econ exam 1
The UofA bookstore decides to raise the price of "Bear Down" t-shirts from $20 to $25. Sales of t-shirts decrease from 600 (last year) to 400 (this year). Determine whether demand is elastic or inelastic.
$20 x 600 = $12000 $25 x 400 = $10000 Since P increased and TR fell, demand is elastic.
You are considering going to LA to visit friends. A round trip plane ride takes 3 hours round trip and costs $400. A round trip bus ride takes 15 hours and costs $100. At what hourly rate would you be indifferent between taking the bus and the plane?
$25
Whataburger decides to raise the price of their Green Chile Double sandwich from $3 to $4. The company sees that sales of the sandwich decrease from 2000 to 1500 per month. Calculate the price elasticity of demand.
-1
You can purchase a plane ticket to Austin, TX for $300. The total travel time (there and back) is 6 hours. Or you can purchase a bus ticket (there and back) for $100 and it takes 16 hours. At what hourly rate would you be indifferent between flying and taking the bus?
20
A car insurance company is willing to offer accident-free drivers a discount. This is an example of: A)a positive incentive B)a negative incentive C)an opportunity cost D)a comparative advantage
A
According to the law of supply, A) price and quantity supplied move in the same direction. B) cost of production and quantity supplied move in the same direction. C) cost of production and quantity supplied move in opposite directions. D) price and quantity supplied move in opposite directions.
A
Arizona recently decided to raise the minimum wage to $10.50/hour. If the market equilibrium wage for low skill jobs around Tucson is $9.00/hour, what impact will the new minimum wage have? A) This will create a surplus of low skill workers (unemployment will increase). B) This will create a shortage of low skill workers (unemployment will decline).
A
Cars and bicycles are substitutes. Which of the following is most likely to cause an increase in demand for bicycles (shift the curve to the right)? A)An increase in the price of cars. B)A decrease in the cost of the frames used in making bicycles. C)A decrease in the cost of the brakes used in making bicycles. D)A decrease in the price of bicycles.
A
Choose the most INELASTIC good. A) The airplane ticket you buy to attend your grandmother's funeral B) a brand new SUV you are thinking of purchasing C) the new stereo system you buy for your car D) a vacation you are planning a year in advance.
A
Consider a demand curve for potato chips. We move along the demand curve when A)the price of potato chips increases. B)the price of Doritos decreases. C)the price of dip increases. D)when a news report indicates that fried potatoes cause cancer.
A
Due to new regulations an oil company is forced to meet stricter refining standards, how will these regulations change the market price and quantity? A) The price will rise and the quantity will fall. B) The price will fall and the quantity will rise. C) The price and quantity will both rise. D) The price and quantity will both fall.
A
Economics is A)the study of how people make choices B)the study of stock trading C)the study of money D)the study of large corporations
A
If a new binding price ceiling is passed, what impact will this have on the amount of discrimination in society? A) discrimination will increase B) discrimination will decrease C) discrimination against consumers will remain the same D) discrimination will no longer be possible.
A
If society decreases its savings rate, the current production possibilities curve will A)remain the same. B)shift out, more than in the past. C)shift out during expansions, and in during contractions. D)shift in.
A
If the Federal minimum wage was raised suddenly to $15.00/hr. What impact would this have on low-skill employment? A) Many low skill workers will lose their jobs. B) The increase will have virtually no impact on employment. C) The employment prospects for low skill workers will expand slightly. D) The employment prospects for low skill workers will expand significantly.
A
If the U.S. government enacts a new tariff (a tax) on the tortillas imported from Mexico, what will happen to the price of tortillas made in the United States? A) The price of tortillas made in the U.S. will rise. B) The price of tortillas made in the U.S. will fall.
A
If the demand curve for a product is horizontal, then A)demand is perfectly elastic. B)consumers are not responsive to price changes. C)its price elasticity of demand is equal to 0. D)consumers will buy a specific amount no matter what the price.
A
In the supply and demand model which of the following is an endogenous factor? A) Quantity B) The price of related goods C) Income D) Technology
A
Once-in-a-lifetime experiences have: A) inelastic demand. B) elastic demand. C) elastic demand for poor people, but inelastic demand if you are wealthy. D) inelastic demand for wealthy people, but elastic demand if you are poor.
A
Which of the following is an example of a price ceiling? A)Price controls during World War II B)Minimum wage C)Agricultural price supports D)A clearance sale on laptop computers
A
Which of the following is an example of a price ceiling? A)Rent controlled apartments B)Minimum wage C)Agricultural price supports D)Purchasing a combo meal at McDonalds.
A
Which of the following is most likely to increase the equilibrium price charged and increase the equilibrium quantity of customers at Dunkin Donuts? A)An increase in prices at Starbucks, a competitor one block away. B)A new technology that makes it cheaper to mass-produce donuts. C)An increase in the rent paid by Dunkin Donuts. D)Starbucks decides to renovate, expand and offer a better experience at lower prices.
A
During a shortage, how does the market respond until it once again reaches equilibrium?
A shortage in the market means that more quantity is demanded than is being supplied. This causes upward pressure on price because there are consumers who are willing to pay a higher price. To meet this demand, additional firms that are willing to supply the good at a higher price will enter the market. This cycle will continue until the equilibrium price is reached.
If we define a equation for demand, Qd = 240 - 12P and a equation for supply, Qs = 60 + 6P. Determine the equilibrium price and output in the market.
Answer: 240 - 12P = 60 + 6P so 180 = 18P and P = 10 Checking: 240 - (12 * 10) = 120 and 60 + (6 * 10) = 120
A demand curve for a good slopes downward because A)as our income grows, we demand less of the good B)there is an inverse relationship between the price of a good and the quantity demanded of that good. C)there is a direct relationship between the price of a good and the quantity demanded of that good. D)when the price of a good increases, we demand more of it.
B
A production possibilities frontier graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities frontier A)it lacks the resources necessary to produce at full employment. B)it is utilizing some resources inefficiently. C)it does not confront the problem of scarce goods relative to unlimited wants. D)it does not exist in the real world since it is impossible for an economy to operate inside its production possibilities curve.
B
Given the following production table, and the law of comparative advantage we discussed in class, which assignment of duties makes the most sense? Tony Manny Cakes Kilos of Yeyo Cakes Kilos of Yeyo 0 8 0 12 2 6 1 9 4 4 2 6 6 2 3 3 8 0 4 0 A)Tony and Manny should each split their time between baking cakes and making yeyo. B)Tony should do the baking and Manny should make the yeyo. C)Manny should do the baking and Tony should make the yeyo. D)Drugs are bad, so they should both stick to baking cakes.
B
Identify the normative statement? A)Tickets to see the upcoming Fergie concert at McKale Center cost $35. B)Being able to see Fergie perform live for $35 is a good deal. C)Fergie's favorite Black Eyed Peas song to perform is "Let's Get It Started." D)Fergie's debut solo album, The Dutchess, went platinum in both America and Japan.
B
If a new price ceiling is enacted, what impact will this have on quality? A) the quality of the good will increase B) the quality of the good will fall C) quality will remain the same
B
If a society saves less now than in the past, then the production possibilities curve will over time A)shift in. B)shift out but not as much as in the past. C)shift out more than in the past. D)shift in during recessions, and out during expansions.
B
If an effective price ceiling is implemented in a market what is likely to happen to the opportunity cost of finding the good? A)The opportunity cost will fall. B)The opportunity cost will rise. C) The opportunity cost is not affected by a price ceiling D) The opportunity cost is higher if the good is inferior.
B
If the demand for a good rises when your income rises, the good is A)inferior B)normal C)capital
B
If the price elasticity of demand is -0.4, this tells us that demand is: A) relatively elastic. B) relatively inelastic. C) perfectly elastic. D) perfectly inelastic.
B
In the following ad for umbrellas is IKEA's pricing strategy consistent with what we learned about the price elasticity of demand? A)Yes, IKEA knows its economics. B)No, this is completely backwards.
B
The following picture shows a case of Bud Light with ping pong balls being sold nearby. If the price of Bud Light rises, what will happen to the demand for ping pong balls? A) the demand for ping pong balls will increase B) the demand for ping pong balls will decrease C) the demand for ping pong balls will increase on hot days D) the demand for ping pong balls will decrease because you don't have any paddles to use.
B
The quote from Robert Frost illustrates what economic concept? A)Trade-offs B)Opportunity costs C)Trade creates value D)Incentives
B
This term refers to the specific components that are left out of (not determined within) a model. A)endogenous B)exogenous C)caveat emptor D)ceteris paribus
B
Which curve is the most ELASTIC? A) Short run demand B) Long run demand C) Immediate run demand D) The demand curve can never be elastic
B
Which one of these is NOT scarce? A)A Selena Gomez autographed t-shirt B)Gravity C)Drinking water D)Armadillos
B
Your friend offers you a free ticket to the next home Wildcat football game. On the same date, Post Malone is playing in the McHale Center. The Post Malone tickets are $45 but you would have been willing to pay $75. If there are no costs of getting to either place, what is the opportunity cost of going to the football game? A) $ 0.00 B) $ 30.00 C) $ 45.00 D) $ 75.00
B
An example of a direct negative incentive is: A)providing a commission for sales. B)awarding a promotion for hard work. C)threatening to fire those who do not perform well. D)providing an orientation for new employees.
C
Assume that saddles and lassos are complementary goods. Which of the following will cause the demand curve for lassos to shift to the right? A) The price of lassos increases B) The price of lassos decreases C) The price of saddles decreases D) The price of saddles increases
C
Consider a demand curve for Oreos. If the price of milk decreases while the price of Oreos stays the same, then I would consume more Oreos because. A)milk is an inferior good B)milk is a normal good C)Oreos and milk are complements D)Oreos and milk are substitutes
C
Consider a demand curve for ground beef. We move along the demand curve when A)the price of hamburger buns increases B)when a news report comes out saying that ground beef cures cancer C)only the price of ground beef changes D)the price of ground turkey decreases
C
Consider a demand curve for tortilla chips. If the price of salsa decreases while the price of tortilla chips stays the same, then I would consume more tortilla chips because. A) salsa is an inferior good B) salsa is a normal good C) tortilla chips and salsa are complements D) tortilla chips and salsa are substitutes
C
Consider a supply curve for raw lumber (wood). If, all of the sudden there is a huge fire that burns half of all trees in the world, then the supply curve for raw lumber A)shifts to the right B)does not shift at all C)shifts to the left D)becomes downward sloping
C
Economists believe that voluntary trade between two individuals A) benefits one partner at the expense of the other. B) hurts both trade partners. C) benefits both trade partners.
C
If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are A)normal goods. B)inferior goods. C)complements. D)substitutes.
C
If the demand for a good decreases when your income increases, then the good is A)an economic bad B)a normal good C)an inferior good D)expensive
C
If the government imposes a new 25% tax on respirators it will create ______ increase in tax revenue in the short run. A) no B) a small C) a large D) an infinite
C
If there is a shortage of a good at the current price we expect that A)the supply curve for the good will shift to the left. B)the demand curve for the good will shift to the right. C)the price of the good will rise. D)the price of the good will fall.
C
In the film, A Knight's Tale, the peasants decide to reinvest 13 silver coins in training to become better at jousting. This reinvestment is known as what kind of good? A)consumer good B)an inferior good C)a capital good D)It is not a good, it is a bad.
C
Legislation that requires children under age two to sit in infant seats on airplanes has made air travel safer but also more expensive for families. Which of the following is an unintended consequence of the infant safety policy? A) Airlines have nowhere to store all the child seats and strollers so many flights are delayed. B) Airplanes can only show G-rated movies. C) Many families with infants now choose to drive instead of fly. D) With all the infants in diapers on the flights, the smell is terrible.
C
Marfa, TX decides to raise the minimum wage in the town from $7.25/hour to $9.00/hour. If the current market equilibrium wage in for low skill jobs is $10.00/hour in Marfa, what impact will the new minimum wage have? A) This will create a surplus of low skill workers. B) This will create a shortage of low skill workers. C) Since the new minimum wage is below the current market equilibrium wage, this will have no impact on the wages of low skill workers.
C
Scalpers set the? A)price ceiling B)price floor C)equilibrium price D)ticket price
C
Suppose that Selena Gomez cuts the price of her concert tour from $55/ticket to $30/ticket. What will happen to the demand for her Tour? A) Demand shifts to the left. B) Demand shifts to the right. C) The quantity demanded would increase. D) The quantity demanded would fall.
C
The Production Possibilities Frontier is bowed out because of A) the Law of Decreasing Relative Cost B) the fact that every point on the PPC is efficient C) the Law of Increasing Relative Cost D) the fact that it is easier to be inefficient in production
C
The highest-valued, next-best alternative that must be sacrificed to attain something or satisfy a want is called A)a marginal cost B)a financial cost C)an opportunity cost D)a price
C
What is the most important consideration when bartering? A) your wants B) your needs C) a double coincidence of wants D) using cash to make the transaction easier.
C
What is the opportunity cost of taking this exam? A)All of things that you could have done by not studying. B)Each of the questions that you miss on the exam. C)The highest valued alternative that you gave up to prepare for and attend the exam. D)The money you spent to buy the textbook, redacted notes, and all the other materials you used to study with.
C
What would happen to price and quantity sold of Dr. Pepper (a normal good) if income decreased? A)Equilibrium price will go up and equilibrium quantity will go down. B)Equilibrium price will go up and equilibrium quantity will go up. C)Equilibrium price will go down and equilibrium quantity will go down. D) Equilibrium price will go down and equilibrium quantity will go up.
C
When incentives don't work as designed this is known as __________________. A)absolute advantage B)comparative advantage C)unintended consequences D)absolute disadvantage
C
When someone wishes to invest in more capital goods, it is usually true that A)there will be fewer consumer goods available to her in the future B)there are no opportunity costs involved in this C)she must give up some consumer goods in the present D)she will operate inefficiently.
C
Which of the following is a positive economic statement? A)Tim Berg is the top DJ in the world. B)Fade into Darkness is Avicii's best song. C)Levels has over 25,000,000 views on YouTube. D)"Oh oh sometimes I get a good feeling" is the best part of Levels.
C
Which of the following is an example of a price floor that creates a surplus? A) price gouging B) rent control C) minimum wage
C
Which of these is ENDOGENOUS in the supply and demand model? A)income B)the price of related goods C)price
C
Which of these is a normative statement? A) Having roses delivered is more expensive on Valentine's Day than usual. B) More roses are delivered on Valentine's Day than any other. C) Giving roses is the best way to express your love on Valentine's Day. D) The scientific name for a rose is Rosa.
C
According to the law of comparative advantage, a particular task is performed most efficiently by the individual with the lowest A)wage rate. B)tax liability. C)net worth. D)opportunity cost.
D
According to the law of demand: A)price and quantity demanded move in the same direction. B)there is an inverse relationship between the quantity supplied and the price. C)there is a direct relationship between the quantity supplied and the price. D)price and quantity demanded move in opposite directions.
D
Comparative advantage implies that you will A)produce at the highest opportunity cost. B)produce a good using the most inputs. C)produce a good only when demand is high D)produce a good where you have the lowest opportunity cost.
D
Consider a demand curve for pork. If the price of beef decreases while the price of pork stays the same, then I would consume less pork because. A) beef is an inferior good B) beef is a normal good C) beef and pork are complements D) beef and pork are substitutes
D
Demand is more ELASTIC if: A) the good is inexpensive. B) it is needed now. C) the price of the good does not matter. D) the good has many substitutes.
D
For which of the following goods would you expect demand to be the most elastic? A)Chewing tobacco. B)An electric generator when your power is out. C)A specialized tiller you need to harvest your cotton crop. D)The food from Maria's food truck, one of many food trucks at a county fair.
D
If a nation has a high unemployment rate, what will happen to the production possibilities frontier? A)The nation will slide down along the curve. B)The curve will shift in. C)The curve will shift out. D)None of the above is correct.
D
If it takes even a small amount of time, energy or money to acquire then a good is A) abundant B) in shortage C) cheap D) scarce
D
If the cost of the components used to make the PS4 suddenly increases what will happen to the demand curve for PS4's? A)shifts to the left B)it becomes upward sloping C)shifts to the right D)nothing happens to the demand for the PS4.
D
If there is an excess supply of a good, we expect that A)The price of the good will rise. B)The supply curve for the good will shift to the left C)The demand curve for the good will shift to the right. D)The price of the good will fall.
D
Scalpers in the ticket resale market help eliminate A)High prices B)Surpluses C)Price controls D)Shortages
D
Suppose that the price of Avicii concerts increase from $25 a ticket to $40 a ticket. What will happen to the demand curve for his concerts? A)It shifts to the left. B)It shifts to the right. C)Its slope increases. D)Nothing would happen to the demand curve; only the quantity demanded would fall.
D
The most expensive private high schools in New York City cost close to $50,000 a year to attend. That is MORE than it costs to attend some elite universities. What explains why the tuition is so high at these schools? A)There is very high demand. B)There is a limited supply of highly prestigious schools. C)The demand is low but supply is large. D)The demand is quite high and the supply is quite low.
D
This quote from Dwight D. Eisenhower, "The cost of one modern heavy duty bomber is this: a modern brick school in more than thirty cities. It is two electric power plants each serving a town of 60,000 people. It is two fine, fully equipped hospitals. It is some fifty miles of concrete highways. We pay for a single fighter with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people." is an example of A)absolute advantage. B)comparative advantage. C)the law of demand. D)trade-offs.
D
What is ceteris paribus? A)It occurs when some of the endogenous variables in your model are incorrect. B)It is when you fail to account for the effects of the exogenous variables. C)It is when you leave out crucial endogenous variables. D)It is when the variables that are not mentioned remain constant.
D
Which of the following is most likely to shift the demand curve for a good to the right (outward)? A)An decrease in the cost of production of the good B)The introduction of a new technology that lowers the cost of producing the good. C)A decrease in the price of the good D)An increase in the price of a substitute good
D
Which of the following would cause an increase in the price of gasoline and an expansion in the equilibrium quantity? A) an increase in the price of crude oil, a key ingredient required for the production of gasoline B) the introduction of a miracle carburetor that substantially improves the gas mileage of automobiles C) a recession that substantially reduces the income of households D) an increase in the popularity and use of Sport Utility Vehicles that consume a lot of gasoline per mile driven
D
Which of these is NOT an unintended consequence of a binding minimum wage? A) unemployment B) firms replacing low-skilled jobs with technology C) firms relocating to other countries (or states) with lower wages D) Longer hours for workers
D
If the price is above the equilibrium price, would there be a shortage or a surplus?
If the price is above the equilibrium price there would be a surplus, because at prices above the equilibrium price there is more quantity supplied than demanded.
What will happen if the price is below the equilibrium price?
If the price is below the equilibrium price there would be a shortage, because at prices below the equilibrium price there is more quantity demanded than supplied.
The price decreases
Slide along the demand curve
Name the two ways we discussed in class to shift the entire PPF out:
Technology, capital, more laborers, higher population, more resources
The price of a complement falls
The demand curve shifts out
The market for Red Vines has a demand function, Qd = 20 - 8P and supply function, Qs = -4 + 4P. Determine the equilibrium price and quantity sold in this market.
The price is ___$2____ and the quantity sold is ___4_____.
A firm receives a subsidy
The supply curve shifts out
Whole Foods cuts the price of organic milk kefir from $4 to $3. Sales increase from 1000 units to 1500 units. Calculate total revenues before and after the increase in price. Is the price elasticity of demand elastic, unitary or inelastic?
elastic
A price ceiling is set above the equilibrium price. This will result in a shortage of goods. surplus of goods. Neither.
neither
The market for Snickers has a demand function, Qd = 10 - 7P and supply function, Qs = -1 + 4P. Determine the equilibrium price and quantity sold in this market.
p=1 and q=3
Consider a market with demand function, Qd = 22 - 2P and supply function, Qs = 2 + 3P. Assume the market price is 3. Is there a surplus or shortage of the good at this price?
shortage
The cost of labor rises
the supply curve shifts in
