Economics Exam 1

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case: a)excess demand will lead the price of oranges to rise b)excess supply will lead the price of oranges to fall c)excess demand will lead the price of oranges to fall d)excess supply will lead the price of oranges to rise

excess demand will lead the price of oranges to rise

If price is above the equilibrium price, then there will be: a)both excess supply and excess demand. b)neither excess supply nor excess demand. c)excess supply. d)excess demand.

excess supply

An increase in both the equilibrium price and the equilibrium quantity of DVD players is best explained by a(n): a)increase in the demand for DVD players. b)increase in the supply of DVD players. c)decrease in the supply of DVD player. d)decrease in the demand for DVD players.

a) increase in the demand for DVD players.

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called: a)the substitution effect of a price change. b)the income effect of a price change. c)a decrease in the buyer's reservation price. d)a decrease in the seller's reservation price.

a) the substitution effect of a price change.

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza is: a)less than $1.75. b)at least $1.75 but less than $2. c)exactly $1.75. d)exactly $2.00.

at least $1.75 but less than $2.

All else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity. a)increase; decrease b)decrease; decrease c)increase; decrease d)increase; increase

b) decrease; decrease

The Cost-Benefit Principle predicts that people will be less likely to smoke if the government: a)increases taxes on smoking-cessation devices such as nicotine patches. b)increases taxes on cigarettes, effectively raising the price. c)subsidizes hospitals treating lung disease. d)invests more money in cancer research.

b) increases taxes on cigarettes, effectively raising the price.

If supply increases and demand decreases, the new equilibrium price will be ______ and the new equilibrium quantity will be ______. a)lower; lower b)lower; uncertain c)higher; higher d)higher; uncertain

b) lower; uncertain

According to the Cost-Benefit Principle, you should spend an additional hour studying for an exam if, and only if,: a)the benefits of studying for an additional hour are really high. b)the benefits of studying for an additional hour exceed the costs of studying for an additional hour. c)the benefits of studying for an additional hour are higher for you than for anyone else in your class. d)you have time to study for an additional hour.

b) the benefits of studying for an additional hour exceed the costs of studying for an additional hour.

Suppose the residents of Metropolis travel to work either by bus or train. If the price of train tickets increases, then: a)the demand for train tickets will increase. b)the demand for bus tickets will increase. c)the demand for train tickets will decrease. d)the demand for bus tickets will decrease.

b) the demand for bus tickets will increase.

If supply increases, then: a)demand will increase. b)the quantity demanded will increase. c)the quantity demanded will decrease. d)price will increase.

b) the quantity demanded will increase.

If the price of rubber (an input to the production of tires) increases: a)the supply of tires will increase. b)the supply of tires will decrease. c)the demand for tires will increase. d)the demand for tires will decrease

b) the supply of tires will decrease.

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ______ because it generates a ______ economic surplus. a)mow the lawn; bigger b)wash clothes; bigger c)mow the law; smaller d)wash clothes; smaller

b) wash clothes; bigger

When the price of a good changes, the amount of that good that buyers wish to buy changes: a)solely because of the substitution effect. b)solely because of the income effect. c)because of both the substitution and the income effects. d)only if the substitution effect and the income effect do not cancel out each other.

because of both the substitution and the income effects.

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the buyer's surplus from this transaction was: a)$195 b)$10 c)$20 d)$215

c) $20

Suppose that a disease that affects people who consume beef has been discovered in the United States. One likely result is: a)an increase in buyers' reservation prices for beef. b)a decrease in demand for chicken. c)a decrease in demand for beef. d)a decrease in the quantity demanded of beef.

c) a decrease in demand for beef.

Economics is the study of: a)the financial concerns of businesses and individuals. b)the role of government in limiting the choices people make. c)choice in the face of limited resources. d)whether we will have enough resources in the future.

c) choice in the face of limited resources.

At the beginning of the fall semester, college towns experience large increases in their populations, causing a(n): a)decrease in the quantity of apartments demanded. b)increase in the supply of apartments. c)increase in the demand for apartments. d)decrease in the quantity of apartments supplied.

c) increase in the demand for apartments.

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is: a)the $12 she spent on the umbrella, food and drinks. b)only $0 because she would have spent $12 to go to the movie. c)the value she places on seeing the movie. d)the value she places on seeing the movie plus the $12 she spent on the umbrella, food and drinks.

c) the value she places on seeing the movie.

If supply and demand both increase, the new equilibrium price will be ______ and the new equilibrium quantity will be ______. a)lower; lower b)lower; uncertain c)uncertain; higher d)higher; higher

c) uncertain; higher

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is: a)$6 b)$4 c)$0.25 d)$0

d) $0

Suppose you observe a decrease in the equilibrium price and quantity of corn. Of the options listed below, this is best explained by: a)a decrease in the cost of growing corn. b)an increase in the cost of growing corn. c)a rise in consumer income assuming corn is a normal good. d)a fall in consumer income assuming corn is a normal good.

d) a fall in consumer income assuming corn is a normal good.

Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is: a)a decrease in demand for pickles. b)an increase in demand for pickles. c)a decrease in the supply of pickles. d)an increase in the supply of pickles.

d) an increase in the supply of pickles.

A demand curve is ______ sloping because ______. a)downward; of increasing opportunity costs b)upward; people prefer to purchase high-quality consumer goods c)downward; reservation prices tend to fall over time d)downward; fewer people are willing to buy an item at higher prices

d) downward; fewer people are willing to buy an item at higher prices

If the supply curve and the demand curve both shift to the left, then the new equilibrium: a)quantity will be higher, but the direction of the price change is uncertain. b)price will be lower, but the direction of the change in quantity is uncertain. c)price will be higher, but the direction of the change in quantity is uncertain. d)quantity will be lower, but the direction of the price change is uncertain.

d) quantity will be lower, but the direction of the price change is uncertain.

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is: a)at least $5.00. b)$4.50. c)greater than $4.50 but no more than $5.00. d)$5.00.

greater than $4.50 but no more than $5.00.

A decrease in the price of pizza will lead to a(n): a)increase in the demand for pizza. b)increase in the quantity of pizza demanded. c)decrease in the quantity of pizza demanded. d)decrease in the number of consumers.

increase in the quantity of pizza demanded.

The supply curve illustrates that firms: a)increase the supply of a good when its price rises. b)increase the quantity supplied of a good when its price rises. c)decrease the quantity supplied of a good when input prices rise. d)decrease the supply of a good when its price rises.

increase the quantity supplied of a good when its price rises.

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n): a)normal good. b)complementary good. c)substitute good. d)inferior good.

inferior good.

If the demand for steak increases as income increases, then steak is a(n): a)complementary good. b)normal good. c)inferior good. d)substitute good.

normal good.

If the demand for olives falls when the price of cheese falls, then we know that cheese and olives are: a)normal goods b)complements c)substitutes d)inferior goods

substitutes