ECON 1113 Exam 2

Which of the following statements correctly describes a perfectly competitive market? a) Haggling and bargaining is commonly observed in a perfectly competitive market b) All participants in a perfectly competitive market are price-takers c) in a perfectly competitive market, individual sellers and buyers can influence the market price d) buyers in a perfectly competitive market pay different prices according to their individual demand

b) all participants in a perfectly competitive market are price-takers

When the price of a good increases by 300%, the quantity supplied of the good increases from 200 to 900 units. The price elasticity of supply of the good is: 1.17 1.5 3 4.5

1.17

Two goods are said to be complements when a fall in the price of one good: A) leads to a fall in price of the other good.B) doesn't affect the demand for the other good.C) leads to a left shift in the demand for the other good. D) leads to a right shift in the demand for the other good.

D) leads to a right shift in the demand for the other good

When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is: a) -.25 b) -.43 c) -.50 d) -.75

a) -.25

Which of the following is likely to lead to a rightward shift in the supply curve of cotton? a) an increase in labor productivity due to training programs b) a rise in labor costs due to wage demands by labor unions c) an increase in the price of cotton d) a decrease in the price of cotton

a) An increase in labor productivity due to training programs

Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2011 was $25 and 60 units, respectively. It was seen that, in 2014, the equilibrium price of Z had decreased to $15, but the equilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change? a) Shift of the supply curve of Z to the right b) Shift of the supply curve of Z to the left c) Shift of the demand curve for Z to the left d) Shift of the demand curve for Z to the right

a) Shift of the supply curve of Z to the right

Which of the following is NOT an example of a market? a) A city requires homeowners to pay $500 for putting in a sidewalk on their street b) Etsy.com, a Web site where artists, designers, and crafts persons offer items they have made to interested buyers c) The National Residency Matching Program, where medical residents express their preferences for residencies, hospitals express their preferences for medical residents, and these preferences are used to match residents to residencies d)A cattle auction, where farmers and ranchers bring cattle to be purchased by packing plants

a) a city requires homeowners to pay $500 for putting in a sidewalk on their street

Which of the following pairs of goods is likely to be considered substitutes? a) A Ford car and public transportation b) coffee and sugar c) A nokia cell phone and a nokia cell phone charger d) Printers and printing ink

a) a ford car and public transportation

The gasoline market in the United States is often said to be highly competitive. It is not perfectly competitive, but it has features and results that are similar to those of a perfectly competitive market, such as _______. a) all of the above b)gas stations located near each other tend to charge the same or very similar prices c) an individual buyer cannot influence the market price of gasoline by himself d)an individual gas station cannot influence the market price by itself

a) all of the above

In a perfectly competitive market, ___ a) all sellers sell an identical good or service b) all exchanges take place involuntarily c) there is only one seller and many buyers d) there is no provision for the protection of property rights

a) all sellers sell an identical good or service

In a marketplace, prices __ a) are a trade-off b) optimize using total value c) are a marginal optimization d) are a before and after comparison

a) are a trade-off

A price ceiling imposed by the government a) can create situations of excess demand b) involves pricing a commodity above the market price c) is a tax that increases the market price of a good d) helps in establishing equilibrium in case of shortage or surplus

a) can create situations of excess demand

If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n): A) inelastic supply.B) unit elastic supply.C) elastic supply.D) perfectly elastic supply.

a) inelastic supply

Which of the following factors is likely to lead to an increase in the quantity demanded of pens? a) pens and writing pads b) nokia and samsung cell phones c) laptops and electric heaters d) motorcycles and typewriters

a) pens and writing pads

The market demand is the ___ of the individual demand of all the potential buyers a) sum b) square root of the sum c) square of the sum d) product

a) sum

Which of the following situations depicts diseconomies of scale? a) The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units b) The average total cost of a firm decreases from $50 to $40 when it increases its production from 10 units to 20 units c) The average total cost of a firm remains at $50 when it increases its production from 10 units to 20 units d) The average total cost of a firm remains at $50 when it decreases its production from 20 units to 10 units

a) the average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units

Which of the following examples best approximates a competitive market? a) the market for soybeans in the United States b) the market for jackson pollock paintings c) the market for f-35 fighter planes d) the market for tesla electric cars

a) the market for soybeans in the United states

A buyer is said to be a price taker if: a) can bargain over the prices of the goods she consumes b) can purchase any amount of a good at a fixed price provided she has the money to pay for it c)always pays less than the market-determined price for the goods she has the money to pay for it d) ignores the prices of related goods and considers only the price of the goods she is purchasing

b) can purchase any amount of a good at a fixed price provided she has the money to pay for it

The demand curve for most goods is normally___ a) parallel to the y-axis b) downward sloping c) parallel to the x-axis d) upward sloping

b) downward sloping

The buyers of a good will want to purchase it as long as their willingness to pay for the good is__ a) less than the price b) greater than or equal to the price c) greater to zero d) equal to zero

b) greater than or equal to the price

The long-run average cost curve connects the lower part of the short-run cost curves because: a) prices of inputs are less when acquired for a longer time period b) in the long run, firms have more flexibility to change input combinations c) specialization of inputs increases productivity only in the long run d) the firms earn positive profits in the long run

b) in the long run, firms have more flexibility to change input combinations

Which of the following is true of a market? a)A market must be under continuous surveillance and government control b) Price acts as a selection device for buyers and sellers in every market c) Goods and services are exchanged at fixed prices in all markets d) a market always requires a specific physical location

b) price acts as a selection device for buyers and sellers in every market

An expected increase in the market price of oil in the coming year is likely to ___ in the current year. a) shift the demand curve for oil to the left b) shift the supply curve of oil to the left c) shift the supply curve of oil to the right d) cause no changes in the demand and supply curves of oil

b) shift the supply curve of oil to the left

A seller who is a price-take charge___ a) a price below the market price b) the market price c) different prices to different buyers d) a price above the market price

b) the market price

The Law of Supply states that a) supply creates its own demand b) the quantity supplied of a good rises when the price rises, all other things remaining constant c) at the equilibrium price, there is always some excess supply in the market d) the quantity supplied of a good will always equal the quantity of the good demanded

b) the quantity supplied of a good rises when the prices rises, all other things remaining constant

Which of the following factors is likely to lead to an increase in the quantity demanded of pens? a) a fall in the price of paper b) a fall in the incomes of all consumers c) a fall in the price of pens d) a rise in the incomes of all consumers

c) a fall in the price of pens

If the demand and supply curves for a commodity shift to the right and the shift in demand is greater than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: a) a lower price and quantity b) a lower quantity and a higher price c) a higher price and quantity d) a higher pice and a lower quantity

c) a higher price and quantity

At a price of $1 per table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true? a) the equilibrium price is $1 per table b) the market clearing price is $1 per table c) at a price of $1 per table, there is a surplus in the market d) At a price of $1 per table, there is a shortage in the market

c) at a price of $1 per table, there is a surplus in the market

A firm should shut down in the short run if the price is less than the: A) average fixed cost.B) average total cost.C) average variable cost. D) marginal cost.

c) average variable cost

A surplus occurs in a market when: a) demand exceeds supply b) price is lower than the equilibrium price c)price is higher than the equilibrium price d) the marginal cost of production is negligible

c) price is higher than the equilibrium price

Which of the following statements is true? A) In the short run, a firm can vary all its inputs.B) In the long run, a firm cannot vary any of its inputs. C) Short-run cost curves lie above long-run cost curves. D) Short-run cost curves lie below long-run cost curves.

c) short-run cost curves lie above long-run cost curves

when the marginal cost curve lies below the average cost curve a) the marginal cost curve is vertical b) the marginal cost curve is horizontal c)the average cost curve slopes downward d) the average cost curve slopes upward

c) the average cost curve slopes downward

Suppose the market for cement is such that the output of all sellers is identical in composition and quality. While there are a large number of buyers and sellers, everyone conducts transactions at a common market price. Which of the following statements is true about the structure of the cement market? a) all transactions in the cement market are likely to be involuntary b) the cement market is government regulated c) the cement market is perfectly competitive d) all participants in the cement market are price-makers

c) the cement market is perfectly competitive

The slope of a budget constraint represents: a) the price of the good measured along the horizontal axis b) the price of the good measured along the vertical axis c) the opportunity cost of one good in terms of another d) the money income of the consumer

c) the opportunity cost of one good in terms of another

The general rule for welfare maximization suggests that in personal equilibrium: a) the ratio of total benefits to price should be identical across all goods b) the ratio of total benefits to income should be identical across all goods c) the ratio of marginal benefits to price should be identical across all goods d) the ratio of marginal benefits to income should be identical across all goods

c) the ratio of marginal benefits to price should be identical across all goods

If the price elasticity of supply of a good is 2, a 200% increase in the price of the good, will change the quantity supplied by: a) 50% b) 100% c) 200% d) 400%

d) 400%

If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: a) a higher quantity and price b) a lower quantity and a higher price c) the same quantity and a lower price d) a higher quantity and the same price

d) a higher quantity and the same price

In a perfectly competitive market, situations of surplus or shortage of a good: a) can exist simultaneously b) are permanent phenomena c) exist till the goverment or any ruling authority intervenes d) are self-corrected due to the competitive nature of the market

d) are self-corrected due to the competitive nature of the market

The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? a) An individual seller can dictate what price a consumer pays for a vehicle b) more than three major car companies exist in this market c) An individual car buyer can dictate what price he or she pays for a vehicle d) different car companies make different vehicles with different features

d) different car companies make different vehicles with different features

Which of the following is NOT a required characteristic of a market? a) trade or exchange of a good or service b) A collection of economic agents c) rules and arrangements for trading D) government setting. the price of the good or service

d) government setting the price of the good or service

Two goods are said to be complements when a fall in the price of one good a) leads to a fall in the price of the other good b) does not affect the demand for the other good c) leads to a leftward shift in the demand for the other good d) leads to a rightward shift in the demand for the other good

d) leads to a rightward shift in the demand for the other good

Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will a) increase his profit b) increase his sales c)lose only a few buyers d) lose almost all of his buyers

d) lose almost all of his buyers

A seller's willingness to accept is the same as his __ cost of production a) total b) fixed c) average d) marginal

d) marginal

At the competitive equilibrium, the ___ a) demand curve is tangential to the supply curve b) quantity demanded exceeds the quantity supplied of a good c) quantity supplied exceeds the quantity demanded on a good d) quantity demanded is equal to the quantity supplied of a good

d) quantity demanded is equal to the quantity supplied of a good

The quantity supplied of a good is a) inversely related to the price of the good b) determined irrespective of the market price c) always equal to the quantity demanded of the good d) the amount of the good that sellers are ready to supply at a given price

d) the amount of the good that sellers are ready to supply at a given price

In a perfectly competitive market: a) the long-run market price is equal to the average fixed cost of the industry b) the long-run market price is less than the minimum average cost of the industry c) the long-run market price is more than the minimum average cost of the industry because of free entry and exit of firms d) the long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms

d) the long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms

The Law of Demand states that__ a)the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market b)the demand for a commodity always equals the supply of the commodity c)the demand for a commodity is directly related to consumers' income, all other things remaining constant d)the quantity demanded of a commodity varies inversely with the price of the commodity, all other things remaining constant

d) the quantity demanded of a commodity varies inversely with the price of the commodity, all other things remaining constant

If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n): inelastic supply unit elastic supply elastic supply perfectly elastic supply

inelastic supply