Appendix to Chapter 1
Applying Graphs to Economics
1. What is used to illustrate an independent relationship between two variables?
a. An upward-sloping curve.
b. A downward-sloping curve.
c. A hill-shaped curve.
d. A horizontal or vertical line.
ANS
a. Incorrect. An upward-sloping curve is a direct relationship between variables.
b. Incorrect. A downward-sloping curve is an inverse relationship between variables.
c. Incorrect. The slope of a curve is the slope of the tangent line to the curve.
d. Correct. Two variables have an independent relationship along a horizontal or vertical
line.
2. Which of the following pairs is the most likely to exhibit an inverse relationship?
a. The amount of time you study and your grade point average.
b. People's annual income and their expenditure on personal computers.
c. Baseball players' salaries and their batting averages.
d. The price of a concert and the number of tickets that people purchase.
ANS
a. Incorrect. This example would be a direct relationship.
b. Incorrect. This example would be a direct relationship.
c. Incorrect. This example would be a direct relationship.
d. Correct. At a lower concert price, the number of tickets purchased increases.
Exhibit A.7 Straight Line Relationship
20
15
Price per
pizza 10
(dollars)
5
0
10
20
30
40
Quantity of pizzas purchased
(hundreds per week)
1
3. According to Exhibit A.7, what is the relationship between the price per pizza and the
quantity of pizza purchased?
a. Direct.
b. Inverse.
c. Complex.
d. Independent.
ANS
a. Incorrect. A downward-sloping line represents an inverse relationship between the
price and quantity of pizzas purchased.
b. Correct. A downward-sloping line represents an inverse relationship between the price
and quantity of pizzas purchased.
c. Incorrect. This answer is meaningless.
d. Incorrect. An independent relationship is represented by a horizontal line.
4. What is the slope of the line shown in Exhibit A.7?
a. -1.
b. -1/2.
c. -1/4.
d. 0.
ANS
a. Incorrect. The slope equals the ratio of the negative change in the vertical axis (20-10)
divided by the change in the horizontal axis (40), which is -10/40 = -1/4.
b. Incorrect. The slope equals the ratio of the negative change in the vertical axis (20-10)
divided by the change in the horizontal axis (40), which is -10/40 = -1/4.
c. Correct. The slope equals the ratio of the negative change in the vertical axis (20-10)
divided by the change in the horizontal axis (40), which is -10/40 = -1/4.
d. Incorrect. The slope equals the ratio of the negative change in the vertical axis (20-10)
divided by the change in the horizontal axis (40), which is -10/40 = -1/4.
5. Which of the following would cause a leftward shift in the relationship shown in
Exhibit A.7?
a. A fall in household incomes
b. A fall in the price of pizza
c. A fall in the quantity of pizza that people wish to purchase
d. All of the above would shift the line in the graph.
2
ANS
a. Correct. With less income, consumers can afford to purchase less pizza at any price of
pizza along the vertical axis and the line shifts leftward.
b. Incorrect. This example causes a movement downward along the line and not a shift in
the line.
c. Incorrect. This example causes a movement upward along the line and not a shift in the
line.
d. Incorrect. Answers (b) and (c) causes a movement along the line and not a shift in the
line.
6. Suppose two variables are directly related. If one variable rises, the other variable
a. also rises.
b. falls.
c. remains unchanged.
d. reacts unpredictably.
ANS
a. Correct. A direct or positive relationship means that both variables move in the same
direction.
b. Incorrect. This is an inverse relationship.
c. Incorrect. A direct or positive relationship means that both variables move in the same
direction.
d. Incorrect. A direct or positive relationship means that both variables move in the same
direction.
7. When an inverse relationship is graphed, the resulting line or curve is
a. horizontal.
b. vertical.
c. upward-sloping.
d. downward-sloping.
ANS
a. Incorrect. This is an independent relationship.
b. Incorrect. This is a direct or positive relationship.
c. Incorrect. This is a direct or positive relationship.
d. Correct. A movement along a downward-sloping line results in the variables changing in
opposite directions.
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Exhibit A.8 Straight Line Relationship
40
B
30
Y value
20
A
10
0
10
20
30
40
X value
8. Straight line AB in Exhibit A.8 shows that
a. increasing values for X decrease the values of Y.
b. decreasing values for Xl increase the values of Y.
c. there is a direct relationship between X and Y.
d. all of the above answers are correct.
ANS
a. Incorrect. Increasing values of x will increase values of Y.
b. Incorrect. Decreasing values of X will decrease values of Y.
c. Correct. Values of X and Y move in the same direction.
d. Incorrect. Answers (a) and (b) are incorrect.
9. In Exhibit A.8, the slope of straight line AB is
a. positive.
b. zero.
c. negative.
d. variable.
ANS
a. Correct. Along line AB the changes in the Y values move in the same direction as the
X values.
b. Incorrect. A horizontal line has a zero slope.
c. Incorrect. If line AB has a negative slope, Y values and X values move in opposite
directions.
d. Incorrect. The slope along a straight line is constant.
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10. In Exhibit A.8, the slope of straight line AB is
a. 1.
b. 5.
c. 1/2.
d. -1.
ANS
a. Incorrect. The slope of line AB equals the change in the Y value (30 – 10) divided by
the change in the X value (40 – 0), which equals 20/40 or ½.
b. Incorrect. The slope of line AB equals the change in the Y value (30 – 10) divided by
the change in the X value (40 – 0), which equals 20/40 or ½.
c. Correct. The slope of line AB equals the change in the Y value (30 – 10) divided by the
change in the X value (40 – 0), which equals 20/40 or ½.
d. Incorrect. The slope of line AB equals the change in the Y value (30 – 10) divided by
the change in the X value (40 – 0), which equals 20/40 or ½.
11. As shown in Exhibit A.8, the slope of straight line AB
a. decreases with increases in X.
b. increases with increases in X.
c. increases with decreases in X.
d. remains constant with changes in X.
ANS
a. Incorrect. The slope of a straight line remains unchanged with changes in X.
b. Incorrect. The slope of a straight line remains unchanged with changes in X.
c. Incorrect. The slope of a straight line remains unchanged with changes in X.
d. Correct. The slope of a straight line remains unchanged with changes in X.
12. In Exhibit A.8, as X increases along the horizontal axis, the Y values increase. The
relationship between the X and Y variables is
a. direct.
b. inverse.
c. independent.
d. variable.
ANS
a. Correct. For a direct or positive relationship both variables move in the same direction.
b. Incorrect. For a direct or positive relationship both variables move in the same
direction.
c. Incorrect. For an independent relationship, there is not change in Y values as X values
increase.
d. Incorrect. The slope for an upward-sloping straight line is constant.
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Exhibit A.9 Straight Line Relationship
20
A
15
Y value
10
5
0
B
5
10
15
20
X value
13. In Exhibit A.9, as X increases along the horizontal axis, the Y values decrease. The
relationship between the X and Y variables is
a. direct.
b. inverse.
c. independent.
d. variable.
ANS
a. Incorrect. For an inverse or negative relationship, both variables more in the
opposite direction.
b. Correct. For an inverse or negative relationship, both variables more in the
opposite direction.
c. Incorrect. For an independent relationship, there is no change in Y values as X
values increase.
d. Incorrect. The slope for an upward-sloping straight line is constant.
14. Straight line AB in Exhibit A.9 shows that
a. increasing values for X reduces the value of Y.
b. decreasing values for X increases the value of Y.
c. there is an inverse relationship between X and Y.
d. All of the above answers are correct.
ANS
a. Incorrect. Along a downward-sloping line, the values of Y change in the opposite
direction than the X values.
b. Incorrect. Along a downward-sloping line, the values of Y change in the opposite
direction than the X values.
c. Incorrect. There is a direct or positive relationship between X and Y.
d. Correct. Each of the above answers is correct.
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15. As shown in Exhibit A.9, the slope of straight line AB
a. decreases with increases in X.
b. increases with increases in X.
c. increases with decreases in X.
d. remains constant with changes in X.
ANS
a. Incorrect. The slope of a straight line remains unchanged with changes in X.
b. Incorrect. The slope of a straight line remains unchanged with changes in X.
c. Incorrect. The slope of a straight line remains unchanged with changes in X.
d. Correct. The slope of a straight line remains unchanged with changes in X.
16. In Exhibit A.9, the slope for straight line AB is
a. 3.
b. 1.
c. -1.
d. -5.
ANS
a. Incorrect. The slope equals the ratio of negative change in the vertical axis -20 divided
by the change in the horizontal axis 20, which is -1.
b. Incorrect. The slope equals the ratio of negative change in the vertical axis -20 divided
by the change in the horizontal axis 20, which is -1.
c. Correct. The slope equals the ratio of negative change in the vertical axis -20 divided
by the change in the horizontal axis 20, which is -1.
d. Incorrect. The slope equals the ratio of negative change in the vertical axis -20 divided
by the change in the horizontal axis 20, which is -1.
17. In Exhibit A.9, the slope of straight line AB is
a. positive.
b. zero.
c. negative.
d. variable.
ANS
a. Incorrect. The slope of an upward-sloping curve is positive.
b. Incorrect. The slope of a horizontal curve is zero.
c. Correct. The slope of a downward-sloping curve is negative.
d. Incorrect. The slope of a curve is variable.
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Exhibit A.10 Straight Line Relationship
Y value
40
30
A
B
C
D
10
20
30
X value
40
20
10
0
18. In Exhibit A.10, as X increases along the horizontal axis, corresponding to points AD on the line, the Y values remain unchanged at 20 units. The relationship between the X
and Y variables is
a. direct.
b. inverse.
c. independent.
d. undefined.
a. Incorrect. If the relationship were direct, the Y values would rise as X increases.
b. Incorrect. If the relationship were inverse, the Y values would fall as X increases.
c. Correct. An independent relationship is one in which the Y values remain constant as X
increases.
d. Incorrect. This term is meaningless.
19. In Exhibit A.10, the slope of straight line A-D is
a. greater than 1.
b. equal to 1.
c. less than 1.
d. zero.
a. Incorrect. The slope is greater than or equal to 1 for a direct or positive relationship.
b. Incorrect. The slope is greater than or equal to 1 for a direct or positive relationship.
c. Incorrect. The slope is less than zero for an inverse or negative relationship.
d. Correct. The slope of a horizontal straight line is zero.
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Exhibit A.11 Multicurve Graph
30
Annual Income
$50,000
25
Price per 20
compact
15
disc
(dollars) 10
5
0
A
Annual Income
$30,000
20
40 60
B
80 100 120
Quantity of compact dics
(millions per year)
20. Exhibit A.11 represents a three-variable relationship. As the annual income of
consumers falls from $50,000 (line A) to $30,000 (line B), the result is a (an)
a. upward movement along each curve.
b. downward movement along each curve,.
c. leftward shift in curve A to curve B.
d. rightward shift in curve A to curve B.
ANS
a. Incorrect. A change in the price causes a movement along the curve and not a shift in the
curve from line A to line B.
b. Incorrect. A change in the price causes a movement along the curve and not a shift in the
curve from line A to line B.
c. Incorrect. The increase in annual income causes a rightward or upward shift from line A
to line B.
d. Correct. The increase in annual income causes a rightward or upward shift from line A to
line B.
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