Microeconomics Final Exam 1/3

12. If these are the only four buyers in the market, then the market quantity demanded at the price of $8 is

24 units

England has an absolute advantage in the production of

both goods and Spain has an absolute advantage in the production of neither good

The word "economy" comes from the greek word oikonomos, which means

"one who manages a household"

19. All else equal, a large number of people becoming vegetarians would cause a move from

Da to Db

Goods produced abroad and sold domestically are

Imports

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her 2,500 and replacing the roof will cost her 9,000. Katie expects the new carpeting to increase the value of her house by 3,000 and the new roof to increase the value of her house by 7,000.

She should replace the carpeting but not replace the roof

When a species of fish dies off due to pollution in a river where it once lived, this is an example of

a market failure caused by an externality

Elasticity is

a measure of how much buyers and sellers respond to changes in market conditions

49. A price ceiling set at (equilibrium price= 10, eq=10) a. $6 will be binding and result in a shortage of 8 units b. $6 will be binding and will result in a shortage of 4 units c. $16 will be binding and result in a shortage of 12 units d. 16 will be binding and result in a shortage of 6 units

a. $6 will be binding and result in a shortage of 8 units

27. What is the amount of the tax per unit a. $8 b. $6 c. $4 d. $3

a. $8

An increase in the quantity demanded a. Results in a movement downward and to the right along the demand curve b. results in a movement upward and to the left along the demand curve c. shifts the demand curve to the left d. shifts the demand curve to the right

a. Results in a movement downward and to the right along the demand curve

5. The inner loop of the circular-flow diagram represents the flow of inputs and outputs. Which of the following does not appear on the inner loop? a. Wages b. Land c. Capital d. Goods and services sold

a. Wages

29. The buyers and sellers will bear an equal share of the tax burden if the demand is a. perfect diagonal and the supply curve is perfect diagonal b. steeper and the supply curve is PD c. PD and the supply curve is relatively flat d. steeper and the SC is relatively flat

a. perfect diagonal and the supply curve is perfect diagonal (X)

The demand curve for a good is a line that relates a. price and quantity demanded b. income and quantity demanded c. quantity demanded and quantity supplied d. price and income

a. price and quantity demanded

22. An increase in the price from $30-35 would a. increase total revenue by 250 b. Decrease total revenue by 250 c. increase TR by 500 d. Decrease TR by 500

b. Decrease total revenue by 250

40. Which of the following is not held constant when looking at an individual's demand curve? a. Income b. Price c. Preferences d. the availability of alternative goods

b. Price

36. An example of a perfectly competitive market would be the market for a. Electricity b. Soybeans c. Coffee shops d. Restaurants

b. Soybeans

26. If a tax is levied on the sellers of a product, then there will be a(n) a. downward shift of the supply curve b. Upward shift of the supply curve c. movement up and to the right along the supply curve d. movement down and to the left along the supply curve

b. Upward shift of the supply curve

14. Which of the following would cause the demand curve to shift to the right in the market for DVD's in the US?

b. a decrease in the price of DVD players

46. Rent control laws dictate

b. a maximum rent that landlords must charge tenants

34. Which of the following statements is correct? a. Buyers determine supply, and seller determine demand b. buyers determine demand, and seller determine supply c. buyers determine both demand and supply d. sellers determine both demand and supply

b. buyers determine demand, and seller determine supply

17. If suppliers expect the price of their product to fall in the future, then they will a. Decrease supply now b. increase supply now c. Decrease supply in the future but not now d. Increase the supply in the future but not now

b. increase supply now

44. Another term for equilibrium price is a. dynamic price b. market-clearing price c. quantity-defining price d. balance price

b. market-clearing price

15. If the demand curve shifts to the left, then

b. people are willing to buy less of the good than before at each possible price

28. The tax burden will fall most heavily on sellers of the good when the demand curve is a. Relatively steep, and the supply curve is relatively flat b. relatively flat, and the supply curve is relatively steep c. and the supply curve are both relatively flat d. and the supply curve are both relatively steep

b. relatively flat, and the supply curve is relatively steep

42. An example of a perfectly competitive market would be the a. Cable TV market b. soybean market c. breakfast cereal market d. Shampoo market

b. soybean market

16. Which of the following is not held constant in a supply schedule? a. the production technology b. the price of the goods c. the price of inputs d. expectations

b. the price of the goods

The price elasticity of supply measures how much

b. the quantity supplied responds to changes in the price of the good

Which of the following is not correct about most economic models: a. they are composed of equations and diagrams b. they contribute very little to economists' understanding of the real world c. they omit many features of the real-world economy d. in constructing models, economists make assumptions

b. they contribute very little to economists' understanding of the real world

23. At a price of 1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of 1.5, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is a. 1.18 b. 1.00 c. .85 d. .25

c. .85

18. At the price of $35 there would be a (Qd=200, Qs=600) a. Shortage of 400 units b. Surplus of 200 units c. Surplus of 400 units d. Surplus of 600 units

c. Surplus of 400 units

Minimum-wage laws dictate

c. a minimum wage that firms must pay workers

45. Suppose good X has a negative income elasticity of demand. This implies that good X is a. a normal good b. A necessity c. an inferior good d. a luxury

c. an inferior good

Price Controls

c. can generate inequalities of their own

24. In a competitive market free of government regulations, a. A price adjusts until quantity demanded is greater than quantity supplied b. price adjusts until quantity demanded is less than quantity supplied c. price adjusts until quantity demanded equals quantity supplied d. supply adjusts to meet demand at every price

c. price adjusts until quantity demanded equals quantity supplied

21. Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? the demand for wheat is a. income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers b. income elastic so an increase in the price of wheat will increase the total revenue of wheat farmers c. price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers d. price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers

c. price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers

13. If these are the only four buyers in the market, then the market quantity demanded at the price of $1 is

d. 31 units

35. Which of the following is not a characteristic of a perfectly competitive market? a. Different sellers sell identical products b. there are many sellers c. sellers must accept the price the market determines d. All of the above are characteristics of a perfectly competitive market

d. All of the above are characteristics of a perfectly competitive market

20. Which of the following statements about the price elasticity of demand is correct? a. The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases b. the price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer taste c. other things equal, if good x has a close substitute and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y d. All of the above are correct

d. All of the above are correct

37. Which of the following would most likely serve as an example of a monopoly a. a restaurant in a large city b. a dry cleaners in a large city c. a local gas station d. a local electricity company

d. a local electricity company

47. A binding price ceiling i causes a surplus ii Causes a shortage iii is set at a price above the equilibrium price iv is set at a price below the equilibrium price a. ii only b. iv only c. i and iii only d. ii and iv only

d. ii and iv only

25. The price ceiling causes a a. surplus of 40 units b. surplus of 85 units c. shortage of 45 units d. shortage of 85 units

d. shortage of 85 units

50. Price buyers pay after tax is imposed is a. random low number ($8) b. bottom point of the tax triangle ($10) c. equilibrium price ($16) d. top point of the tax triangle ($24)

d. top point of the tax triangle ($24)

43. An example of a perfectly competitive market would be the market for a. Tennis racquets b. Pizza c. Garbage collection d. wheat

d. wheat

48. A binding price ceiling is shown in

panel b only (line below equilibrium price)

Normative statements are

prescriptive, whereas positive statements are descriptive

Economics deal primarily with the concept of

scarcity

The production possibilities frontier illustrates

the combinations of output that an economy can produce

Suppose there are only two people in the world. Each person's PPF also represents his or her consumption possibilities when

they choose not to trade with one another

The opportunity cost of 1 unit of cheese for England is

¼ unit of bread