APMicro: Unit 2

Refer to the above data. The value for W is: A) 15. B) 20. C) 25. D) 30.

B) 20.

Refer to the above diagram. The equilibrium price and quantity in this market will be: A) $1.00 and 200. B) $1.60 and 130. C) $.50 and 130. D) $1.60 and 290.

A) $1.00 and 200.

Refer to the above data. The value for Z is: A) -5. B) + 5. C) -10. D) zero.

A) -5.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be: A) 0F and 0C respectively. B) 0G and 0B respectively. C) 0F and 0A respectively. D) 0E and 0B respectively.

A) 0F and 0C respectively.

Refer to the above data. The value for X is: A) 15. B) 5. C) 55. D) 10.

A) 15.

Refer to the above data. Which of the following is correct? A) Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges. B) Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges. C) Although the demand curve is concave to the origin, price elasticity of demand is constant throughout. D) A steep slope means demand is inelastic; a flat slope means demand is elastic.

A) Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.

Refer to the above diagram. Between prices of $5.70 and $6.30: A) D1 is more elastic than D2. B) D2 is an inferior good and D1 is a normal good. C) D1 and D2 have identical elasticities. D) D2 is more elastic than D1

A) D1 is more elastic than D2.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? A) an increase in supply B) an increase in demand C) a decrease in supply D) a decrease in demand

A) an increase in supply

Refer to the above data. The price elasticity of demand is relatively elastic: A) in the $6-$4 price range. B) over the entire $6-$1 price range. C) in the $3-$1 price range. D) in the $6-$5 price range only.

A) in the $6-$4 price range.

Refer to the above table. In relation to column (3), a change from column (2) to column (1) would indicate a(n): A) increase in demand. B) decrease in demand. C) increase in supply. D) decrease in supply.

A) increase in demand.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n): A) increase in the wage rates paid to laborers employed in the production of X. B) government subsidy per unit of output paid to firms producing X. C) decline in the price of the basic raw material used in producing X. D) increase in the number of firms producing X.

A) increase in the wage rates paid to laborers employed in the production of X.

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to: A) increase the supply of B and increase the demand for C. B) decrease the supply of B and increase the demand for C. C) decrease the supply of B and decrease the demand for C. D) increase the supply of B and decrease the demand for C.

A) increase the supply of B and increase the demand for C.

Refer to the above diagram. A government-set price ceiling is best illustrated by: A) price A. B) quantity E. C) price C. D) price B. Answer: A

A) price A.

Refer to the above diagram. Rent controls are best illustrated by: A) price A. B) quantity E. C) price C. D) price B.

A) price A.

The law of demand states that: A) price and quantity demanded are inversely related. B) the larger the number of buyers in a market, the lower will be product price. C) price and quantity demanded are directly related. D) consumers will buy more of a product at high prices than at low prices.

A) price and quantity demanded are inversely related.

In the above market, economists would call a government-set minimum price of $40 a: A) price ceiling. B) price floor. C) equilibrium price. D) fair price.

A) price ceiling.

Other things equal, if the price of a key resource used to produce product X falls, the: A) product supply curve of X will shift to the right. B) product demand curve of X will shift to the right. C) product supply curve of X will shift to the left. D) product demand curve of X will shift to the right.

A) product supply curve of X will shift to the right.

The location of the product supply curve depends on: A) production technology. B) the number of buyers in the market. C) the tastes of buyers. D) the location of the demand curve.

A) production technology.

The law of supply: A) reflects the amounts that producers will want to offer at each price in a series of prices. B) is reflected in a downsloping supply curve. C) shows that the relationship between producer revenue and quantity supplied is negative. D) reflects the income and substitution effects of a price change.

A) reflects the amounts that producers will want to offer at each price in a series of prices.

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus, A) the demand for pizza is elastic above $5 and inelastic below $5. B) the demand for pizza is elastic both above and below $5. C) the demand for pizza is inelastic above $5 and elastic below $5. D) $5 is not the equilibrium price of pizza.

A) the demand for pizza is elastic above $5 and inelastic below $5.

Refer to the above diagram. A surplus of 160 units would be encountered if price was: A) $1.10, that is, $1.60 minus $.50. B) $1.60. C) $1.00. D) $.50.

B) $1.60.

Refer to the above information. If the Mudhens' management wanted to maximize total revenue from the game, it would set the ticket price at: A) $5. B) $7. C) $9. D) $13.

B) $7.

Refer to the above table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be: A) $10 and 60 units. B) $9 and 60 units. C) $8 and 80 units. D) $7 and 30 units.

B) $9 and 60 units.

Which of the following would not shift the demand curve for beef? A) a widely publicized study that indicates beef increases one's cholesterol B) a reduction in the price of cattle feed C) an effective advertising campaign by pork producers D) a change in the incomes of beef consumers

B) a reduction in the price of cattle feed

Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9, a: A) the market would clear. B) a surplus of 20 units would occur. C) a shortage of 20 units would occur. D) demand would change from columns (3) and (2) to columns (3 and (1).

B) a surplus of 20 units would occur.

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: A) beer and marijuana are substitute goods. B) beer and marijuana are complementary goods. C) beer is an inferior good. D) marijuana is an inferior good.

B) beer and marijuana are complementary goods.

If steak is a normal good and its price rises: A) the amount purchased may either increase or decrease depending on the relative importance of the income and substitution effects. B) both the income and substitution effects suggest that less will be purchased. C) the substitution effect suggests more will be purchased, but the income effect suggests less will be purchased. D) the income effect suggests more will be purchased, but the substitution effect suggests less will be purchased.

B) both the income and substitution effects suggest that less will be purchased.

Refer to the above diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer spending would: A) decrease if demand were D1 only. B) decrease if demand were D2 only. C) decrease if demand were either D1 or D2. D) increase if demand were either D1 or D2.

B) decrease if demand were D2 only.

Other things equal, the shortage associated with a price ceiling will be greater the: A) smaller the elasticity of both demand and supply. B) greater the elasticity of both demand and supply. C) greater the elasticity of supply and the smaller the elasticity of demand. D) greater the elasticity of demand and the smaller the elasticity of supply.

B) greater the elasticity of both demand and supply.

Refer to the above data. The price elasticity of demand is unity: A) throughout the entire price range because the slope of the demand curve is constant. B) in the $4-$3 price range only. C) over the entire $3-$1 price range. D) over the entire $6-$4 price range.

B) in the $4-$3 price range only.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n): A) decrease in income if X is an inferior good. B) increase in the price of complementary good Y. C) increase in money incomes if X is a normal good. D) increase in the price of substitute product Y. 

B) increase in the price of complementary good Y.

Utility: A) is synonymous with usefulness. C) is easy to quantify. B) is want-satisfying power. D) rarely varies from person to person.

B) is want-satisfying power.

The basic formula for the price elasticity of demand coefficient is: A) absolute decline in quantity demanded/absolute increase in price. B) percentage change in quantity demanded/percentage change in price. C) absolute decline in price/absolute increase in quantity demanded. D) percentage change in price/percentage change in quantity demanded.

B) percentage change in quantity demanded/percentage change in price.

Refer to the above diagram. A government price support program to aid farmers is best illustrated by: A) quantity E. B) price C. C) price A. D) price B.

B) price C.

In the above market, economists would call a government-set minimum price of $50 a: A) price ceiling. B) price floor. C) equilibrium price. D) fair price.

B) price floor.

An effective price floor will: A) force some firms in this industry to go out of business. B) result in a product surplus. C) result in a product shortage. D) clear the market.

B) result in a product surplus.

In 2003 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A) complementary goods and the higher price for oil increased the demand for natural gas. B) substitute goods and the higher price for oil increased the demand for natural gas. C) complementary goods and the higher price for oil decreased the supply of natural gas. D) substitute goods and the higher price for oil decreased the supply of natural gas.

B) substitute goods and the higher price for oil increased the demand for natural gas.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1 , then: A) supply has increased and equilibrium quantity has decreased. B) supply has decreased and equilibrium quantity has decreased. C) there has been an increase in the quantity supplied. D) supply has increased and price has risen to 0G.

B) supply has decreased and equilibrium quantity has decreased.

We would expect: A) the demand for Coca-Cola to be less elastic than the demand for soft drinks in general. B) the demand for Coca-Cola to be more elastic than the demand for soft drinks in general. C) no relationship between the elasticity of demand for Coca-Cola and the elasticity of demand for soft drinks in general. D) none of the above to hold true.

B) the demand for Coca-Cola to be more elastic than the demand for soft drinks in general.

Which of the following will not cause the demand for product K to change? A) a change in the price of close-substitute product J B) an increase in consumer incomes C) a change in the price of K D) a change in consumer tastes

C) a change in the price of K

If two goods are complements: A) they are consumed independently. B) an increase in the price of one will increase the demand for the other. C) a decrease in the price of one will increase the demand for the other. D) they are necessarily inferior goods.

C) a decrease in the price of one will increase the demand for the other.

Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6, a: A) the market would clear. B) a surplus of 40 units would occur. C) a shortage of 40 units would occur. D) demand would change from columns (3) and (2) to columns (3 and (1).

C) a shortage of 40 units would occur.

When the percentage change in price is greater than the resulting percentage change in quantity demanded: A) a decrease in price will increase total revenue. B) demand may be either elastic or inelastic. C) an increase in price will increase total revenue. D) demand is elastic.

C) an increase in price will increase total revenue.

If a firm's demand for labor is elastic, a union-negotiated wage increase will: A) necessarily be inflationary. B) cause the firm's total payroll to increase. C) cause the firm's total payroll to decline. D) cause a shortage of labor.

C) cause the firm's total payroll to decline.

Refer to the above information. Over the $13-$11 price range, demand is: A) perfectly elastic. B) perfectly inelastic. C) elastic. D) inelastic.

C) elastic.

Refer to the above information. Over the $9-$7 price range, demand is: A) perfectly elastic. B) perfectly inelastic. C) elastic. D) inelastic.

C) elastic.

Refer to the above data. The price elasticity of demand is relatively inelastic: A) in the $6-$4 price range. B) over the entire $6-$1 price range. C) in the $3-$1 price range. D) in the $6-$5 price range only.

C) in the $3-$1 price range.

An increase in consumer incomes will: A) increase the demand for an inferior good. B) increase the supply of an inferior good. C) increase the demand for a normal good. D) decrease the supply of a normal good.

C) increase the demand for a normal good.

Refer to the above information and assume the stadium capacity is 5000. The supply of seats for the game: A) varies inversely with ticket prices. B) varies directly with ticket prices. C) is perfectly inelastic. D) is perfectly elastic.

C) is perfectly inelastic.

Refer to the above data. If this demand schedule were graphed, we would find that: A) its slope diminishes as we move southeast down the curve. B) its slope diminishes as we move northwest up the curve. C) its slope is constant throughout. D) the data is inconsistent with the law of demand.

C) its slope is constant throughout.

The above data illustrate the: A) law of comparative advantage. B) utility-maximizing rule. C) law of diminishing marginal utility. D) law of increasing opportunity costs.

C) law of diminishing marginal utility.

Over the $10-$8 price range, the elasticity coefficient of supply is: A) 1. B) zero. C) less than 1. D) greater than 1.

C) less than 1.

Over the $4-$2 price range, the elasticity coefficient of supply is: A) 1. B) zero. C) less than 1. D) greater than 1.

C) less than 1.

Refer to the above diagram. A government-set price floor is best illustrated by: A) price A. B) quantity E. C) price C. D) price B.

C) price C.

The demand curve shows the relationship between: A) money income and quantity demanded. B) price and production costs. C) price and quantity demanded. D) consumer tastes and the quantity demanded.

C) price and quantity demanded.

The demands for such products as salt, bread, and electricity tend to be: A) perfectly price elastic. B) of unit price elasticity. C) relatively price inelastic. D) relatively price elastic.

C) relatively price inelastic.

An effective ceiling price will: A) induce new firms to enter the industry. B) result in a product surplus. C) result in a product shortage. D) clear the market.

C) result in a product shortage.

Refer to the above information and assume the stadium capacity is 5000. If the Mudhens' management wanted a full house for the game, it would: A) set price so as to maximize its total revenue. B) encourage scalpers to sell their tickets for more than $7. C) set ticket prices at $5. D) set ticket prices at $9.

C) set ticket prices at $5.

A decrease in demand is depicted by a: A) move from point x to point y. B) shift from D1 to D2. C) shift from D2 to D1. D) move from point y to point x.

C) shift from D2 to D1.

n 1994 Ford sold 500,000 Escorts at an average price of $7,200 per car; in 1995, 600,000 Escorts were sold at an average price of $7,500 per car. These statements: A) suggest that the demand for Escorts decreased between 1994 and 1995. B) imply that Escorts are an inferior good. C) suggest that the demand for Escorts increased between 1994 and 1995. D) constitute an exception to the law of demand in that they suggest an upsloping demand curve.

C) suggest that the demand for Escorts increased between 1994 and 1995.

If government set a minimum price of $50 in the above market, a: A) shortage of 21 units would occur. B) shortage of 125 units would occur. C) surplus of 21 units would occur. D) surplus of 125 units would occur.

C) surplus of 21 units would occur.

The elasticity of demand: A) is infinitely large for a perfectly inelastic demand curve. B) tends to be inelastic in high-price ranges and elastic in low-price ranges. C) tends to be elastic in high-price ranges and inelastic in low-price ranges. D) is the same at each price-quantity combination on a stable demand curve.

C) tends to be elastic in high-price ranges and inelastic in low-price ranges.

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates that: A) the demand for oranges will necessarily rise. B) the equilibrium quantity of oranges will rise. C) the amount of oranges that will be available at various prices has declined. D) the price of oranges will fall.

C) the amount of oranges that will be available at various prices has declined.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes: A) the cost effect. B) the inflationary effect. C) the income effect. D) the substitution effect.

C) the income effect.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes: A) an inferior good. B) the rationing function of prices. C) the substitution effect. D) the income effect.

C) the substitution effect.

Refer to the above information and assume the stadium capacity is 5000. If the Mudhens' management charges $7 per ticket: A) some fans who want to see the game will find that tickets are not available. B) there will be 2,000 empty seats. C) there will be 1,000 empty seats. D) the game will be sold out.

C) there will be 1,000 empty seats.

Refer to the above information. Over the $5-$3 price range, demand is: A) perfectly elastic. B) perfectly inelastic. C) elastic. D) inelastic.

D) inelastic.

Refer to the above information. Over the $7-$5 price range, demand is: A) perfectly elastic. B) perfectly inelastic. C) elastic. D) inelastic.

D) inelastic.

A decrease in quantity demanded (as distinct from a decrease in demand) is depicted by a: A) move from point x to point y. B) shift from D1 to D2. C) shift from D2 to D1. D) move from point y to point x.

D) move from point y to point x.

If government set a maximum price of $45 in the above market: A) a shortage of 21 units would arise. B) a surplus of 21 units would arise. C) a surplus of 40 units would arise. D) neither a shortage nor a surplus would arise.

D) neither a shortage nor a surplus would arise.

Refer to the above diagram. A government-set maximum permissible interest rate is best illustrated by: A) price B. B) quantity E. C) price C. D) price A.

D) price A.

The substitution effect causes a consumer to buy less of a product when its price rises because the: A) consumer's real income has decreased. B) consumer's real income has increased. C) product is now less expensive compared to other products. D) product is now more expensive compared to other products.

D) product is now more expensive compared to other products.

A leftward shift of a product supply curve might be caused by: A) an improvement in the relevant technique of production. B) a decline in the prices of needed inputs. C) an increase in consumer incomes. D) some firms leaving an industry.

D) some firms leaving an industry.

Over the $8-$6 price range, supply is: A) inelastic. B) elastic. C) perfectly inelastic. D) perfectly elastic.

A) inelastic.

Which of the following statements is correct? A) If demand increases and supply decreases, equilibrium price will fall. B) If supply increases and demand decreases, equilibrium price will fall. C) If demand decreases and supply increases, equilibrium price will rise. D) If supply declines and demand remains constant, equilibrium price will fall.

B) If supply increases and demand decreases, equilibrium price will fall.

The elasticity of demand for a product is likely to be greater: A) if the product is a necessity, rather than a luxury good. B) the greater the amount of time over which buyers adjust to a price change. C) the smaller the proportion of one's income spent on the product. D) the smaller the number of substitute products available.

B) the greater the amount of time over which buyers adjust to a price change.

Refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be: A) $10 and 60 units. B) $9 and 50 units. C) $8 and 60 units. D) $7 and 50 units.

C) $8 and 60 units.

Refer to the above information. Over the $11-$9 price range, demand is: A) perfectly elastic. B) perfectly inelastic. C) elastic. D) inelastic.

C) elastic.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then A) at any price above 0G a shortage would occur. B) 0F represents a price that would result in a surplus of AC. C) a surplus of GH would occur. D) 0F represents a price that would result in a shortage of AC.

D) 0F represents a price that would result in a shortage of AC.

Which of the following is not characteristic of the demand for a commodity that is elastic? A) The relative change in quantity demanded is greater than the relative change in price. B) Buyers are relatively sensitive to price changes. C) Total revenue declines if price is increased. D) The elasticity coefficient is less than one.

D) The elasticity coefficient is less than one.

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: A) an increase in consumer income. B) an increase in the price of a substitute good. C) a change in consumer expectations. D) a change in buyer tastes.

D) a change in buyer tastes.

A rightward shift in the demand curve for product C might be caused by: A) an increase in income if C is an inferior good. B) a decrease in income if C is a normal good. C) a decrease in the price of a product that is a close substitute for C. D) a decrease in the price of a product that is complementary to C.

D) a decrease in the price of a product that is complementary to C.

Refer to the above table. In relation to column (3), a change from column (5) to column (4) would indicate a(n): A) increase in demand. B) decrease in demand. C) increase in supply. D) decrease in supply.

D) decrease in supply.

If Z is an inferior good, a decrease in money income will shift the: A) supply curve for Z to the left. C) demand curve for Z to the left. B) supply curve for Z to the right. D) demand curve for Z to the right.

D) demand curve for Z to the right.

Diminishing marginal utility explains why: A) the income effect exceeds the substitution effect. B) the substitution effect exceeds the income effect. C) supply curves are upsloping. D) demand curves are downsloping.

D) demand curves are downsloping.

Refer to above data. Marginal utility becomes negative beginning with the: A) first unit. B) second unit. C) third unit. D) fourth unit.

D) fourth unit.

Over the $6-$4 price range, supply is: A) perfectly elastic. B) elastic. C) perfectly inelastic. D) inelastic.

D) inelastic.

Other things equal, which of the following might shift the demand curve for gasoline to the left? A) the discovery of vast new oil reserves in Montana B) the development of a low-cost electric automobile C) an increase in the price of train and air transportation D) a large decline in the price of automobiles

B) the development of a low-cost electric automobile

The income and substitution effects account for: A) the upward sloping supply curve. B) the downward sloping demand curve. C) movements along a given supply curve. D) the "other things equal" assumption.

B) the downward sloping demand curve.

Refer to the above diagram and assume a single good. If the price of the good increased from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand curve would be: A) 0.8. B) 1.0. C) 1.2. D) 2.0.

C) 1.2.

Refer to the above diagram. A shortage of 160 units would be encountered if price was: A) $1.10, that is, $1.60 minus $.50. B) $1.60. C) $1.00. D) $.50.

D) $.50.

Refer to the above data. The value for Y is: A) 25. B) 30. C) 40. D) 45.

D) 45.