished and resources should be collectively owned and shared by all members of society. This idea is central to the communist ideology and distinguishes it from other economic systems.

If water became very scarce, its marginal utility would increase because it would become more valuable and essential for survival. On the other hand, if diamonds became very plentiful, their marginal utility would decrease because they would become less scarce and less valuable. Therefore, the marginal utility of water would rise while the marginal utility of diamonds would fall.

When the demand curve shifts left and the supply curve shifts right simultaneously, the equilibrium quantity may increase, decrease, or remain the same depending on the magnitude of the shifts in demand and supply. If the decrease in demand is greater than the increase in supply, the equilibrium quantity will decrease. If the increase in supply is greater than the decrease in demand, the equilibrium quantity will increase. If the magnitude of the shifts is equal, the equilibrium quantity will remain the same. The direction and magnitude of the shifts in demand and supply determine the final impact on the equilibrium quantity.

The water-diamond paradox refers to the fact that water, which is essential for survival, has a lower price compared to diamonds, which are not necessary for survival. This paradox is resolved when we consider the concept of marginal utility. The marginal utility of the last gallon of water consumed is very low because water is abundant and we consume it in large quantities. On the other hand, the marginal utility of the last diamond carat purchased is very high because diamonds are scarce and we consume them in small quantities for luxury purposes. Therefore, the correct answer is "low; high".

An increase in population in the age group buying that good, a rise in income, a change in the price of substitutes, and a successful advertising campaign convincing people that they want more of this good can all potentially shift the demand curve. However, a shift of the supply curve does not affect the demand curve directly. The supply curve represents the relationship between the price of a good and the quantity supplied, while the demand curve represents the relationship between the price of a good and the quantity demanded. Therefore, a shift in the supply curve would impact the quantity supplied, not the quantity demanded, and would not cause a shift in the demand curve.

An increase in the price of IBM personal computers is likely to decrease the demand for IBM computers because as the price goes up, consumers may be less willing or able to purchase them. This decrease in demand for IBM computers may lead consumers to consider alternative options, such as Apple computers (Macs), thereby increasing the demand for Apple computers.

When demand decreases, it means that consumers are buying less of a product at a given price. This causes the demand curve to shift downward and to the left. The curve becomes flatter because at lower prices, consumers are willing to buy more of the product, and at higher prices, they are willing to buy less. Therefore, the demand curve shows the relationship between price and quantity demanded, and a decrease in demand shifts the curve to the left, indicating a lower quantity demanded at each price level.

The government helps the free enterprise system work by enforcing business contracts, defining property rights, and lowering some of the barriers to competition. However, using a central planning agency to direct the production process goes against the principles of a free enterprise system, which is based on individual freedom and market forces. In a free enterprise system, businesses are expected to make their own production decisions based on market demand and competition.

Cars and tires are examples of complementary goods because they are typically used together. When someone buys a car, they also need to purchase tires for it. The demand for cars and tires is interconnected, as an increase in the demand for cars will lead to an increase in the demand for tires. Similarly, a decrease in the demand for cars will result in a decrease in the demand for tires. Therefore, cars and tires are considered complementary goods.

If sneakers and hiking boots are substitutes, it means that consumers can choose between the two when making a purchase decision. When the price of sneakers falls, it becomes a more attractive option for consumers, leading to an increase in demand for sneakers. As a result, the demand for hiking boots, the substitute product, will decrease because consumers are now more likely to choose the cheaper sneakers over hiking boots. Therefore, the correct answer is that the demand for hiking boots will fall.

The correct answer is "The invisible hand" because it is the only option that does not pertain to government intervention or control. "Government regulations," "a government five-year plan," and "government planning" all involve the role of the government in making decisions and implementing policies. However, the concept of "the invisible hand" refers to the idea that the market forces of supply and demand, rather than government intervention, guide the economy.

A socialist country typically exhibits all of the mentioned attributes. High taxes, especially on the wealthy, are implemented to fund social programs and services. The government owns some means of production, aiming for collective control and distribution of resources. Cradle-to-grave security ensures social welfare and protection for citizens. Lastly, a large-scale redistribution of income program aims to reduce income inequality and support the middle class, working class, and the poor. Therefore, all of the choices are indeed typical attributes of a socialist country.

The given correct answer is "Russia has been more successful than China in becoming a market-oriented economy." This statement is false because China has been more successful than Russia in transitioning to a market-oriented economy. China's economic reforms in the late 1970s led to significant growth and liberalization of its economy, while Russia's transition has been more challenging and marked by corruption and inefficiencies. China's economic rise and integration into the global market have made it one of the world's largest economies, while Russia has faced economic stagnation and dependence on natural resources.

All of the options listed - national defense, a lighthouse, flood control protection from the Tennessee Valley Authority (TVA), and police protection - are examples of public goods. Public goods are goods or services that are non-excludable and non-rivalrous, meaning that they are available to everyone and one person's use does not diminish their availability to others. In this case, all of the options listed are provided by the government and are available to all members of the public without discrimination. Therefore, they all qualify as examples of public goods.

If a firm changes its price and there is no change in the total revenues it receives, it indicates that the demand for its product is unit elastic. This means that the percentage change in quantity demanded is exactly equal to the percentage change in price. In other words, the responsiveness of demand to price changes is neither elastic (sensitive to price changes) nor inelastic (insensitive to price changes). This suggests that the firm is able to adjust its price without significantly affecting the quantity demanded, resulting in constant total revenues.

When there are fewer substitutes available for a good, it means that consumers have limited options to choose from. This makes the demand for the good less responsive to changes in price or other factors. In other words, even if the price of the good increases, consumers are still willing to purchase it because there are no close alternatives. Therefore, the demand for the good is more inelastic, meaning it does not change significantly with changes in price or availability of substitutes.

When the price is $2, the quantity demanded is 70 and the quantity supplied is 2. Since the quantity demanded is greater than the quantity supplied, there is excess demand in the market. In order to reach equilibrium, where quantity demanded equals quantity supplied, the price must rise to incentivize suppliers to increase their quantity supplied. Therefore, the correct answer is that quantity demanded is greater than quantity supplied and, therefore, price must rise to get to equilibrium.

If the government set a price of $24, it would create a price floor. This means that the price cannot go below $24. In this case, the price floor would cause a surplus of 10 units. This means that there would be more supply than demand at the price of $24, resulting in an excess of 10 units that cannot be sold.

When demand falls, it means that consumers are less willing to purchase the product at the current price. On the other hand, when supply rises, it means that producers are offering more of the product to the market. These two factors together result in a decrease in the equilibrium price, as there is less demand for the product and more supply available. The equilibrium quantity can either rise, fall, or stay the same depending on the magnitude of the changes in demand and supply.

An increase in supply means that the quantity supplied rises at all prices. This is because when supply increases, producers are willing and able to supply more of the good or service at any given price. In other words, they are willing to produce and sell more units of the product at all price levels. This is a fundamental concept in economics, as it shows the relationship between supply and price in a market.

The correct answer is "None of these statements are true." This means that none of the statements provided accurately describe the relationship between quantity demanded and quantity supplied. In reality, the quantity demanded is determined by buyers, while the quantity supplied is determined by sellers. Therefore, none of the given statements are correct.

A surplus in the fertilizer market occurs when the quantity supplied exceeds the quantity demanded. In this situation, the market price ($2.50 per bag) is lower than the equilibrium price ($2.00 per bag), indicating that there is excess supply in the market. This means that there are more bags of fertilizer available than consumers are willing to buy, leading to a surplus.

A production possibility curve represents the different combinations of two goods that can be produced given the available resources and technology. It illustrates the concept of scarcity, as it shows the limited nature of resources and the need to make choices. It also demonstrates the concept of opportunity cost, as producing more of one good requires sacrificing the production of another good. However, a production possibility curve does not directly represent the concept of price, which is determined by factors such as supply and demand in a market economy.

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The correct answer is flood control protection from the Tennessee Valley Authority (TVA). This is an example of a public good because it is a service provided by the government that benefits the entire community. Flood control protection helps to prevent or mitigate the damage caused by floods, which can affect a large number of people and properties in an area. It is non-excludable, meaning that once the protection is in place, it benefits everyone regardless of whether they contribute to its provision or not. It is also non-rivalrous, meaning that one person's use of flood control protection does not diminish its availability to others.

When state governments issue licenses that allow the growth of a previously illegal substance, it increases the supply of the substance in the market. This increase in supply leads to a decrease in the equilibrium price, as the market becomes more saturated with the substance. At the same time, the increase in supply also leads to an increase in the equilibrium quantity, as producers are now able to legally grow and sell more of the substance. Therefore, the correct answer is that the equilibrium price will fall and the equilibrium quantity will rise for the substance.

The correct answer is that if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. This is because resources are limited and finite, so they can only be allocated to produce a certain amount of goods. If more of one good is desired, resources must be reallocated from the production of another good, resulting in less of that good being produced. This concept is illustrated by the production possibilities curve, which shows the trade-off between producing different goods when resources are fully utilized.

If demand is inelastic and price is raised, total revenue will increase. This is because when demand is inelastic, a change in price has a smaller impact on quantity demanded compared to the change in price. Therefore, when the price is raised, the increase in revenue from the higher price outweighs the decrease in revenue from the lower quantity demanded. Similarly, if demand is inelastic and price is lowered, total revenue will decrease, as the decrease in price leads to a smaller increase in quantity demanded compared to the decrease in price. The same logic applies to the elastic options, but in the opposite direction.

Statement I is true because technological advance allows for the development of new and more efficient production methods, which increases a country's potential output and expands its production possibilities frontier.
Statement II is true because it states that economic growth slowed down from the early 1970s compared to the two decades before the 1970s. This is a factual statement that can be supported by historical data and economic analysis. Therefore, both statements are true.

The explanation for the given answer is that statement I is true because in the modern global economy, if our steel industry were operating at full capacity, we could easily import steel from other steel-producing countries. However, statement II is false because the constraints on our production possibilities frontier are not only physical constraints like the number of steel factories available, but also economic constraints such as cost, demand, and technology.

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A move from H to I represents an increase in supply. This means that there has been a positive change in the factors affecting supply, such as an increase in the availability of resources, improved technology, or a decrease in production costs. As a result, the quantity of goods or services supplied at each price level will increase, leading to a rightward shift of the supply curve.

Gas lines were the result of price ceilings. Price ceilings set a maximum price that can be charged for a product, in this case, gas. When the demand for gas exceeds the supply, as in times of crisis or shortage, price ceilings prevent prices from rising to match the increased demand. This leads to a situation where the quantity demanded exceeds the quantity supplied, resulting in gas shortages and long lines at gas stations.

A move from E to F represents a change in supply. This means that there has been a shift in the entire supply curve, indicating a change in the quantity of a good or service that producers are willing and able to supply at each price level. This shift could be caused by various factors such as changes in production costs, technology, government regulations, or expectations of future prices.

When there is a price floor, it means that the minimum price for a good or service is set above the equilibrium price. This creates a situation where the quantity supplied exceeds the quantity demanded, leading to a surplus. Suppliers are willing to supply more at the higher price, but consumers are not willing to purchase as much at the higher price, resulting in excess supply.

An increase in the supply of loanable funds means that there is more money available for lending. When there is a larger supply of funds, lenders will compete for borrowers by offering lower interest rates. This is because borrowers have more options and can choose the lender with the lowest interest rate. Therefore, an increase in the supply of loanable funds will lower interest rates.

Rent controls tend to lower the supply of housing because landlords may be less incentivized to build or maintain rental properties if they are not able to charge market rents. Additionally, rent controls tend to lower the level of rents paid because they impose limits on how much landlords can charge, which can result in artificially low rental prices.

The correct answer is that Statement II is true and statement I is false. This means that full production does not necessarily mean that the nation's resources are being allocated in the most efficient manner possible. The unemployment rate being at five percent does not necessarily indicate that we are inside our production possibilities frontier.

If the elasticity of demand for the car dealership's top models is 0.5, it means that a 10% increase in price will lead to a 5% decrease in quantity demanded. However, because the demand is inelastic (elasticity less than 1), the decrease in quantity demanded is proportionally smaller than the increase in price. As a result, total revenue will increase. This is because the increase in price outweighs the decrease in quantity demanded, leading to a net gain in revenue.

When the demand for hamburger buns is elastic, it implies that consumers are sensitive to changes in price. Therefore, if the price of the product increases, the quantity demanded will decrease significantly. As a result, the total revenue, which is calculated by multiplying the price by the quantity demanded, will decrease. This is because the decrease in quantity demanded outweighs the increase in price, leading to a fall in total revenue.

In market economies, the adjustment of prices serves as the rationing mechanism. Prices play a crucial role in determining the allocation of goods and services, as they reflect the supply and demand dynamics in the market. When the demand for a particular good or service exceeds its supply, the price tends to increase, signaling scarcity and encouraging consumers to ration their consumption. Conversely, when supply exceeds demand, prices tend to decrease, incentivizing consumers to increase their consumption. Therefore, price adjustments act as a mechanism to balance supply and demand and allocate resources efficiently in market economies.

During 2009 and 2010, one-quarter of Americans under 25 were unemployed. This means that 25% of the population in this age group did not have a job during that time period.

Usury laws typically impose restrictions on the maximum interest rates that can be charged on loans. These laws are intended to protect borrowers from excessive interest rates. However, by limiting the interest rates, usury laws can discourage lenders from providing loans, especially to borrowers with higher credit risks. This can lead to a decrease in the supply of loanable funds, rather than a surplus. Therefore, the statement "Usury laws can lead to a surplus of loanable funds" is false.

When the cross elasticity of demand is positive, it means that an increase in the price of one good or service leads to an increase in the demand for another good or service. This indicates that the two goods or services are substitutes, meaning that consumers are willing to switch from one to the other when the price of one increases. Therefore, the correct answer is positive; substitutes.

Both statements are false. Statement I is false because the burden of a tax increase can be shared between the buyer and the seller depending on the elasticity of demand and supply. Statement II is false because the supply curve is usually more elastic in the long run as producers have more time to adjust their production levels and inputs.

In 1865, all regions of the United States were primarily agricultural. This means that farming and agriculture were the main economic activities in all parts of the country. This statement implies that both the North and the West, in addition to the South, relied heavily on agriculture as their primary source of income and livelihood.

If the government sets a price ceiling of $18 in a market with intersecting lines that look like an "X," it means that the price cannot exceed $18. However, the equilibrium price, where supply and demand intersect, is higher than $18. Therefore, there would be a permanent shortage in the market because the price ceiling prevents the price from reaching the equilibrium level. This shortage would continue until the price ceiling is lifted.

When the price is $6, it means that the market is in equilibrium, where the quantity demanded equals the quantity supplied. In this situation, there is neither a surplus nor a shortage. A surplus occurs when the quantity supplied exceeds the quantity demanded, leading to a decrease in price. On the other hand, a shortage occurs when the quantity demanded exceeds the quantity supplied, resulting in an increase in price. However, in this case, the price of $6 indicates that the market is balanced, with no excess supply or demand.

The given answer is incorrect. According to the information provided, the elasticity of demand for tongue depressors is 0.5. This means that a 10% fall in price would result in a 5% increase in quantity demanded, not a 10% increase. Therefore, the correct answer would be "a 10% fall in the price of tongue depressors will raise quantity demanded by 5%."

The given statement that "Sweden has one of the world's most equal distributions of income, but also has a relatively low standard of living" is false. Sweden is known for its high standard of living and strong social welfare system, which contributes to a relatively equal distribution of income.

Jimmy Carter had to cope with both rising deficits and a rising rate of inflation during his presidency. In the late 1970s, the United States experienced high inflation, reaching double-digit percentages. Additionally, Carter faced a growing budget deficit due to increased government spending and a decrease in tax revenues. These economic challenges posed significant difficulties for his administration and were major issues during his time in office.

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If the equilibrium price of corn is 20 cents an ear and the government imposes a floor of 30 cents an ear, the price of corn will increase to 30 cents. This is because the floor price set by the government is higher than the equilibrium price, creating a price floor. This price floor prevents the price from falling below 30 cents, so the price of corn will increase to meet the floor price.

Employment discrimination refers to the unfair treatment of individuals based on characteristics such as race, gender, or age, which can result in them being underemployed or not given equal opportunities. This means that statement I, which states that employment discrimination causes underemployment, is true. On the other hand, statement II suggests that the concept of opportunity cost has little validity in the global economy. However, opportunity cost is a fundamental concept in economics, which states that by choosing one option, you forgo the benefits of the next best alternative. Therefore, statement II is false.

In the former Soviet Union, distributing scarce consumer goods was accomplished by making the consumer stand in a long line for hours if not days. This method was used to control the distribution of goods and ensure that everyone had a chance to obtain them. By making people wait in long lines, the government could regulate the amount of goods each person could receive and prevent hoarding or excessive consumption. This system was a common practice in socialist countries where resources were limited and the government had to manage their distribution.

Central planning is not a characteristic of the capitalist form of economic organization. In capitalism, the allocation of resources is primarily determined by the decentralized market processes, where individuals and businesses make decisions based on supply and demand. Private ownership of productive resources is also a key feature of capitalism, allowing individuals and businesses to own and control their assets. However, central planning is more commonly associated with socialist or command economies, where the government plays a significant role in resource allocation and economic decision-making.

The correct answer is that statement II is true and statement I is false. This is because marginal utility and consumer surplus are not identical concepts. Marginal utility refers to the additional satisfaction or benefit that a consumer derives from consuming one more unit of a good or service, while consumer surplus is the difference between the price a consumer is willing to pay for a good or service and the actual price they pay. Utility, on the other hand, is a measure of the satisfaction or benefit that a consumer derives from consuming a good or service, and it is not solely based on the buyer's willingness to pay.

An increase in the price of crude oil would cause the cost of producing gasoline to rise. This would lead to a decrease in the supply of gasoline as it becomes more expensive for producers to make and distribute. Additionally, the increase in production costs would result in an increase in the price of gasoline as producers pass on the higher costs to consumers. Therefore, the correct answer is that the supply of gasoline will decrease, and its price will increase.

As a person buys increasing amounts of a good, their marginal utility decreases because each additional unit of the good provides less satisfaction or benefit. At the same time, their consumer surplus increases because they are able to purchase the good at a lower price than the maximum price they are willing to pay. This means they are getting more value or benefit from the good than what they are paying for it, resulting in an increase in consumer surplus.

This answer suggests that the labor unemployment rate is 5% and the capacity utilization rate is 85%. This means that only 5% of the labor force is unemployed and 85% of the available resources and capacity are being utilized. This indicates that the economy is operating close to its full potential, with a low unemployment rate and a high utilization of resources.

China has not yet achieved world-class industrial power, but it is heading in that direction. This implies that China is currently on the path towards becoming a world-class industrial power, but it has not reached that status yet. This suggests that China's industrial development is ongoing and progressing, indicating that it has made significant advancements in its industrial sector but still has room for further growth and improvement.

Statement I is true because consumer surplus is indeed the difference between the price that a consumer pays for a good or service and the maximum price that the consumer would have been willing to pay for it. It represents the additional benefit or value that the consumer receives from the purchase.

Statement II is also true because a person's total utility, which measures the satisfaction or happiness derived from consuming a certain quantity of a good or service, reaches a maximum when the marginal utility of the last unit consumed falls to zero. This means that consuming more of the good or service beyond that point would not provide any additional satisfaction or utility.

If we move from point R on demand curve D1 to point S on demand curve D2, it implies that at the same price level, the quantity demanded has increased. This suggests that there has been an increase in demand for the product, as consumers are now willing to purchase a higher quantity at the same price.

This answer suggests that market failure does not rarely happen under capitalism, contradicting statement I. However, it acknowledges that one remedy for market failure is public goods and services, supporting statement II. Therefore, statement II is true and statement I is false.

According to the law of demand, there is an inverse relationship between the price of a good and the quantity demanded. This means that as the price of Pepsi increases, consumers will be less willing and able to purchase it, leading to a decrease in the quantity of Pepsi demanded.

China is the correct answer because it is stated that they lead the world with more than 800 million cell phone users. This indicates that China has the highest number of cell phone users compared to the other countries listed.

Changes in the price of the good itself will not shift the demand curve in the short run. This is because the price of the good itself is represented by a movement along the demand curve, rather than a shift of the entire curve. Shifts in the demand curve are caused by factors such as expectations about future prices and income, changes in income, tastes and preferences, and prices of related goods.

The correct answer is directly (positively) related to income. This means that as a person's income increases, their demand for a normal good also increases. This is because people with higher incomes have more purchasing power and can afford to buy more of the good. Conversely, if a person's income decreases, their demand for the normal good will decrease. Income is a key determinant of demand for normal goods, as it directly influences consumers' ability to purchase them.

The price mechanism works best when many competing business firms are in each industry because competition drives prices to their equilibrium levels. In a competitive market, businesses have to constantly adjust their prices to attract customers and stay profitable. This competition ensures that prices accurately reflect supply and demand conditions, allowing resources to be allocated efficiently. Additionally, competition encourages innovation and efficiency as firms strive to gain a competitive edge. Therefore, having many competing business firms in each industry is essential for the price mechanism to function effectively.

The statement "Everything produced by the public sector is a public good" is not true because not everything produced by the public sector is a public good. Public goods are non-excludable and non-rivalrous, meaning that they are available to everyone and one person's consumption does not reduce its availability for others. However, not all goods and services produced by the public sector meet these criteria. Some goods and services produced by the public sector, such as healthcare or education, may be excludable or rivalrous to some extent. Therefore, the statement is incorrect.

When the price is $2, the quantity demanded is greater than the quantity supplied. This means that there is excess demand in the market, and in order to reach equilibrium, the price must rise. As the price increases, suppliers are incentivized to produce more, while consumers are deterred from buying as much, eventually balancing the quantity demanded and supplied at a higher price point.

If the government sets the price at $3, it would create a ceiling on the price, meaning that the price cannot exceed $3. This would result in a shortage of 14 units, as the quantity demanded at the price of $3 would exceed the quantity supplied.

When the cross elasticity of demand for two services is positive, it indicates that an increase in the price of one service leads to an increase in the demand for the other service. This suggests that the two services are substitutes for each other, as consumers are willing to switch from one service to the other when the price of one increases. Therefore, the correct answer is "substitutes".

Cross elasticity is a measure of how the quantity demanded of one good (A) changes in response to a change in the price of a related good (B). It is calculated by taking the percentage change in the quantity demanded of good A and dividing it by the percentage change in the price of good B. This measure helps to determine the relationship between two goods and whether they are substitutes or complements.

When the market price is above the equilibrium price, it means that the price is higher than what both buyers and sellers consider fair. This creates a situation where sellers are willing to supply more goods or services at the higher price, while buyers are not willing to purchase as much at the inflated price. As a result, the quantity supplied exceeds the quantity demanded, leading to a surplus in the market.

The answer 39.8 indicates the price elasticity of demand. Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. In this case, the percentage change in quantity demanded is (3-2)/2 = 0.5, and the percentage change in price is (99-100)/100 = -0.01. By dividing the percentage change in quantity demanded by the percentage change in price, we get 0.5/-0.01 = -50. The negative sign indicates that demand is elastic, and the absolute value of 50 indicates that demand is highly elastic. Therefore, the answer is 39.8, which represents the price elasticity of demand.

When two goods are complementary goods, they are typically consumed together. As the price of one of the goods goes up, it becomes more expensive for consumers to purchase that good. This leads to a decrease in the quantity demanded of that good. On the other hand, the decrease in quantity demanded of one good leads to a decrease in the demand for the complementary good as well. Therefore, as the price of one good goes up, the quantity demanded of the other complementary good goes down.

A reduction in the unemployment rate will not shift an economy's production possibilities curve outward because it does not directly affect the economy's capacity to produce goods and services. While reducing unemployment can lead to increased productivity and efficiency, it does not directly expand the economy's production possibilities. Factors such as an increase in technology, improvement in the literacy rate, and an increase in the number of workers available can all contribute to an outward shift in the production possibilities curve by increasing the economy's productive capacity.

A move from G to H represents a decrease in supply. This is because the quantity supplied decreases as we move from G to H on the supply curve. This could be due to factors such as a decrease in production capacity, increase in production costs, or a decrease in the availability of resources. As a result, suppliers are able to supply less quantity at each price level, leading to a decrease in overall supply.

If we are operating inside our production possibilities frontier, it means that the economy is not utilizing all of its available resources efficiently. This could be due to various factors such as a decrease in consumer demand or a decrease in investment. Consequently, it is possible that the economy is in a recession or a depression. However, it is also possible that the economy is in neither a recession nor a depression, but rather experiencing a temporary slowdown in growth. Therefore, all of the choices are correct.

Moving up a demand curve, price rises and quantity rises. This statement is false because as we move up along a demand curve, the price increases while the quantity demanded decreases. This is because as the price increases, consumers are willing to buy less of a product. Therefore, there is a positive relationship between price and quantity along a demand curve, not an inverse relationship.

The given scenario indicates that a decrease in price leads to a larger increase in quantity demanded, suggesting that the demand for radios is relatively responsive to price changes. This responsiveness is characteristic of elastic demand, where a small change in price results in a proportionally larger change in quantity demanded. Therefore, the demand for radios is classified as slightly elastic.

The correct answer is "Statement II is true and statement I is false." This means that while it is true that purchasing eight ballpoint pens at 75 cents each would result in a consumer surplus, it is not true that utility is measured by a product's usefulness. Utility refers to the satisfaction or value that a consumer derives from consuming a product, and it is not necessarily tied to its usefulness.

When demand is elastic, it means that a small change in price will result in a proportionally larger change in quantity demanded. Therefore, if the price is raised, the quantity demanded will decrease by a greater percentage, leading to a decrease in total revenue. Hence, the correct answer is "fall."

When we go from one demand curve to another, it indicates a shift in the entire demand curve, rather than just a change in quantity demanded at a specific price. This means that there has been a change in the factors influencing demand, such as consumer preferences, income levels, or the price of related goods. This shift leads to a change in demand for the product or service, rather than just a change in the quantity demanded at a given price.

The price mechanism refers to the way prices determine the allocation of resources in a market economy. It is based on the principles of supply and demand. However, the statement that the price mechanism works best with a limited number of firms in each industry is not true. In fact, the price mechanism works most efficiently in a competitive market with many firms. In a competitive market, firms compete with each other, leading to lower prices and greater efficiency. When there are only a few firms in an industry, they may have the power to manipulate prices and restrict competition, leading to market inefficiencies.

The main criticism of socialist countries is not that they gave their citizens too many benefits. In fact, the main criticism of socialist countries is often that they did not provide enough economic incentives and individual freedoms, resulting in inefficiency and lack of innovation.

The government helps the free enterprise system work by ensuring that information flows freely, providing the necessary infrastructure for the market system to function efficiently, and defining property rights. Additionally, the government lowers some barriers to competition. However, creating an equal distribution of income is not a role of the government in supporting the free enterprise system.