ECON 2100 Exam 1 Practice Questions

13. Assume the market for pork is perfectly competitive. When one pork buyer exits the market, 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 Page 66

C

15. 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 Page 70

A

19. 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 Page 76

A

2. If an economy is producing efficiently, then A. There is no way to produce more of a 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 other good D. It is possible to produce more of any good at any cost. Pages 5, 25

A

23. If at the current price, there is a surplus of a good, then A. sellers are producing more then buyers wish to buy B. the market must be in equilibrium C. the price is below the equilibrium price D. quantity demanded equals quantity supplied Page 77

A

26. What would happen to the equilibrium price and quantity of coffee if the wages of coffee- bean pickers fell and 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 the price would be ambiguous D. Quantity would rise and the effect on price would be ambiguous

A

32. 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 Page 90-93

A

35. 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 0. Page 100-101

A

42. 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 .50 B. .50 C. between .50 and 1 dollar D. 1 dollar Page 121-122

A

43. Buyers of a good bear the larger share of the tax burden when the tax is placed on the product for which A. the supply is more elastic then the demand B. the demand is more elastic then the supply C. the tax is placed on the sellers of the product D. the tax is placed on the buyers of the product Page 121-122

A

45. 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

A

49. The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good succesfully lobby congress to impose a price floor $3 above equilibrium price in the market. Price Quantiy Demanded Qunatity Supplied $0 15 0 $1 13 3 $2 11 6 $3 9 9 $4 7 12 $5 5 15 $6 3 18 How many units of the good are sold after the imposition of the price floor? A. 3 B.9 C. 15 D. 18

A

5. Normative Statements are not A. Descriptive B. Prescriptive C. Claims about how the world should be D. Made by economists speaking as policy advisors PG. 28

A

17. 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 Page 73

B

21. Suppose there is an increase in the price of steel. We would expect the supply curve for still beams A. to shift rightward B. to shift leftward C. to become flatter D. to remain unchanged Page 75

B

24. 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 demandedand decreases quantity supplied, until the shortage is eliminated D. Lower price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated Page 77

B

28. 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 Page 90

B

36. A price ceiling is A. often imposed on markets in which "cutthroat competition" would previal 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 succesful in their attempts to convince the government that the market outcome is unfair without a price ceiling D. All of the above are correct Page 112

B

37. 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- term effect of rent control is a relatively 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 aparments 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. Page 115

B

39. Price Quantity demanded Quantity Supplied $0 15 0 $1 13 3 $2 11 6 $3 9 9 $4 7 12 $5 5 15 $6 3 18 Following the impoaition of a price ceiling of 4 dollars, the resulting market price is A. $2 B.$3 C. $4 D.$5 See graphs on page 117

B

44. Suppose that a tax is placed on books. If the seller bears most of the burden of the tax, then we know that the A. demand is more inelastic then 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 Page 125

B

46. The minimum wage, if it is binding, lowers the incomes of A. No workers B. Those workers who cannot find jobs C. Those workers who have jobs D. All workers

B

7. 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 comparitive 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 Page 53

B

1. 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 the 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. PG. 24

C

14. 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 Page 67

C

16. An increase in the number of college scholarships issued by private foundations would A. Increase supply of education B. Decrease the supply of education C. increase the demand for education D. decrease the demand for education Page 71

C

20. Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1 per hour , then it is likely that 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 mantain profit levels Page 75

C

22. 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 Page 75

C

38. 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 corrrect Page 117

C

41. 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 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. Page 121

C

50. 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 to produce the good C. Both the values that society places on the products and the costs to society to produce the good D. None of the above

C

Kelly and Daniel are both capable of repairing cars and cooking meals. Which of the following scinerios is NOT possible? A. Kelly has a comparitive advantage in repairing cars and David has a comparitive advantage in cooking meals. B. Kelly has a absolute advantage in repairing cars and David has an absolute advantage in cooking meals. C. Kelly has a comparitive advantage in repairing cars and cooking meals. D. David has an absolute advantage in repairing cars and cooking meals. PG. 52-53

C

47. Price Quantity Demanded Quantity Supplied $0 250 0 $5 200 75 $10 150 150 $15 100 225 $20 50 300 $25 0 375 Which of the following statements is correct? A. A price ceiling set at $5 will be binding and will result in a shortage of 50 units B. A price ceiling set at $5 will be binding and will result in shortage of 75 limits C. A price ceiling set at $5 will be binding and will result in a shortage of 125 units D. A price set at $5 will not be binding At price $5, what is the market sale ( quantity)? A. 75 B. 200 C. 150 D. Unknown because supply is different from demand at price $5.

C A

11.In a market economy, supply and demand are importnat because they A. Play a critical role in the allocation of the economys 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. Page 9

D

12. 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 and only a few sellers D. Numerous Buyers and Numerous Sellers Page 67

D

18. The following table contains a supply schedule for a good. Price Quantity Supplied $10 100 $20 ? If the law of supply applies to this good, then "?" could be: A. 0 B. 50 C. 100 D. 150 Page 73-74

D

27. Which of the following events will definately cause equilibrium quantity to rise? A. demand increases and supply decreases B. Demalnd and supply both decrease C. Demand decreases and supply increases D. demand and supply both increase Page 76

D

29. The demand for Neapolotin 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 icecream are good substitues for this particular flavor. Page 90

D

30. 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 then the demand for clocks in general C. The deand for cardboard is more elastic over a long period of time then a short period of time D. all of the above are correct Page 90

D

31. Price Quantity Demanded $10 10 $12 9 $14 8 $16 7 As price rises from $10 to $12, the price elasticity of demand using the midpoint method is approximately A. .08 B..18 C. .42 D. .58 Page 92

D

34. A bakery would be willing to supply 500 bagles per day at a price of.50 each. At a price of $.80, the bakery would be willing to supply 1,100 bagles. Using the midpoint method, the price elasticity of supply for bagles is A. .62 B. .77 C. 1.24 D. 1.63

D