Microeconomics: Practice Exam I

Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are A complements. B. both inferior goods. C. both luxury goods. D. substitutes.

A complements.

Assume that microbrewery beer is a normal good. Prices of microbrewery beer have risen steadily in recent years. Over this same period, prices for fermenting vats used in beer making have also risen and consumer incomes have fallen. Which of the following best explains the rising prices of microbrewery beer? A. The supply curve for microbrewery beer has shifted to the left more than the demand curve has shifted to the left. B. The demand curve for microbrewery beer has shifted to the left more than the supply curve has shifted to the left. C. The demand curve and the supply curve for microbrewery beer have both shifted to the right. D. The supply curve for microbrewery beer has shifted to the left while the demand curve for microbrewery beer has shifted to the right.

A. The supply curve for microbrewery beer has shifted to the left more than the demand curve has shifted to the left.

If the United States placed an embargo on Swedish products, what would happen in the U.S. market for Swedish furniture? A. The supply curve would shift to the left. B. The demand curve would shift to the right. C. The supply curve would shift to the right. D. The demand curve would shift to the left.

A. The supply curve would shift to the left.

Marginal benefit is A. the additional benefit from consuming one more unit. B. a legally determined maximum price that sellers may charge. C. the additional cost of producing one more unit. D. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

A. the additional benefit from consuming one more unit.

Consumer surplus is A. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. B. the highest price a consumer is willing to pay to consume a good or service. C. the difference between the highest price a consumer is willing to pay and marginal benefit. D. the difference between the lowest price a firm would be willing to accept and the price it actually receives. E. the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept.

A. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

Why is the demand curve referred to as a marginal benefit curve? A. It shows the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. B. It shows the willingness of consumers to purchase a product at different prices. C. It shows the difference between the highest price a consumer is willing to pay and the marginal benefit of consumption. D. It shows the price consumers actually pay to consume a product. E. It shows the willingness of firms to supply a product at different prices.

B. It shows the willingness of consumers to purchase a product at different prices.

Which of the following statements about scarcity is true? A. Scarcity is only a problem when a country has too large a population. B. Scarcity refers to the situation in which unlimited wants exceed limited resources. C. Scarcity is not a problem for the wealthy. D. Scarcity only arises when there is a wide disparity in income distribution.

B. Scarcity refers to the situation in which unlimited wants exceed limited resources.

Studies have shown links between calcium consumption and a reduction in osteoporosis. How does this affect the market for calcium? A. The calcium demand curve shifts to the left because this new information will increase the price of calcium. B. The calcium demand curve shifts to the right because of a change in tastes in favor of calcium. C. the calcium supply curve shifts to the right because of a change in tastes in favor of calcium. D. The calcium supply curve shifts to the left because this new information will increase the price of calcium.

B. The calcium demand curve shifts to the right because of a change in tastes in favor of calcium.

Which of the following would definitely cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons? A. an increase in supply B. an increase in supply and an increase in demand greater than the increase in supply C. a decrease in demand and an increase in supply D. an increase in demand and an increase in supply

B. an increase in supply and an increase in demand greater than the increase in supply

Holding all other personal characteristics such as age, gender, and income constant, economists would expect that A. people with health insurance are less likely to be overweight than people without health insurance. B. people with health insurance are more likely to be overweight than people without health insurance. C. there is no correlation between having health insurance and being overweight. D. people with health insurance are equally likely to be overweight as people without health insurance.

B. people with health insurance are more likely to be overweight than people without health insurance.

The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books? A. the supply curve for new books shifts to the right. B. the demand curve for new books shifts to the left. C. the demand curve for new books shifts to the right. D. the supply curve for new books shifts to the left.

B. the demand curve for new books shifts to the left.

A change in all of the following variables will change the market demand for a product except A. income. B. the price of the product. C. tastes. D. population and demographics.

B. the price of the product.

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for Bluray players (a complement to LCD televisions)? A. The supply of Bluray players would increase and the equilibrium price of Bluray players would decrease. B. The demand for Bluray players would increase and the equilibrium price of Bluray players would decrease. C. The demand for Bluray players would increase and the equilibrium price of Bluray players would increase. D. The demand for Bluray players would decrease because consumers could afford to buy fewer LCD televisions and Bluray players.

C. The demand for Bluray players would increase and the equilibrium price of Bluray players would increase.

Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease? A. an increase in the demand for red wine grapes B. a decrease in the price of white wine grapes C. an increase in the price of white wine grapes D. an increase in the price of red wine

C. an increase in the price of white wine grapes

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision? A. zero, since she will no longer be earning a salary B. It depends on the "going rate" for home-care providers. C. at least $125,000 D. the value she attributes to the satisfaction she receives from taking care of her parents

C. at least $125,000

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes? A. gross earnings B. marginal costs C. marginal revenue D. pure profit E. net benefit

C. marginal revenue

Which of the following statements is true? A. Any time you have to decide which action to take you are experiencing economic equity. B. Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale. C. Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited. D. Every individual, no matter how rich or poor, is faced with making trade-offs.

D. Every individual, no matter how rich or poor, is faced with making trade-offs.

Which of the following would cause the equilibrium price to decrease and the equilibrium quantity of white bread to increase? A. An increase in the price of butter, a complement for white bread. B. An increase in the price of flour. C. An increase in the price of rye bread, a substitute for white bread. D. A decrease in the price of flour.

D. A decrease in the price of flour.

The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free ConcertminusinminustheminusPark to local residents. Each year, more than 500 people wish to attend the concert, so some of the residents who receive the free tickets sell them for as much as $75 each. Is a transaction where someone pays a resident $75 for a "free ticket" economically efficient? A. No, people should never be allowed to sell items they received for free. B. Yes, but it is efficient only from the perspective of the seller and not from the perspective of the buyer. C. No, the buyer paid too much for the ticket. D. Yes, it was a voluntary exchange that benefited both parties.

D. Yes, it was a voluntary exchange that benefited both parties. / Which of the following is a positive economic statement? A. The government should revamp the health care system. B. The U.S. government should not have bailed out U.S. auto manufacturers. C. If the price of iPhones falls, a larger quantity of iPhones will be purchased. D. The standard of living in the United States should be higher. + C. If the price of iPhones falls, a larger quantity of iPhones will be purchased.

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced A. an increase in the quantity supplied. B. a decrease in the quantity supplied. C. an increase in supply. D. a decrease in supply.

D. a decrease in supply.

If the price of cholocate increases, then there will be A. a change in consumer income. B. an increase in consumers' taste for chocolate. C. a decrease in demand for chocolate. D. a decrease in the quantity of chocolate demanded.

D. a decrease in the quantity of chocolate demanded.

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is A. a necessity. B. a complement. C. a neutral good. D. a normal good.

D. a normal good.

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. A. emotionally B. selfishly C. equitably D. rationally

D. rationally

How does consumer surplus change as the equilibrium price of a good rises or falls? As the price of a good rises, consumer surplus ______, and as the price of a good falls, consumer surplus _______.

Decreases, Increases

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? A. a only B. b only C. c only D. a and b E. a, b,and c

E. a, b,and c

Why do some consumers tend to favor price controls while others tend to oppose them? A. Price ceilings generate surpluses. Consequently, consumers who obtain the product at a lower price win, but consumers who obtain the product at a higher price lose. B. Price ceilings generate shortages. Consequently, consumers surplus increases, but producer surplus decreases. C. Price floors generate shortages. Consequently, the consumers who obtain the product at a lower price win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage. D. Price ceilings generate shortages. Consequently, the consumers who obtain the product at a lower price win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage. E.None of the above.

Price ceilings generate shortages. Consequently, the consumers who obtain the product at a lower price win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage.