Why the demand line slopes downward from right to left/Econometrics
1. The table below show the Production Possibilities Schedule for acountry.
Point A B C D E
Qx 0 20 40 60 60
Qz 180 170 130 100 0
Graph the Production Possibilities Frontier on the diagram above. Plot two other points on the diagram F(20, 100) and G(60,130)
Which of the following statements is true?
a. Combinations A,B, C, D, and E are all efficient.
b. Combination G is unattainable.
c. Combination F is inefficient
d. All of the above.
2. Use the diagram in question 20 to answer this question. Which of the following statements istrue?
a. The opportunity cost of 1x of moving from combination B tocombination D is 2z.
b. The opportunity cost of 1x of moving from combination F tocombination D is 0z.
c. The economy can never produce combination F.
d. The economy can produce combination G today.
3. Plot the following four points on the diagram above.
Point Q P Point Q P
A 200 24 G 100 8
B 400 8 H 500 24
Connect A and B to have line AB. Label it D (Demand).
Connect G and H to have line GH. Label it S (Supply).
Which of the following statements is true?
a. The inverse linear function of the demand is Q= -12.5P+500
b. The inverse linear function of the supply is Q= 25P-100
c. The coordinates of Pointe E, where the demand line crosses thesupply line, are E (Q=300, P=16)
d. All of the above.
4. Use the diagram in question 22 to answer this question. Which of the following statements is true?
a. At the price of $24, there would be a surplus of 200 units andthe price would fall.
b. At the price of $8, there would be a shortage of 300 units andthe price would rise.
c. At the price of $14, there would be neither a surplus nor ashortage and the price would stay the same.
d. None of the above
5. Use the diagram in question to answer this question. Which of the following statements is true?
a. The demand line slopes downward from right to left.
b. The supply line slopes upward from right to left.
c. The two lines cut one another at a point called E, forequilibrium, where the equilibrium price Pe, and the equilibriumquantity Qe, can be determined.
d. All of the above.
6. Given the following demand and supply functions:
Qd = -150 P +2000…..1
Qs = 100 P -500….2
The solutions to this system of two linear functions are:
a. Pe = $9 and Qe = 400
b. Pe = $10 and Qe = 500
c. Pe = $11 and Qe = 600
d. Pe = $12 and Qe = 700
