ECON 1030

40. In general, price controls have a: A. larger effect in the long run because demand and supply become more elastic over time. B. larger effect in the short run since demand and supply become more elastic over time. C. smaller effect in the long run since demand and supply become less elastic over time. D. smaller effect in the short run because demand and supply become less elastic over time.

A.

A box of corn flakes cereal is likely to be: A. very price elastic, since there are many close substitutes available. B. less price elastic, since there are many close substitutes available. C. very price elastic, since the cereal is a unique product. D. less price elastic, since the cereal is a unique product.

A.

A decrease in the price of ice cream is likely to cause: A. an increase in the demand for ice cream cones due to a change in the price of a complementary good. B. an increase in the demand for ice cream cones due to a change in the price of a substitute good. C. an increase in the demand for ice cream cones due to a change in the preferences of consumers. D. a decrease in the demand for ice cream cones due to a change in the price of a related good.

A.

A factual claim about how the world actually works is a ______________ statement. A. positive B. marginal C. irrational D. normative

A.

According to the graph shown, if the market goes from equilibrium to having its price set at $10: A. market transactions will decrease by 7. B. market transactions will decrease by 3. C. market transactions will decrease by 10. D. market transactions will not change, only price has changed.

A.

An increase in price: A. causes a decrease in revenue due to the price effect. B. causes an increase in revenue due to the price effect. C. causes an increase in revenue due to the quantity effect. D. None of these is true.

A.

Assume an equilibrium of $7, with demand D and supply S2, in the graph shown. Total surplus, consumer surplus, with demand D and supply S1, consumer surplus respectively are: A. ($32), equal to producer surplus,($5) B. ($32), (5), (5) C. ($4), ($6), ($5). D. (8), (4), (5)

A.

Assume the market in the graph shown was originally at an equilibrium with demand D and supply S. Suppose Demand shifts and becomes D2. What might have caused such a shift? A. The good became more popular. B. People expect the price of this good to drop in the near future. C. The good became cheaper to produce. D. Substitutes for this good became less expensive.

A.

Assume the market was in equilibrium in the graph shown. If the market price gets set to $7, which of the following is true? A. Some consumers gain surplus, but total surplus falls. B. Some producers gain surplus, but total surplus falls. C. Some producers lose surplus, but total surplus rises. D. Some consumers lose surplus, but total surplus rises.

A.

If an effective price ceiling were placed in the market in the graph shown & which area represents deadweight loss and which area represents total surplus respectively? A. quantity demanded would exceed quantity supplied. (B+D), (A+C+E). )bbbBvB+DB+ B. quantity supplied would exceed quantity demanded.(F+G), (A+C+E). B+d C. the demand curve would have to shift.( D+F), (A+C+B+D+E). D+F D. the supply curve would have to shift.( B+G), (A+B+C+E+D+F+G) .

A.

If the intended aim of the price ceiling set in the graph shown was a net increase in the well being of consumers, then positive analysis would conclude: A. the policy was effective, since area B is smaller than area C. B. the policy was effective, since area A + C is larger than B + D. C. the policy was ineffective, since D is larger than E. D. the policy was ineffective, since A + C + E is larger than B + D.

A.

In economic terminology, a buyer or seller who cannot affect the market price is called a: A. price taker. B. price maker. C. price setter. D. price signaler.

A.

Suppose a tax on sellers has been imposed in the graph shown. What is the total tax paid per unit of the good? What is the amount of tax revenue being generated from the tax? Once the tax is in place, the buyers experience: A. $10, $150, a decrease in quantity demanded B. $31, $310, an increase in quantity demanded. C. $37, $80, a decrease in quantity demanded , D. $15, $135, an increase in quantity demanded.

A.

Suppose when the price of a can of tuna is $1, the quantity demanded is 250, and when the price is $2, the quantity demanded is 100. Using the mid-point method, the price elasticity of demand is: A. 1.28. B. 0.78. C. 128 percent. D. 78 percent.

A.

This graph depicts the demand for a normal good. A movement from A to B in the graph shown might be caused by: A. a decrease in the price of a substitute. B. a decrease in the price of a complement. C. an increase in the price of a complement. D. an increase in the good's price.

A.

Which actor in the circular flow model buys or rents land, labor, and capital? A. Firms B. Households C. Markets for factors of production D. Government

A.

A good that has an income elasticity of 0.4 is: A. a luxury good. B. a normal good. C. an inferior good. D. a substitute good.

B.

According to the graph shown, consumer surplus, Producer surplus and total surplus respectively are: A. ($30), (10), (40). B. ($15), (10), (25). C. ($45), (20), (.65) D. ($90), (10), (100) .

B.

Assume there are three hardware stores in the market for hammers and that all three markets produce a single, standard model hammer. House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7. Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10. Bob's Hardware store is a family owned and operated, independent hardware store and can offer hammers at a minimum price of $13. Given the scenario described, if the market price of hammers increased from $6 to $7: A. total producer surplus would increase. B. total producer surplus would remain unchanged. C. total producer surplus would decrease. D. Total producer surplus cannot be determined with the information given.

B.

Consider a market that is in equilibrium. If it experiences both a decrease in demand and a decrease in supply, what can be said of the new equilibrium? A. The equilibrium price and quantity will both fall. B. The equilibrium quantity will definitely fall, while the equilibrium price cannot be predicted. C. The equilibrium price will definitely fall, while the equilibrium quantity cannot be predicted. D. The equilibrium price and quantity will both rise.

B.

Considering the concept of cross-price elasticity, when two goods are complements: A. an increase in the price of one will cause a decrease in the quantity demanded of the other. B. an increase in the price of one will cause an increase in the quantity demanded of the other. C. a decrease in the price of one will cause a decrease in the quantity demanded of the other. D. None of these is true.

B.

Suppose that when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples per year to 2,000 pineapples. Using the mid-point method, the percentage change in price would be: A. 0.50. B. 50 percent. C. 0.54. D. 54 percent.

B.

The Widgetville County Woolfpack has won 90 percent of their last 20 games played under a full moon. This means: A. the weather affects how they play. B. there is a correlation between their play and the occurrence of a full moon. C. that full moons cause the team to play better. D. that causation can be found between the two events.

B.

The extra cost associated with producing or consuming the next unit is called the: A. variable cost. B. marginal cost. C. utility cost. D. sunk cost.

B.

The government is deciding where to put a $1 tax—either in a market with elastic supply and demand curves, or a market with inelastic supply and demand curves. If their aim is to raise the most revenue with the smallest deadweight loss, where should the tax be placed? A. In the market with elastic supply and demand curves B. In the market with inelastic supply and demand curves C. It is impossible to say without more information D. Since the burden is shared, it doesn't matter which market it is placed in

B.

Which of the following statements best describes the study of economics? A. Economics studies how the Federal Reserve handles fluctuation in business cycles. B. Economics studies how individuals and groups manage resources. C. Economics studies how people maximize returns in the stock market. D. Economics studies how governments determine appropriate tax rates.

B.

A car dealer advertises free satellite radio for one year with the purchase of a new car. This is an example of: A. bait and switch. B. marginal sales. C. an incentive. D. voluntary exchange.

C.

Assume the market is in equilibrium in the graph shown at demand D and supply S1. If the supply curve shifts to S2, and a new equilibrium is reached, which of the following is true? A. Consumer surplus increases, but producer surplus decreases. B. Consumer surplus decreases, but producer surplus increases. C. Both consumer and producer surplus increases. D. Both consumer and producer surplus decreases.

C.

If an effective price floor were placed in the market in the graph shown: A. quantity demanded would exceed quantity supplied & a surplus of 37 would occur . B. quantity supplied would exceed quantity demanded & a surplus of 37 would occur. C. the demand curve would have to shift & a surplus of 27 would occur. D. the supply curve would have to shift & a surplus of 27 would occur.

C.

Suppose a tax on buyers has been imposed in the graph shown. How much are buyers being taxed on each unit sold? What is the amount of tax revenue being generated from the tax? A. $4, $72 B. $8, $36 , C. $12, $72 D. $16, $48

C.

Transaction costs can be defined as: A. the costs incurred by buyer and seller in agreeing to and executing a sale of goods or services. B. the costs the government must pay to allow for an exchange. C. the costs the government must pay to ensure the execution of a sale of goods or services takes place. D. the costs the government incur to create a structured market for the exchange of buyers and sellers.

C.

When we assume that consumers want to pay the lowest price possible, we assume that consumers are: A. cheap. B. deceitful C. rational. D. informed.

C.

Which type of statement is most likely to include the word "should"? A. Positive statement B. Normative statement C. Fair statement D. Factual statement

C.

You decide to drive your car on a long road trip of 1,500 miles. The opportunity cost of driving your car: A. is the amount of money spent on gas. B. is zero because the car is paid for. C. includes lost wages that you could have earned instead of driving. D. None of these.

C.

A perfectly elastic demand: A. means people are extremely sensitive to a change in price. B. means demand will drop to zero if the price changes by any amount. C. is demonstrated by a horizontal demand curve. D. All of these are true.

D.

Assume a subsidy to buyers has been enacted in the market in the graph shown. With the subsidy, the buyers buy _____ units and pay _____ for each of them. And The subsidy causes? And The amount of money spent on this subsidy by the government is: A. 100; $46, 50 more units to be sold in this market, $2400 B. 100; $30, 150 more units to be sold in this market, $3600 C. 150; $40, 100 fewer units to be sold in this market, $6000 D. 150; $24, 50 more units to be sold in this market, $2400

D.

The economic concept of scarcity refers to the fact that: A. the United States will always have a battle to fight hunger. B. resources are often wasted and shortages are often the result. C. income must be redistributed through taxation in order to address income disparity. D. limited resources require economies to make choices among production alternatives.

D.

The supply curve: A. represents producers' willingness to sell. B. shows the minimum price producers will accept for any given quantity. C. visually displays the supply schedule. D. All of these statements are true.

D.

Which of the following prices could represent Sally's willingness to pay for a pair of shoes if she bought them for $45? A. $15.00 B. $25.00 C. $44.99 D. $55.00

D.