Micro Economics Exam 2

The size of the Ouija board surplus will be a. Q2 -Q1 b. Q3-Q1 c. Q4-Q1. d. Q5-Q2. e. Q3-Q2.

d

A normal good is one for which A) demand increases when income increases B) demand increases when price decreases C) demand increases when tastes change D) demand is elastic E) demand is inelastic

A

Anything that increases the value that potential buyers receive from a good may be expected to A) increase demand B) increase supply C) increase both demand and supply D) increased demand but decrease supply

A

Which of the following will NOT increase the quantity of coffees demanded? A) the discovery that coffee cures cancer B) a rise in income, and coffee is a normal good C) a great coffee harvest D) all of the above will increase the quantity of coffee demanded

D

If a minimum price of $2 is established, the size of the Ouija board surplus will be a. Q4-Q1. b. Q5-Q2. c. Q3-Q2. d. There will be a shortage rather than a surplus. e. There will be neither a shortage nor a surplus.

e

Continuing the previous question, suppose a price ceiling of 40 is What would be the quantity transacted? a. 10 b. 20 c. 30 d. 40 e. No sales would occur

a

We would expect a shortage or surplus created by a price control to be greater a. the more elastic demand and supply. b. the less elastic demand and supply. c. if supply is greater than the demand. d. if demand is greater than the supply.

a

Price ceilings on gasoline might be expected to cause: a. increased advertising of gasoline. b. gasoline to be rationed or allocated to people in different quantities than would have occurred otherwise. c. longer hours of operation at most service stations. d. poor people to be assured of an adequate supply of gasoline.

b

If it costs $5 to produce a bushel of wheat (including materials, labor, rent of the land, and transportation), selling the wheat for less than $5 per bushel: a. could never be efficient under any circumstances. b. would only be done under a price ceiling. c. makes sense only if demand is very inelastic. d. might be efficient once some of the costs are sunk.

d

Suppose the price of tea increases. As a result, we would expect to see A) an increase in the demand for coffee ( a substitute) B) an increase in the demand for sugar ( a complement) C) a decrease in the demand for tea D) all of the above

A

The supply curve for pasta reflects A) the cost of the wheat from which pasta is made B) the perceived health benefits of pasta C) the price of spaghetti sauce a complement D) all of the above

A

which of the following will not increase the demand for burritos? A) a big burritos sale B) the discovery that eating burritos cures cancer C) a rise in the price of burgers, a substitute D) a fall in the price of guacamole, a complement E) all of the above will increase the demand for burritos

A

Jon needs 200 cases of Cristal champagne to cater a wedding. First, Jon visits all the wine shops located within ten miles, but can't get enough cases. Then Jon visits all wine shops located between 10 and 50 miles, but still is short a few cases. Finally Jon visits all wine shops located within 50 and 100 miles, and gets the last few cases he needs. Jon's struggles illustrate A) the law of demand. B) the law of supply. C) the principal of absolute advantage D) that sometimes the gains from trade aren't worth it

B

The demand for Kellogg's Corn Flakes tends to be very elastic because A) there are very few close substitutes B) many other cereals are almost perfect substitutes C) if you leave them for too long, they become stale D) the price of milk has been low in recent years

B

What effect would a reduction in the U.S. selling price of Japanese made cars have on the U.S. demand for American made cars? A) no effect, because price changes affect quantity demanded, not demand B) the demand would decrease C) the demand would increase D) we cannot tell unless we know Japans comparative advantage E) we cannot tell unless we know what happened to the price of American made cars

B

Which of the following will increase the demand for frisbees? A) a fall in the cost of plastics (an input) B) a rise in the price of nerf footballs (a substitute) C) a fall in the price of frisbees D) new technology that allows frisbees to be made more cheaply E) all of the above

B

if the supply of peanut butter increases, what would we expect to happen in the market for tuna (a substitute)? a. demand to increase b. demand to decrease c. supply to increase d. supply to decrease e. neither the demand nor the supply of tuna would be affected

B

For which of the following is demand likely to be the most elastic? A) bread B) sourdough bread C) BiLo's wheat sourdough bread D) all will have equally elastic demand

C

If a good is "normal", an increase in income will result in A) no change in the demand for the good B) a decrease in demand for the good C) an increase in demand for the good D) no change in demand, but a movement along the demand curve

C

The "law of demand" A) determines the equilibrium price B) doesn't hold for scarce goods C) says that people buy less of a good when price rises D) applies only to consumer goods

C

Which of the following will Not increase the demand (shift the demand curve) for coffee? A) the discovery that coffee cures cancer B) a rise in income, and coffee is a normal good C) a great coffee harvest D) all of the above will increase the demand for coffee

C

Which of the following will increase the demand for tea? A) a blight destroys 30% of the tea crop in India B) wonderful weather doubles the usual tea crop C) a rise in the price of coffee D) new technology allows tea to be made more cheaply E) all of the above

C

Which of the following will lead to an increase in the demand for satellite TV? A) a fall in consumer income (satellite tv is a normal good) B) a big satellite tv sale C) a rise in the price of Netflix (a substitute) D) all of the above

C

A supply curve shows A) the relationship between price and quantity supplied B) how many units of the good will be supplied at various prices C) the cost of supplying the good D) all of the above

D

If the price of peanut butter increases and the demand for jelly INCREASES as a result, then A) peanut butter is an inferior good and jelly is a normal good B) peanut butter and jelly are complements C) peanut butter is a normal good and jelly is an inferior good D) peanut butter and jelly are substitutes E) the law of demand has been violated

D

What would an increase in the price of diamonds do to the supply of diamond rings? A) nothing; price changes quantity supplied, not supply B) nothing; the demand for diamond rings would change, not the supply C) supply would increase because diamond rings are luxury goods D) supply would decrease

D

Which of the following will increase the quantity of photocopiers supplied? A) a fall in the price of photocopy paper (a complement) B) a rise in the price of scanners (a substitute) C) new technology that makes it possible to manufacture photocopiers much more cheaply D) all of the above

D

Prices are important because they A) bring quantity demanded and quantity supplied into balance B) help determine who obtains scarce goods C) help determine how to allocate our scarce resources D) coordinate the choices made by consumers and producers E) all of the above

E

The law of demand would lead you to expect that if the price of butter goes up, A) people will complain B) people will no longer buy butter C) a butter surplus will occur D) a butter shortage will occur E) people will buy more margarine

E

which of the following will increase the market price of chocolate eclairs? A) the discovery that chocolate causes cancer B) a much larger than expected chocolate crop C) a fall in price of cupcakes (a substitute) D) a rise in the price of milk (a complement) E) none of the above

E

If the price of toasters is fixed by law above the market-clearing price: a. a shortage of toasters will result. b. toaster inventories at appliance stores will be larger. c. toaster sellers will spend less on advertising. d. the quantity of toasters purchased will be more than the quantity supplied.

b

Assume the two graphs refer to a single market, the market for widgets. As a result of the changes, we would expect: a. higher widget prices b. lower widget prices c. no change in the widget prices d. not enough information to say

a

For a price increase from 1 to 2, the supply of kumquat is a. elastic. b. inelastic. c. unit elastic. d. there is not enough information to say.

a

In the range for which the demand curve for a good is above the supply curve a. people value the good more than it costs to make it. b. it costs more to make the good than the good is valued. c. the law of demand dominates the law of supply. d. there are no potential gains from trade.

a

a firm faces the following demand schedule price --> $20, $19, $18, $17, $16 quantity --> 10, 20, 30, 40, 50 If the firm charges a price of $16, its total revenue equals a. $800 b. $1000 c. $1600 d. $2000

a

The recent drought in the Midwest has been severe, and experts say that roughly half the corn crop has been damaged. As a result, we would expect: a. the demand for corn to decrease b. the supply of corn to decrease c. the demand of corn to increase d. the supply of corn to increase e. both a and b

b

Use the graph below to answer the next 3 questions. What area(s) show(s) total surplus at the equilibrium price? a. A+B b. A+B+C+D c. B+C d. B+C+G+F e. B

c

At the equilibrium price, what is the consumer surplus, and what is the producer surplus? a. A+B+C+D is consumer surplus and E+F+G+H is producer surplus b. B+C is consumer surplus and F+G is producer surplus c. A+H is consumer surplus and D+E is producer surplus d. B is consumer surplus and C is producer surplus

d

Suppose that an oil embargo raises the price of oil substantially, and, in response, a national security law is passed which forbids gas stations from increasing the price of gasoline to consumers. Which of the following would we expect to see? a. The quantity of gasoline demanded will exceed the quantity supplied. b. The number of dollars charged at the pumps for a gallon of gasoline will be lower than would be the case without the law. c. Lines will form in front of gas stations. d. All of the above

d

Suppose you study to the point the marginal benefits exactly equal the marginal costs. As a result: a. you have maximized your grade b. you would be better off if you had studied longer c. you minimized the total cost of studying d.studying longer would have produced marginal costs greater than the marginal benefits e. none of the above

d

The following graph should be used to answer the next two questions; it refers to demand and supply for NBA basketball. The solid lines refer to the original demand and supply; the dotted lines to demand and supply after they have shifted. What does the graph show has happened in the market? a. demand has increased; supply has decreased b. demand has decreased; supply has increased c. demand has increased; supply has increased d. demand has decreased; supply has decreased

d

The graph below represents the market for strawberries. Use it to answer the next question. The solid lines are the original curves, the dotted line is the result of a recent change. a. The price of blueberries, a substitute, rose. b. There was a great strawberry crop. c. A drought killed half the strawberry plants. d. Strawberry allergies have killed 100 people.

d

Traveling by bicycle from Clemson to New York could be more efficient than flying in an airplane: a. if airline ticket prices fall enough. b. if someone enjoys riding a bicycle enough. c. if time off from work is very hard to get. d. under no conceivable circumstances.

b

Use the following demand and supply functions to answer the next two questions: QD = 200- QS = P - 30 If supply increases, we would expect that the quantity supplied at $50 a. will equal 20 b. will be greater than 20 c. will be less than 20 d. there is not enough information to say

b

In other words, going from a price of $16 to a price of $17, demand is: a. upward sloping. b. equal to supply. c. going down. d. inelastic. e. elastic.

e

If someone tells you that they "can't live without" something. you would assume A) that they will die if they don't have it B) that their demand is likely to be elastic C) that their demand is likely to be inelastic D) that the law of demand won't apply to them E) that they have excess demand

C

If the supply of "roots" (an input) increases, what would we expect to happen in the market for root beer? A) demand to increase B) demand to decrease C) supply to increase D) supply to decrease

C

If then you discover that you were mistaken, and that, although the price had risen, the equilibrium quantity of soybeans has actually fallen, you would know that A) demand has decreased B) demand has increased C) supply has decreased D) supply has increased E) none of the above

C

Which of the following is/are true? A) a reduction in the price of apricots will increase the demand for apricots B) a reduction in the price of apricots will decrease the demand for apricots C) an increase in consumer income will decrease the demand for apricots if apricots are a normal good D) all of the above E) none of the above

E

Which of the following will decrease the supply (ie. shift the supply curve) of chocolate cakes? A) a rise in the price of chocolates B) a rise in the price of flour C) the news that eating chocolate cake causes cancer D) all of the above E) just A and B

E

If supply increases, we would expect that the quantity demanded at $50 a. will equal 150 b. will be greater than 150 c. will be less than 150 d. there is not enough information to say

a

At any price above the equilibrium price a. total surplus will be larger. b. total surplus will be smaller. c. total surplus will be the same, but consumers will get more of the gain. d. total surplus will be the same, but producers will get more of the gain.

b

At what which of the following prices will the most kumquats actually be sold (i.e., change hands from seller to buyer)? a. 1 b. 3 c. 5 d. 7

b

If three-quarters of the world's cattle are killed by a new disease a. there would be a beef shortage. b. the quantity of beef demanded would exceed the quantity supplied. c. the price of beef would fall. d. the amount of beef purchased would fall.

d

If a firm making widgets lowers its price by 10 percent and finds that it sells 8 percent more widgets, the elasticity of demand for its product equals A) 0.8 B) 1.2 C) 8 D) 10 E) there is not enough information to say

A

If the supply of peanut butter increases, what would we expect to happen in the market for jelly (a complement)? A) demand to increase B) demand to decrease C) supply to increase D) supply to decrease E) neither the demand nor the supply of jelly would be affected

A

What happens in the market for ink when the price of the lead used to make pencils rises? A) demand increases B) demand decreases C) supply increases D) supply decreases E) none of the above, because ink isnt used in lead

A

which of the following will not decrease the supply for burritos? A) the discovery that eating burritos causes cancer B) a rise in the price of the tortillas used to make burritos C) a rise in the price of wages paid to burrito-making employees D) all of the above will decrease the supply of burritos

A

A demand curve indicates the value consumers get from a good. It is measure as A) the benefits people receive less the cost B) the quantity people will buy at various prices C) the prices people prefer to pay D) all of the above

B

A rational decision-maker takes action only if A) the average benefit is greater than the average cost B) the marginal benefit is greater than the marginal cost C) the total benefit is positive D) society will be made better off E) all of the above

B

If the demand function is QD= 40-2p and price rises by 10, what will happen to quantity demanded? A) it will fall by 10 B) it will fall by 20 C) it will fall, but in order to determine the precise amount, we would need a supply function D) demand will fall, but quantity demanded will not change

B

If the elasticity of demand of for camera film is 2.6 and the price of film is raise by 10% A) the quantity demanded will fall by 2.6 percent B) the quantity demanded will fall by 26 percent C) the quantity demanded will fall by 260 percent D) the quantity demanded must fall, but we need more information to determine by how much

B

If the supply of a good is absolutely fixed (like wine bottled in 1983) A) the supply curve will be horizontal B) the supply will be vertical C) the supply curve will slope downward D) the good will have no supply curve

B

If the supply of tea increases, what would we expect to happen in the market for coffee (a substitute)? A) demand to increase B) demand to decrease C) supply to increase D) supply to decrease E) neither the demand nor supply of tea would be affected

B

If you discover that equilibrium price and quantity of soybeans has risen, you could conclude that A) demand has decreased B) demand has increased C) supply has decreased D) supply has increased E) none of the above

B

What would happen in the market for interior house paint if the price of paintbrushes falls while the price of wallpaper (a substitute) rises? A) the equilibrium price would increase, but the impact on quantity would be uncertain B) the equilibrium price would decrease, but the impact on quantity would be uncertain C) both equilibrium price and quantity would increase D) the equilibrium quantity would increase but the impact on price would be uncertain E) the equilibrium quantity would decrease but the impact on price would be uncertain

C

When the demand for something falls, A) price rises and quantity falls B) price falls and quantity rises C) both price and quantity fall D) price rises, but the effect on quantity is uncertain E) quantity falls but price stays the same

C

Which of the following will increase the supply of photocopiers? A) a fall in the price of photocopy paper ( a complement) B) a rise in the price of scanners ( a substitute) C) new technology that makes it possible to manufacture photocopiers much more cheaply D) all of the above

C

Buyers and sellers communicate primarily A) through surveys B) through government agencies C) through advertising D) through their willingness to buy and sell at various prices E) all of the above

D

Doug likes tomatoes now more than he did last year. Therefore A) Dough must have received an increase in income B) tomatoes must be a necessity C) the supply of tomatoes has increased D) Doug is willing to pay more for tomatoes than last year

D

If I tell you that the price of cameras has fallen and the number sold has fallen rather than risen, you would know that A) the law of demand has been violated B) supply is greater than demand C) demand is greater than supply D) the demand for cameras has decreased

D

Suppose that the supply of root beer ( a complement) increases and the price of cream ( an input) falls. What would you expect to happen to the market price and quantity of ic cream? A) the equilibrium price would increase, but the impact on equilibrium quantity would be uncertain B) the equilibrium price would decrease, but the impact on equilibrium quantity would be uncertain C) both equilibrium price and quantity would increase D) equilibrium quantity would increase, but the impact on equilibrium price would be uncertain E) equilibrium quantity would decrease, but the impact on equilibrium price would be uncertain

D

Below are a demand and supply schedule for kumquats. Use it to answer the next 3 questions. P QD QS 1 100 10 2 90 30 3 76 49 4 58 52 5 45 57 6 33 76 7 12 90 The efficient quantity of kumquats to produce is a. greater than 52. b. less than 52. c. exactly 52. d. None of the above.

a

Below is a demand schedule and a supply schedule for kumquats P - Quantity Demanded - Quantity Supplied 1 - 101 - 10 2 - 87 - 30 3 - 76 - 49 4 - 58 - 52 5 - 45 - 57 6 - 33 - 76 7 - 12 - 90 At what price is the quantity demanded greatest? At what price is quantity supplied greatest? a. 1, 7 b. 3, 5 c. 5, 3 d. 7, 1

a

Continuing the previous question, at the price ceiling of 40, there would be a. a shortage b. a surplus c. Quantity demanded would equal quantity supplied d. a negative externality e. a positive externality

a

Which of the following is the most plausible explanation for the changes? a. the price of basketball players has rose while the price of basketballs fell b. the price of basketball players has rose while the price of NHL hockey games (a substitute) fell c. the price of basketball players fell while income increased, and NBA basketball is a normal good d. the price of hockey players rose while the cost of basketball jerseys fell

b

If a law sets a maximum price of 7 a. there will be a kumquat shortage. b. there will be a kumquat surplus. c. there will be neither a kumquat shortage or a kumquat surplus. d. the market will not clear.

c

If a price ceiling prevents a market from clearing a. price will rise. b. quantity supplied will rise. c. other ways of rationing the good will be found. d. all of the above.

c

If the demand for widgets is Qd = 90 - Pd and the supply of widgets is Qs = Ps - 30, what is the total surplus created is widgets sell at the equilibrium price? a. 225 b. 500 c. 900 d. 2700 e. -2700

c

If the government, recognizing that the price of roses goes up at absolutely the worse time for consumers, passes a law that says no more than $1.50 can be charged per rose (instead of the $5 now charged) the most likely outcome would be that a. consumers will buy more roses. b. suppliers will sell more roses. c. it will be harder to find roses in florists' shops. d. the demand for roses will become more elastic.

c

It is considering raising its price to $17. If it does so: a. its total revenue will increase, because the percent increase in price is greater than the percent decrease in quantity demanded. b. its total revenue will increase, because the percent increase in price is less than the percent decrease in quantity demanded. c. its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded. d. its total revenue will decrease, because the percent increase in price is greater than the percent decrease in quantity demanded.

c

Refer to the graph below to answer the next 3 questions about the Ouija board market. A surplus (excess supply) in Ouija boards will occur if a. a minimum price of $2 is established. b. a maximum price of $2 is established. c. a minimum price of $5 is established. d. a maximum price of $5 is established. e. any price other than $3.50 is mandated by law.

c