Basic Microeconomics Midterm (Chapters 1-9 HW MCQ)

2. A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand?

It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables.

15. Refer to Figure 3-1. What should Fred produce?

Only tap shoes

10. Suppose that the incomes of buyers in a particular market for a normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market?

The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.

5. When evaluating differences or similarities between an increase in supply and an increase in quantity supplied, what do we know?

The former is a shift of the curve and the latter is a movement along the curve.

6. What happens if there is a shortage of a good at the current price?

The price is below the equilibrium price.

$1 per unit

Use the following information for questions 7, 8 and 9. The graph below shows supply and demand in a perfectly competitive market for widgets. Suppose the government decides to impose a $3 excise tax (per-unit tax) on widgets. 8. The part of the tax paid by sellers is...

3. Which of the following would NOT shift the demand curve for a good or service?

a change in the price of the good or service

3. What does a point on a country's production possibilities frontier represent?

a combination of two goods that an economy can produce using all available resources and technology.

3. If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is...

relatively inelastic.

1. For what reason do both households and societies face many decisions?

because resources are scarce

4. Morgan tells you that the price of DVDs at the video store will be going up next week. How will you probably respond?

by increasing your current demand for DVDs

4. If the cross-price elasticity of demand for computers and software is negative, this means the two goods are...

complements

2. Welfare economics is the study of how

the allocation of resources affects economic well-being.

1. Consumer surplus is...

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

10. Suppose that the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

d. A technological advance makes cellular phones production less expensive

1. When the price of apples decreases, the quantity of apples supplied...

falls

8. Refer to Figure 1. Which of the four graphs represents the market for winter boots in June?

graph B

7. Refer to Figure 1. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing area?

graph D

17. For two people who are planning to trade, it is impossible to:

have a comparative advantage in both goods.

1. Price elasticity of demand measures...

how responsive quantity demanded is to a change in price.

10. How can the production possibilities frontiers shift outward?

if there is an increase in technology

8. In a perfectly competitive market from a closed economy, suppose a price ceiling is below the equilibrium price. If supply and demand are not perfectly elastic or perfectly inelastic, then removing the price ceiling will...

increase the quantity sold.

2. If goods A and B are complements, what will result from an increase in the price of A?

less of good B sold

7. The current price in the market for milk is $8.00. If the government imposed a price floor of $4.00 in this market total surplus would ____________.

not change

7. Refer to Figure 2-1. At which point or points can the economy NOT produce?

point A, C

6. Refer to Figure 2-1. Which point represents the maximum possible production of tubas?

point E

4. What does it mean if an economy is producing efficiently?

there is no way to produce more of one good without producing less of the other.

9. Refer to Figure 2-2. What is the opportunity cost in terms of toothbrushes of getting 10 additional toasters by moving from point B to point A?

zero, since the economy has the additional resources to produce 10 additional toasters

4. See Table 1. The total quantity of oranges demanded is exactly 2 if the price (P) of an orange satisfies...

$2.25 < P < $2.95.

3. See Table 1. If the market price of an orange is $2.10, consumer surplus will be...

$2.90.

Use the following information for questions 7, 8 and 9. The graph below shows supply and demand in a perfectly competitive market for widgets. Suppose the government decides to impose a $3 excise tax (per-unit tax) on widgets. 9. How much tax revenue is generated in the market for widgets?

$60

6. Aisha is willing to spend $22 for a haircut. If she finds a salon where the price of a haircut is only $15, she will receive ______ in consumer surplus from this transaction.

$7

Use the following information for questions 7, 8 and 9. The graph below shows supply and demand in a perfectly competitive market for widgets. Suppose the government decides to impose a $3 excise tax (per-unit tax) on widgets. 7. The quantity of widgets purchased after the tax is imposed is...

20

13. Refer to Figure 3-1. What is the opportunity cost of 1 pair of ballet slippers for Ginger?

3/4 pair of tap shoes

12. Refer to Figure 3-1. What is the opportunity cost of 1 pair of tap shoes for Fred?

3/5 pair of ballet slippers

Points B, D, E

5. Refer to Figure 2-1. At which point or points can the economy produce?

16. Refer to Figure 3-1. If Fred and Ginger both specialize in the good in which they have a comparative advantage, what would the total production be?

8 ballet slippers and 10 tap shoes.

20 toothbrushes

8. Refer to Figure 2-2. What is the opportunity cost of getting 15 additional toasters by moving from point D to point C?

2. Suppose the value of the price elasticity of demand is -3. What does this mean?

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

5. The nation of Hamsterville has passed a law that from this day forth, nobody shall sell a bowl of gazpacho for more than $10 per bowl. Nobody really cares, however, because the equilibrium price of gazpacho in Hamsterville is $8. What is the term for the price control described above?

A non-binding price ceiling

HW 4

HW 4

HW 1

HW 1

HW 2

HW 2

5. Suppose bad weather in California decreases the quantity of avocados harvested. The market for avocados is perfectly competitive. What happens to consumer surplus in the market?

Consumer surplus decreases.

12. Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation?

Consumer tastes have changed so as to prefer beef less than before.

11. Suppose that the number of buyers in a market increases and a technological advancement occurs. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

14. Refer to Figure 3-1. Which of the following is true?

Ginger has a comparative advantage in ballet slippers and Fred has a comparative advantage in tap shoes.

HW 3

HW 3

6. The city of Montrose recently imposed a price ceiling on cookies, limiting the price of a cookie to $1 each. Before the price ceiling was imposed, the equilibrium price of a cookie was $2 each. All of the following are likely consequences of this price ceiling EXCEPT...

an increase in the quantity supplied of cookies

9. Which of the following would definitely result in a higher price in the market for Snickers?

demand increases and supply decreases

11. When a production possibilities frontier shifts outward, what concept is being demonstrated?

economic growth