ECON 2100 EXAM 1 practice questions

You can increase your revenue by raising the price of your product only if the demand for your product is a. inelastic b. elastic c. 0 d. infinite

b. elastic

Suppose there is an increase in the price of steel. a. to shift rightward. b. to shift leftward. c. to become flatter. d. to remain unchanged. We would expect the supply curve for steel beams

b. to shift leftward.

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a. Price would fall and the effect on quantity would be ambiguous. b. Price would rise and the effect on quantity would be ambiguous. c. Quantity would fall and the effect on price would be ambiguous. d. Quantity would rise and the effect on price would be ambiguous.

a. Price would fall and the effect on quantity would be ambiguous.

Which of the following statements is valid when supply is perfectly elastic at a price of $4? a. The elasticity of supply approaches infinity. b. The supply curve is vertical. c. At a price below $4, quantity supplied is infinite. d. At a price above $4, quantity supplied is zero.

a. The elasticity of supply approaches infinity.

Which of the following would not shift the supply curve for mp3 players? a. an increase in the price of mp3 players b. a decrease in the number of sellers of mp3 players c. an increase in the price of plastic, an input into the production of mp3 players d. an improvement in the technology used to produce mp3 players

a. an increase in the price of mp3 players

Normative statements are not a. descriptive. b. prescriptive. c. claims about how the world should be. d. made by economists speaking as policy advisers.

a. descriptive

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is a. inelastic. b. elastic. c. unit elastic. d. quite sensitive to changes in income.

a. inelastic.

Suppose that the demand for picture frames is inelastic and the supply of picture frames is elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by a. less than $0.50. c. between $0.50 and $1. b. $0.50. d. $1.

a. less than $0.50

Pizza is a normal good if a. the demand for pizza rises when income rises. b. the demand for pizza rises when the price of pizza falls. c. the demand curve for pizza slopes downward. d. the demand curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.

a. the demand for pizza rises when income rises.

Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which a. the supply is more elastic than the demand. b. the demand in more elastic than the supply. c. the tax is placed on the sellers of the product. d. the tax is placed on the buyers of the product.

a. the supply is more elastic than the demand

If an economy is producing efficiently, then a. there is no way to produce more of one good without producing less of another good. b. it is possible to produce more of both goods without increasing the quantities of inputs that are being used. c. it is possible to produce more of one good without producing less of another good. d. it is not possible to produce more of any good at any cost.

a. there is no way to produce more of one good without producing less of another good.

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by a. 280 bushels of corn and 450 bushels of oats. b. 340 bushels of corn and 500 bushels of oats. c. 360 bushels of corn and 520 bushels of oats. d. 360 bushels of corn and 640 bushels of oats.

b. 340 bushels of corn and 500 bushels of oats.

Which of the following statements about the effects of rent control is correct? a. The short-run effect of rent control is a surplus of apartments, and the long-run effect of rent control is a shortage of apartments. b. The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments. c. In the long run, rent control leads to a shortage of apartments and an improvement in the quality of available apartments. d. The effects of rent control are very noticeable to the public in the short run because the primary effects of rent control occur very quickly.

b. The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.

A price ceiling is a. often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. b. a legal maximum on the price at which a good can be sold. c. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. d. All of the above are correct.

b. a legal maximum on the price at which a good can be sold.

For a good that is a necessity, a. quantity demanded tends to respond substantially to a change in price. b. demand tends to be inelastic. c. the law of demand does not apply. d. All of the above are correct.

b. demand tends to be inelastic

When a shortage exists in a market, sellers a. raise price, which increases quantity demanded and decreases quantity supplied, until the shortage is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied, until the shortage is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.

b. raise price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.

Suppose that a tax is placed on books. If the sellers bear most of the burden of the tax, then we know that the a. demand is more inelastic than the supply. b. supply is more inelastic than the demand. c. government has required that buyers remit the tax payments. d. government has required that sellers remit the tax payments.

b. supply is more inelastic than the demand

The minimum wage, if it is binding, lowers the incomes of a. no workers. c. those workers who have jobs. b. those workers who cannot find jobs. d. all workers.

b. those workers who cannot find jobs.

The law of supply states that, other things equal, a. when the price of a good falls, the supply of the good rises. b. when the price of a good rises, the quantity supplied of the good rises. c. when the price of a good rises, the supply of the good falls. d. when the price of a good falls, the quantity supplied of the good rises.

b. when the price of a good rises, the quantity supplied of the good rises.

Which of the following is a correct statement about production possibilities frontiers? a. An economy can produce only on the production possibilities frontier. b. An economy can produce at any point inside or outside a production possibilities frontier. c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible? a. Kelly has a comparative advantage in repairing cars and David has a comparative advantage in cooking meals. b. Kelly has an absolute advantage in repairing cars and David has an absolute advantage in cooking meals. c. Kelly has a comparative advantage in repairing cars and in cooking meals. d. David has an absolute advantage in repairing cars and in cooking meals.

c. Kelly has a comparative advantage in repairing cars and in cooking meals.

When the "invisible hand" guides economic activity, prices of products reflect a. only the values that society places on those products. b. only the costs to society of producing those products. c. both the values that society places on those products and the costs to society of producing those products. d. none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair."

c. both the values that society places on those products and the costs to society of producing those products.

To say that a price floor is binding is to say that the price floor a. results in a shortage. b. is set below the equilibrium price. c. causes quantity supplied to exceed quantity demanded. d. All of the above are correct.

c. causes quantity supplied to exceed quantity demanded.

An increase in the number of college scholarships issued by private foundations would a. increase the supply of education. b. decrease the supply of education. c. increase the demand for education. d. decrease the demand for education.

c. increase the demand for education.

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. government increases the minimum wage by $1.00 per hour, then it is likely that the a. demand for bicycle assembly workers will increase. b. supply of bicycles will shift to the right. c. supply of bicycles will shift to the left. d. firm must increase output to maintain profit levels. If the federal

c. supply of bicycles will shift to the left

Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the a. demand for flour to increase. b. demand for flour to decrease. c. supply of flour to increase. d. supply of flour to decrease.

c. supply of flour to increase.

The term tax incidence refers to a. whether buyers or sellers of a good are required to send tax payments to the government. b. whether the demand curve or the supply curve shifts when the tax is imposed. c. the distribution of the tax burden between buyers and sellers. d. widespread view that taxes always will be a fact of life.

c. the distribution of the tax burden between buyers and sellers.

Assume the market for pork is perfectly competitive. a. the price of pork increases. b. the price of pork decreases. c. the price of pork does not change. d. there is no longer a market for pork. When one pork buyer exits the market,

c. the price of pork does not change.

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is a. 0.62. b. 0.77. c. 1.24. d. 1.63.

d. 1.63.

In a market economy, supply and demand are important because they a. play a critical role in the allocation of the economy's scarce resources. b. determine how much of each good gets produced. c. can be used to predict the impact on the economy of various events and policies. d. All of the above are correct.

d. All of the above are correct.

Which of the following statements is correct? a. The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. b. The demand for grandfather clocks is more elastic than the demand for clocks in general. c. The demand for cardboard is more elastic over a long period of time than over a short period of time. d. All of the above are correct.

d. All of the above are correct.

Which of the following events will definitely cause equilibrium quantity to rise? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

d. demand and supply both increase

All market participants are price takers that have no influence over prices in markets that feature a. only a few buyers and a few sellers. b. numerous sellers but only a few buyers. c. numerous buyers but only a few sellers. d. numerous buyers and numerous sellers

d. numerous buyers and numerous sellers

The demand for Neapolitan ice cream is likely quite elastic because a. ice cream must be eaten quickly. b. this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. c. the market is broadly defined. d. other flavors of ice cream are good substitutes for this particular flavor.

d. other flavors of ice cream are good substitutes for this particular flavor.

The law of demand states that, other things equal, a. when the price of a good falls, the demand for the good rises. b. when the price of a good rises, the quantity demanded of the good rises. c. when the price of a good rises, the demand for the good falls. d. when the price of a good falls, the quantity demanded of the good rises.

d. when the price of a good falls, the quantity demanded of the good rises.