Econ Unit 2 Exam (Micro)
175. What is the price elasticity of supply for apples? Supply Price $1.5 20 $0.75 10
(A) 1
161. If the tomato price increases by 20 percent, and as a result quantity demanded for lettuce increases by 40 percent, the cross-price elasticity of demand for tomatoes and lettuce is
(A) 2
168. The price of peaches increases 30 percent. As a result, quantity demanded for plums increases from 50 to 80. What is the price elasticity of demand for peaches and plums?
(A) 2
172. If a nation's income increases by 5 percent and quantity demanded for sports cars rises by 15 percent, income elasticity of demand for sports cars is
(A) 3
151. What moves on the apartment supply and demand curves would represent the passage of rent control laws that limited the maximum apartment rental price? (im not drawing a picture)
(A) Apartments supplied would move to A2 and apartments demanded would move to B2.
138. How do economists know that a good is a viable substitute?
(A) Calculate cross-elasticity and the result is a positive number.
93. Which of the following situations will cause the demand curve for chicken, a normal good, to shift to the left? A). Consumer incomes decrease B). Consumer incomes increase C). The price of steak decrease D). There is a decrease in the cost of raising chickens on a farm. E). There is a scientific discovery that relates eating chicken to lower blood pressure.
(A) Consumer incomes decrease.
156. If auto demand shifted from D2 to D1 because of consumer expectations, what could this indicate? \ \ \ D1 D2 D3
(A) Consumers expect auto prices to fall.
126. Bell peppers are a substitute for artichokes. If the price of bell peppers increases, demand for artichokes could shift from D1 D2 D3 Quantity A). D1 to D2 B). D2 to D1 C). D3 to D2 D). D3 to D1 E). The demand would not change
(A) D1 to D2
99. Which is an important factor to make the demand for a good inelastic? A). It is a necessity B). There are manny substitutes C). It is a luxury item D). There are many cross-price substitutes E). A significant portion of consumers' budgets goes to purchasing the good.
(A) It is a necessity.
134. Measuring allocative efficiency through allocation of resources is best expressed in which formula?
(A) P = MC
85. What will most likely result if the price of apples decreases? A). The quantity of apples demanded will increase. B). The supply of apples will decrease. C). The demand for apples will increase. D). The quantity of apples supplied will decrease. E). None of the above.
(A) The quantity of apples demanded will increase.
133. If tacos are a better substitute for burritos than hamburgers, tacos will have
(A) a higher cross-price elasticity of demand
109. If the supply curve is a line with an upward slope, an increase in demand will cause A). An increase in prices and a larger quantity sold B). An increase in prices and a smaller quantity sold C). A decrease in prices and a larger quantity sold D). A decrease in prices and a smaller quantity sold E). None of the above
(A) an increase in prices and a larger quantity sold
96. If the quantity demanded for baseballs shifts from point B to point A, this represents Price Quantity A $5 10 B $3 20 A). an increase in the price of the good B). An increase in consumer income C). An increase in the price of a complementary good D). An increase in the price of a substitute good E). None of the above
(A) an increase in the price of the good
122. Suppose the market is in equilibrium for razor blades where the marginal benefit equals the marginal cost. If the government imposes a tax on razor blades, what may result? A). Deadweight loss B). An increase in demand C). An increase in supply D). A price ceiling E). A price floor
(A) deadweight loss
128. Consumer surplus is the A). Difference between the price consumers would have been willing to pay and the price they actually did pay B). Price consumers would have been willing to pay minus total variable costs C). Price consumers would have been willing to pay in addition to total variable costs D). Price consumers would have been willing to pay in addition to total fixed costs E). Price consumers would have been willing to pay minus total fixed and variable costs
(A) difference between the price consumers would have been willing to pay and the price they actually did pay
120. Suppose the price of iPhones increases 2 percent and the quantity demanded for iPhones decreases by 4 percent, then A). Elasticity is 2 and the demand is price elastic B). Elasticity is 0.5 and demand is price inelastic C). Elasticity is 8 and the demand is price elastic D). Elasticity is .05 and the demand is price inelastic E). Answer cannot be determined without knowing the length of time the product is on the market with the increase in price
(A) elasticity is 2 and demand is price elastic
141. The federal government increases mass transit subsidies, and as a result, the price of a train ticket from New York to Boston decreases by 40 percent. Ridership increases from 10 million to 12 million as a result. Demand for train tickets is
(A) inelastic
173. If consumers demand more soda, but health care costs increase as well, this indicates a
(A) negative externality
146. The price elasticity of supply is shown in the table below. Which of the following goods is inelastic? Good Elasticity of Supply Oil 0.5 Apples 1.1 Oranges 3 Cars 4 Phones 6
(A) oil
113. If the price of a good increases, the most likely result would be for the A). Quantity supplied to increase B). Quantity supplied to decrease C). Demand to increase D). Supply to decrease E). Demand to decrease
(A) quantity supplied to increase
177. Income for New York consumers rises 20 percent. Quantity demanded for heating oil doesn't change. Heating oil is a
(A) sticky good
163. Which area represents a surplus created by a price floor? (Below price ceiling and above equilibrium)
(A) the area below line A and between the supply and demand curves
152. A shortage of rental apartments would result in a deadweight loss. Which area would represent the value of this loss? (im not drawing a picture)
(A) the area between points A2, B2, and C
155. Producer surplus is equal to
(A) the area to the left of the demand curve and below the price equilibrium
130. If peanut butter and grape jelly are complementary goods, and the supply of grape jelly moves from S1 to S2, / / S1 S2 Quantity A). The demand curve for peanut butter will shift to the right B). The demand curve for peanut butter will remain the same C). The demand curve for peanut butter will shift to the left D). Quantity demanded will decrease for peanut butter on the same demand curve E). Quantity demanded will increase for peanut butter on the same demand curve
(A) the demand curve for peanut butter will shift to the right
123. Deadweight loss refers to A). The lost benefit to society caused by the movement away from the market equilibrium quantity B). The gained benefit to suppliers caused by the increase in the market equilibrium quantity C). The incremental benefit or loss when the consumer increases consumption by one additional unit (marginal utility) D). The legal maximum price above which a product cannot be sold (the price ceiling) E). The legal minimum price below which a product cannot be sold (price floor)
(A) the lost benefit to society caused by the movement away from the market equilibrium quantity
104. All of the following are factors that contributed to Supply 1 shifting to Supply 2 EXCEPT (Supply decreases) A). The price of a key ingredient to the product decreased B). The number of sellers decreased C). Sellers expect the price of the good to rise in the future D). The government increased a tax on the product E). The product is no longer subsidized by the government
(A) the price of a key ingredient to the product decreased
106. Which factor contributes to price elasticity of supply? A). Time B). Consumer surplus C). Consumer expectations regarding future prices D). Producer tastes and preferences E). The availability of a producer surplus
(A) time
149. Which of the following is shown in the chart? Price | / Supply | / | / |/ ____________Quantity
(A) unit elastic supply
166. The price of bread increases by 50 percent. As a result, quantity demanded for cheese falls 20 percent. The cross-price elasticity of demand for bread and cheese is
(B) -0.4
165. Quantity demanded for pork is 10. The price of chicken increases 10 percent. If pork and chicken have a cross-price elasticity of 5, the new quantity demanded for pork will be
(B) 15
179. The government places a tariff on imported cars. If price elasticity of supply for cars is 0.6, and price elasticity of demand for cars is -0.4, what percentage of the tariff is paid by the car buyer?
(B) 60 percent
147. What factor would NOT contribute to a shift from Demand 2 to Demand 1? \ \ Demand 1 Demand 2
(B) A substitute product leaves the market.
154. The price of sugar is currently $3 per pound. The government establishes a price floor at $2 per pound. What happens to sugar supply?
(B) Quantity demanded will equal quantity supplied.
90. A hurricane destroyed a significant supply of bananas in 2011. As a result, the price of bananas increases. What prediction may be made regarding the supply of apples, a substitute good, when its market is in equilibrium? A). the apple price rises, and the apple supply will increase B). The apple quantity supplied will increase C). The apple price falls, and the apple supply will decrease D). The apple price falls, and the apple quantity supplied will decrease E). Both the apple price and the apple quantity suppled are undetermined.
(B) The apple quantity supplied will increase.
119. A warm winter results in a larger supply of wheat for the year. Corn is a substitute good for wheat. What happens to wheat and corn prices? A). The corn price stays the same and the wheat price falls B). The corn price falls and the wheat price falls C). The corn price rises and the wheat price falls D). The corn price stays the same and the wheat price rises E). The corn price and the wheat price both increase
(B) The corn price falls and the wheat price falls.
150. How will the change in the supply by 10 percent impact the price in the market conditions shown in the chart? Price | / Supply | / | / |/ ____________Quantity
(B) The price will increase by 10 percent.
91. What is likely to happen if the price of figs increases? A). The supply of figs will increase B). The quantity of figs demanded will decrease. C). The demand for figs will increase. D). The quantity of figs supplied will increase. E). None of the above
(B) The quantity of figs demanded will decrease.
143. A handbag designer sells luxury handbags for $2,000. The designer raises the handbag price to $4,000 and demand for handbags increases 50 percent. Which type of good is a handbag?
(B) a Veblen good (wtf is that, Mr. Lieggi has failed us)
103. All of the following are factors that contributed to Demand 1 shifting to Demand 2 EXCEPT (Demand increases) A). An increase in consumer income B). A decrease in the price of a substitute good C). An increase in the number of buyers in a market D). Consumers expect the price of the good to increase in the future E). The product's popularity with consumers increase
(B) a decrease in the price of a substitute good
135. If corn oil is less substitutable for olive oil, then corn oil will have
(B) a lower cross-price elasticity of demand
86. If Michael's average yearly income increases and it is observed that his demand for steak has increased, then steak must be considered... A). An inferior good B). A normal good C). A determinant of demand D). A determinant of supply E). A necessity
(B) a normal good
180. What would a change from point B to point A represent? B --> A (increase in quantity and price)
(B) an expansion of supply
153. If the demand curve remains constant, and supply decreases, the result will be
(B) an increase in prices and a smaller quantity sold
102. Sally works at a clothing store and the manager has cut her weekly shift from 30 to 20 hours, reducing her income. As a result, her demand for fresh vegetables decreases and her demand for canned vegetables increases. In this example, which type of good is a can of vegetables? A). A shortage good B). An inferior good C). A necessity D). A capital good E). A normal good
(B) an inferior good
125. If there is joint demand for olives and mushrooms, then olives and mushrooms are A). Substitute goods B). Complementary goods C). Normal goods D). Inferior goods E). Luxury goods
(B) complementary goods
174. The number of buyers in a market, consumer tastes, the availability of substitute goods, and income are known as
(B) determinants of demand
137. If the government establishes a price less than the market equilibrium price, then it is a(n)
(B) effective price ceiling
100. There is a 10 percent rise in the price of bottled water. This creates a 40 percent change in the quantity demanded. The demand for bottled water is considered to be A). Perfectly inelastic B). Elastic C). Inelastic D). Perfectly elastic E). None of the above
(B) elastic
162. Peanut butter and blackberry jam have a cross-price demand elasticity of -2. The price of peanut butter increases by 20 percent.
(B) fall 40 percent
170. A Fashion retailer can easily order new inventory and can employ inexperienced workers in its stores. A motorcycle manufacturer must wait several months for part shipments and workers need training to work at the motorcycle plant. Price elasticity of supply for the fashion retailer and the motorcycle manufacturer, respectively, are likely to be
(B) high, low
117. If a market surplus exists, establishing an effective price floor would A). Reduce a market surplus B). Increase a market surplus C). Remove the need for government regulation D). Decrease demand E). Increase government regulation
(B) increase a market surplus
114. What is point A commonly known as? (intersection of demand/supply curves) A). Deadweight loss B). Market equilibrium C). Price discrimination D). Marginal revenue E). Inflated value
(B) market equilibrium
145. Firm A and firm B offer high-speed Internet service. When firm B increases the price of its Internet service by 20 percent, people stop purchasing Internet service from firm B. In comparison with firm B's Internet service, firm A's Internet service is a(n)
(B) perfect substitute
111. A limit on interest rates charged by a credit card company is an example of a A). Price floor B). Price ceiling C). Prince support D). Consequence of minimum wage law E). Negative externality
(B) price ceiling
171. If the price of a good decreases, the most likely result would be for the
(B) quantity supplied to decrease
112. When quantity demanded is greater than quantity supplied, there is a(n) A). Negative externality B). Shortage in the market C). Surplus in the market D). Increase in government regulation E). Decrease in unemployment
(B) shortage in the marker
164. Which area represents a shortage caused by a price ceiling? (Above price floor and below equilibrium)
(B) the area above line B and between the supply and demand curves
139. The income effect refers to
(B) the change in the quantity demanded because of a change in a consumer's purchasing power
160. When a government establishes an intervention price and the price moves below this level,
(B) the demand curve shifts to the right
95. The equilibrium price is established A). At the next price above where the demand and supply curves intersect B). When the quantity supplied equals the quantity demanded C). At the next price below where the demand and supply curves intersect D). When you take the difference between the two lowest points plotted on the demand and supply curves E). At the price where either the demand or supply curve becomes horizontal
(B) when the quantity supplied equals the quantity demanded
178. The government imposes a $50 tax on television sets. Price elasticity of supply for television sets is 0.6 and price elasticity of demand for television sets is -0.2. As a result of the tax increase, a consumer who buys a television set will pay an additional
(C) $37.50
182. The government raises the tax on a truck by $10,000. The price elasticity of supply for trucks is 1.5 and the price elasticity of demand is -1.0. Truck manufacturers will absorb costs of
(C) $4,000
176. German consumers experience a 30 percent income rise. Quantity demanded for oatmeal falls 15 percent in Germany. Income elasticity of demand for oatmeal is
(C) -0.5
167. Cross-price elasticity for corn and wheat is 0.75. The corn price rises 40 percent. As a result, the new quantity demanded for wheat is 13. What was quantity demanded for wheat before the corn price increased?
(C) 10
97. Doherty Industries is a leading producer of an energy drink. Which of the following will cause Doherty Industries to offer more of the product at all possible sale prices? A). A competitor lowers the price of the product B). The price of a key ingredient increases C). The price of a key ingredient decreases D). The demand for the energy drink decreases E). The demand is perfectly elastic
(C) The price of a key ingredient decreases.
94. Mr. Harrington produces hot dog buns. Hot dogs and hot dog buns are complementary goods. He is most likely to sell his hot dog buns at a higher price if... A). The price of hot dogs decreases B). There is an increase in consumer income C). The price of hot dogs increases D). A new technology is developed enabling an increase in hot dog production. E). A new technology is developed enabling an increase in hot dog bun production.
(C) The price of hot dogs increases
108. A grape farm uses fertilizer to produce grapes. Which will occur if the price of fertilizer increases? A). The demand for grapes will increase. B). The quantity of grapes demanded will increase C). The supply of grapes will decrease D). The quantity of fertilizer demanded will increase. E). The supply of grapes will increase
(C) The supply of grapes will decrease.
181. Which of the following could be a cause of a shift from point B to point A?
(C) a higher quantity of the product supplied
118. The number of substitutes for a good and time are known as A). Determinants of supply B). Determinants of demand C). Determinants of elasticity D). Factors of production E). Elements of the Gini ratio
(C) determinants of elasticity
140. The price of a golf ball increases from $1 to $1.25. As a result, golf ball sales fall by 50 percent. Demand for golf balls is
(C) elastic
157. Which demand shift would indicate that consumers expect higher auto prices?
(C) from D1 to D3
115. Which of the following could shift point A to the right? (decrease quantity) A). If a substitute good were subsidized by the government B). If a tariff was implemented on the product by the government C). If the price of a complementary good decreased D). If the purchasing power of consumers decreased E). If the good in question became less attractive to consumers
(C) if the price of a complementary good decreased
142. Which of the following is the LEAST elastic good?
(C) insulin
136. Price elasticity of demand is an extremely useful tool in economics because
(C) it shows how consumer behavior is affected by price
158. The price elasticity of demand is shown in the following table. For which of the products would the change in the quantity demanded be exactly proportional to the change in the price? Good Elasticity of Supply Pizza -2 Olives -1.3 Ketchup 0 Laptops 1 Phones 1.4
(C) laptops
124. If you calculate the price elasticity of a good to be 0, you are correct to assume A). It is a normal good B). It is a luxury good C). People will buy the good regardless of the price D). The good has few substitutes E).the good has few complements
(C) people will buy the good regardless of the price
183. The government places a tax on bicycle manufacturers. Bicycle supply is inelastic and demand is elastic. A possible response by bicycle manufacturers would be
(C) reduce wages at the bicycle manufacturing plant
110. A price increase in product X resulted in an increase in demand for product Z. Product Z is most likely a(n) A). Inferior good B). Complementary good C). Substitute good D). Normal good E). Factor of production
(C) substitute good
107. Consumer surplus is measured by A). The area above the supply curve but below the price equilibrium B). The sum of buyer and seller surplus C). The area above the supply curve and above the price equilibrium D). The quotient of percentage change in quantity supplied and percentage change in price E). The quotient of percentage change in quantity demanded and percentage change in price
(C) the area above the supply curve and above the price equilibrium
89. According to the law of demand, A). As the price of a good or service increases, the demand will shift to the right B). As the price of a good or service increases, the demand will shift to the left C). There is an inverse relationship between quantity demanded of a good or service and the price of that good or service D). As prices for a good or service increase, consumers will begin to use substitute goods E) as the price of a good or service increases, the quantity demanded will increase.
(C) there is an inverse relationship between quantity demanded of a good or service and the price of that good or service
127. Bell peppers are a substitute for artichokes. Tomatoes are also a substitute for artichokes. If a 10 percent price drop for bell peppers would shift artichoke demand from D2 to D1 and a 10 percent price drop for tomatoes would shift artichoke demand from D3 to D1, then \ \ \ D1 D2 D3 Quantity A). Tomatoes are a perfect substitute B). Bell peppers are a perfect substitute C). Tomatoes are a better substitute D). Bell peppers are a better substitute E). Tomatoes and bell peppers are equally substitutable
(C) tomatoes are a better substitute
121. Demand for hamburgers increases. Hamburgers and hamburger buns are complementary goods. What happens to the demand curve for hamburger buns and the price? A). The price of hamburger buns does not change and the demand curve shifts to the left B). The price of hamburger buns does not change and the demand curve shifts to the right C). The price of hamburger buns increases and the demand curve remains the same D). The price of hamburger buns increases and the demand curve shifts to the right E). The price of hamburger buns increases and the demand curve shifts to the left
(D) The price of hamburger buns increases and the demand curve shifts to the right.
144. A worker at a shoe store buys five pounds of rice, which is less expensive than other food items, each week. The rice farm increases the price of rice and the shoe store worker starts buying six pounds of rice each week. What type of good is the rice?
(D) a Giffen good (wtf is that, Mr. Lieggi has failed us)
87. If Peter's average yearly income increases, and it is observed that his demand for thrift-store-bought shoes decreases, then thrift-store-bought shoes must be considered A). A normal good B). A shortage good C). A necessity D). an inferior good E). A determinant of demand
(D) an inferior good
105. An effective price ceiling is usually set A). Above the equilibrium price and quantity B). At the intersection of the supply and demand curves C). By subtracting the highest price for supply and the lowest point for demand on their respective curves D). Below the equilibrium price E). None of the above
(D) below the equilibrium price
131. All of the following explain the downward slope of the demand curve EXCEPT
(D) complement effect
101. If a 30 percent rise in gas prices creates a 0 percent decrease in the quantity demanded, the demand is said to be A). Inelastic B). Perfectly elastic C). Elastic D). Perfectly inelastic E). None of the above
(D) perfectly inelastic
116. Another name for excess supply is A).Disequilibrium B). Equilibrium ratio C). Gini ratio (thanks Mr. Lieggi) D). Surplus E). Shortage
(D) surplus
159. Which of the following BEST represents an example of how a price floor can be set?
(D) when the United States imposed that the minimum wage should be $10 per hour
169. The price of a peach falls from $2 to $1.40. Quantity supplied for peaches falls from 100 to 85. Price elasticity of supply for peaches is
(E) 0.5
148. What factors would contribute to a shift from Supply 1 to Supply 2? / / Supply 1 Supply 2
(E) All of these factors would shift supply from $1 to $2. (A) A key production input becomes less expensive. (B) The factory becomes more efficient at producing this product. (C) Production workers' wages decrease. (D) The government reduces taxes on the factory.
92. If the demand for tennis rackets increases, which prediction can be made regarding tennis balls? A). The demand of tennis balls will fall. B). The supply of tennis balls will remain the same. C). The price of tennis balls will remain the same. D).the supply of tennis balls will fall. E). The price and the quantity supplied of tennis balls will increase.
(E) The price and the quantity supplied of tennis balls will increase.
88. Suppose it is necessary for tin to be used in the production of guitar strings. If the price of tin decreases and all other variables are constant, what will most likely result? A). The demand for silver will increase. B). The quantity demanded for guitars will decrease C). The demand for guitars will increase D). The supply of guitars will decrease. E). The supply of guitar strings will increase.
(E) The supply of guitar strings will increase.
129. The government establishes a price ceiling on good X above the equilibrium price. The result would A). Raise the price of the good B). Raise the price of the good and decrease the quantity demanded C). Lower the price of the good and increase the quantity demanded D). Lower the price of the good E). Have no effect on the price of the good or quantity demanded
(E) have no effect on the price of the good or quantity demanded
98. Suppose the demand for a product is inelastic. If a producer wishes to increase total revenue, it should A). decrease prices B). Decrease the quantity supplied C). Increase the quantity supplied D). Hire more workers E). Raise prices
(E) raise prices
132. If an increase in technology in a perfectly competitive firm only lowers the firm's costs of production, the effect will be? Price= Quantity= Profit=
Price Quantity Profit (D) no change increase increase
