Microeconomics Practice Tests
Scarcity is a situation in which a. something is being wasted. b. something is on the verge of running out. c. some people are poor and others are rich. d. we are unable to satisfy all our wants. e. All of the above.
d. we are unable to satisfy all our wants.
Suppose the manufacturers of potato chips are subjected to a new ten cents tax. How much the consumer price of potato chips will rise after the tax depends upon a. the cost of producing potato chips. b. whether there are any externalities in chip manufacturing. c. the law of demand. d. which among supply and demand is relatively more elastic. e. The market price will rise by exactly ten cents.
d. which among supply and demand is relatively more elastic.
Which of the following best describes the output decision of a perfectly competitive market? a. Price = Marginal Cost. b. Price > Marginal Cost. c. Price < Marginal Cost. d. None of the above.
a. Price = Marginal Cost.
If a firm making widgets lowers its price by 10 percent and finds that it sells 8 percent more widgets, the elasticity of demand for its product equals (absolute value) a. 0.8 b. 1.2 c. 8 d. 10 e. there is not enough information to say.
a. 0.8
A trade that would make both Beth and Emma better off is a. 1.5 cars for 1 truck b. 1.5 trucks for 1 car c. 2 cars for 1 truck d. 1 car for 2.5 trucks e. No mutually beneficial trade is possible because Bert is better at both cars and trucks
a. 1.5 cars for 1 truck
Which of the following will not shift the demand for burritos? a. A big burritos sale b. The discovery that eating burritos cures cancer c. A rise in the price of burgers, a substitute d. A fall in the price of guacamole, a complement. e. All of the above will increase the demand for burritos.
a. A big burritos sale
Why are taxes so often imposed on land? a. Because tax revenue is higher when supply or demand is inelastic b. Because wealthier people buy more land c. Because demand for land is elastic and no one minds buying less d. None of the above
a. Because tax revenue is higher when supply or demand is inelastic
Suppose that the price of oranges and apples rises. What would you expect to happen to the market price and quantity of orange juice (apple juice is a substitute)? a. Equilibrium price would increase, but the impact on equilibrium quantity would be uncertain. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be uncertain. c. Both equilibrium price and quantity would increase. d. Equilibrium quantity would increase, but the impact on equilibrium price would be uncertain. e. Equilibrium quantity would decrease, but the impact on equilibrium price would be uncertain.
a. Equilibrium price would increase, but the impact on equilibrium quantity would be uncertain.
If a 10% increase in the price of beer reduces the quantity demanded by 8%, then demand for beer is a. Inelastic b. Elastic c. Unit elastic d. has increased e. has decreased.
a. Inelastic
A production point outside the production possibility frontier represents which of the following situations? a. It is impossible for the economy to be at that production point given the resources that the economy has b. The economy is inefficient and not is not utilizing all its resources completely c. The economy is using its resources in the best possible way d. None of the above
a. It is impossible for the economy to be at that production point given the resources that the economy has
For which of the following will there be a negative externality? a. Jeff Bridges brings his Hollywood friends to his MT ranch, and they clog the road. b. Jeff Bridges makes his workers on the ranch work late into the night entertaining guests but pays them extra salary. c. Jeff Bridges throws empty beer cans out his bedroom window and into his walled-off garden. d. All will create negative externalities.
a. Jeff Bridges brings his Hollywood friends to his MT ranch, and they clog the road.
Which of the following are marginal costs associated with studying economics for an extra hour? a. The T.V. program you would otherwise have watched b. The cost of your economics textbook. c. The tuition paid for that economics class d. All of the above.
a. The T.V. program you would otherwise have watched
The concept of comparative advantage explains why if UK becomes much more productive a. USA ends up being better off b. USA ends up being worse off c. USA is unaffected d. UK becomes poorer
a. USA ends up being better off
The effect of the 1970s' price ceiling on gasoline was a. a lot of motorist time wasted waiting in long lines at gas stations. b. a fairer distribution of gasoline. c. an efficient distribution of gasoline. d. Both b and c.
a. a lot of motorist time wasted waiting in long lines at gas stations.
"Senior citizens deserve an income that will allow them to live in comfort for their remaining years." This is an example of a. a normative statement. b. a positive statement. c. neither a positive nor normative statement. d. a statement reflecting the concept of scarcity. e. a recognition of opportunity costs.
a. a normative statement.
You paid $20000 for your car, but you have no use for it now. You want to sell the car, but the best offer you are now getting for the car is $14000. You should sell the car a. if its worth to you is less than $14000. b. if its worth to you is more than $14000. c. if its worth to you is more than $20000. d. only if you get $20000 for it.
a. if its worth to you is less than $14000.
Anything that increases the value that potential buyers receive from a good may be expected to a. increase the demand b. increase the supply c. increase both demand and supply d. increase the demand but decrease the supply
a. increase the demand
The cost of a tourist guide of taking a day off a. is higher during the vacation season when many people go out on vacation than during the busy school season. b. falls when it is the vacation season c. rises during the busy school season d. None of the above.
a. is higher during the vacation season when many people go out on vacation than during the busy school season.
Demand for PB's maple nut ice cream tends to be elastic because a. other flavors of ice cream are good substitutes. b. the market is very broadly defined. c. there are few close substitutes d. it must be eaten quickly.
a. other flavors of ice cream are good substitutes.
In a freely operating market with excess demand or excess supply: a. price adjusts to bring quantity supplied and quantity demanded into balance. b. there will be a shortage or a surplus. c. the country will be an importer or an exporter. d. demand will decrease, or supply will decrease.
a. price adjusts to bring quantity supplied and quantity demanded into balance.
When economists refer to tradeoffs, they are highlighting a. the existence of scarcity b. the fact that trade makes us better off c. the importance of gains from trade d. the importance of ensuring that gains from trade are distributed equitably e. All of the above
a. the existence of scarcity
We would expect a shortage or surplus created by a price control to be greater: a. the more elastic demand and supply. b. the less elastic demand and supply. c. if supply is greater than demand. d. if demand is greater than supply.
a. the more elastic demand and supply.
If you are searching for a new pair of skis, it makes sense to keep looking as long as a. the shopping time matters less to you than the lower price you expect to get. b. you haven't found the lowest price available. c. there are stores left that you haven't checked. d. you face no opportunity costs at all. e. All of the above
a. the shopping time matters less to you than the lower price you expect to get.
In a perfectly competitive market, mango producer has the following marginal cost function : MC = 2 + 0.05Q. The price that this mango producer faces in the market is $10. How many mangoes does this mango producer decide to produce? (Hint: In perfect competition, output decision is given by P=MC). a. 140. b. 160. c. 180. d. 200.
b. 160.
Below is a table showing the MC and MB for product A: Quantity 1 2 3 4 5 MB 15 10 8 7 2 MC 6 7 7 8 9 If they charge you $12 for an "All you can consume" pass, how many will you consume? a. None, as it is not worth paying that price given the benefits. b. At least 5 c. 4 d. 3 e. 1
b. At least 5
If Beth can produce 25 cars or 25 trucks with the same resources that Emma can produce 20 cars or 10 trucks, then a. Beth has the comparative advantage in cars, Emma in trucks. b. Beth has the comparative advantage in trucks, Emma in cars. c. Beth has the comparative advantage in both cars and trucks. d. Both a and d.
b. Beth has the comparative advantage in trucks, Emma in cars.
Which of the following trades would make both countries better off? a. Bulgaria makes hats and trades them for coats at a price of 1 coat = 3 hats. b. Bulgaria makes coats and trades them for hats at a price of 1 coat = 3 hats. c. Bulgaria makes hats and trades them for coats at a price of 1 coat = 4 hats. d. Bulgaria makes coats and trades them for hats at a price of 1 coat = 4 hats. e. Bulgaria makes coats and trades them for hats at a price of 1 coat = 2.5 hats.
b. Bulgaria makes coats and trades them for hats at a price of 1 coat = 3 hats.
What would happen in the market for shredded wheat cereal if the price of wheat decreased and the price of corn flakes (a substitute) decreased? a. Equilibrium price increases, but the impact on equilibrium quantity would be uncertain. b. Equilibrium price decreases, but the impact on equilibrium quantity would be uncertain. c. Equilibrium quantity increases, but the impact on equilibrium price would be uncertain. d. Equilibrium quantity decreases, but the impact on equilibrium price would be uncertain.
b. Equilibrium price decreases, but the impact on equilibrium quantity would be uncertain.
There is no deadweight/welfare loss in case of imposition of subsidies" - TFU. a. True b. False c. Uncertain d. There is not enough information to conclude.
b. False
For which of the following will there be a positive externality: a. Fred donates a park to Clemson. b. Fred re-paves Highway 123 so that he can travel from the airport to his new park more comfortably. c. Pepsi improves its cola's formula so that it tastes even more delicious. d. None of the above.
b. Fred re-paves Highway 123 so that he can travel from the airport to his new park more comfortably.
Which of the following would you expect to have the least elastic demand? a. Wheat bread made by Pepperidge Farm. b. Headache medicine c. Wheat bread made by Pepperidge Farm and sold at Bi-Lo. d. There is not enough information to determine.
b. Headache medicine
If India can make 10 roses or 40 daffodils and Nepal can make 5 roses or 10 daffodils, then a. India has the absolute advantage in both products and the comparative advantage in roses. b. India has the absolute advantage in both products and the comparative advantage in daffodils. c. India has the absolute and the comparative advantage in both products. d. Nepal has the absolute advantage in roses and the comparative advantage in roses. e. Nepal has the comparative and absolute advantage in both products.
b. India has the absolute advantage in both products and the comparative advantage in daffodils.
What will happen to the equilibrium quantity of potato chips after the tax? a. It will rise. b. It will fall. c. It will rise if demand is more elastic than supply. d. It will rise if supply is more elastic than demand.
b. It will fall.
If Bulgaria can make 500 hats or 200 coats or some combination, and Peru can make 400 hats or 100 coats or some combination, then a. Bulgaria has the comparative advantage in hats and Peru in coats. b. Peru has the comparative advantage in hats and Bulgaria in coats. c. Bulgaria has the comparative advantage in both hats and coats. d. Neither has the comparative advantage in either product since the differences aren't large
b. Peru has the comparative advantage in hats and Bulgaria in coats.
How will the demand curve of soaps shift after it becomes a common knowledge that bacteria and other organisms cause and spread disease? a. Shifts left. b. Shift right. c. Does not shift at all. d. Cannot be determined.
b. Shift right.
Jon needs 200 pieces of Filet mignon to cater a wedding. First, Jon visits all the butcher shops located within ten miles but can't get enough pieces. Then Jon visits all butcher shops located between 10 and 50 miles, but still is short a few pieces. Finally, Jon visits all butcher shops located within 50 and 100 miles and gets the last few pieces he needs. Jon's struggles illustrate a. The law of demand b. The law of supply c. The principle of absolute advantage d. That sometimes the gains from trade aren't worth it.
b. The law of supply
What is the most likely effect of agricultural price supports, which guarantee a minimum price for such products as peanuts? a. They lead to shortages. b. They lead to surpluses. c. They reduce the demand for agricultural products. d. They increase the supply of agricultural products.
b. They lead to surpluses.
Suppose the elasticity of demand for apple sauce is less than the elasticity of supply. Who will end up paying most of the $1 tax? a. producers. b. consumers. c. apple growers. d. There is not enough information to say.
b. consumers.
The costs that influence decisions are always a. average costs. b. marginal costs c. sunk costs. d. total costs.
b. marginal costs
We would expect cigarette taxes to reduce smoking more among younger people than among older people if: a. older people have a higher level of demand. b. older people have less elastic demand than younger people. c. younger people have a higher level of demand. d. younger people have less elastic demand than older people.
b. older people have less elastic demand than younger people.
Air pollution creates a negative externality. Therefore, a. social welfare will be maximized when all pollution is eliminated. b. social welfare will be maximized when some, but not necessarily all, pollution is eliminated. c. governments should encourage firms to reduce pollution by at least 10%. d. polluting firms should be carefully regulated. e. All of the above
b. social welfare will be maximized when some, but not necessarily all, pollution is eliminated.
Jeremy manages the local rug cleaning service, which cleans rugs and carpets. He is employing marginal analysis when he compares a. the total revenue from cleaning Persian carpets to the total cost. b. the extra revenue from cleaning a few more Persian carpets to the extra cost. c. the average cost of cleaning carpets to the average cost of cleaning rugs, in order to specialize more efficiently. d. how much his cleaning service costs relative to that of his nearest competitor. e. All of the above.
b. the extra revenue from cleaning a few more Persian carpets to the extra cost.
Lauren is a manager for Dell and must decide whether to produce a few additional printers. She is choosing at the margin when she compares a. the total revenue from sales of printers to the total cost of producing printers. b. the extra revenue from selling a few additional printers to the extra costs of producing the additional printers. c. Dell's printer sales to sales of competing printers. d. the extra revenue from selling a few additional printers to the average cost of producing the additional printers. e. All of the above
b. the extra revenue from selling a few additional printers to the extra costs of producing the additional printers.
If a price ceiling is set above the market clearing price of toasters: a. a shortage of toasters will result. b. toaster inventories at appliance stores will be larger. c. toaster sellers will spend on advertising. d. the quantity of toasters purchased will be more than quantity supplied.
b. toaster inventories at appliance stores will be larger.
Use the graph on Questions 3: #23 At any price above the equilibrium price: a. total surplus will be larger. b. total surplus will be smaller. c. total surplus will be the same, but consumers will get more of the gain. d. total surplus will be the same, but producers will get more of the gain.
b. total surplus will be smaller.
Suppose the government puts a tax of $1 on each jar of apple sauce purchased. Assuming demand for apple sauce is not perfectly inelastic, a result of the tax, the price consumers pay for a jar of apple sauce a. will rise by exactly $1. b. will rise by less than $1. c. will rise by more than $1. d. does not change. e. May rise or fall, depending on the elasticity of supply.
b. will rise by less than $1.
The idea that "people respond to incentives" would lead us to conclude that the murder rate a. would rise if tougher penalties are enacted. b. would fall if tougher penalties are enacted. c. would be unaffected by changes in penalties, since crimes are committed in moments of passion. d. depends entirely on the level of penalties enacted
b. would fall if tougher penalties are enacted.
If you decide that you are willing to pay $200 for a Tag Heuer watch and after buying it, you emerge with a consumer surplus of $45. How much did you actually pay for the watch? a. $200 b. $245 c. $155 d. Impossible to determine from the given information.
c. $155
If India can make 10 roses or 40 daffodils and Nepal can make 5 roses or 10 daffodils, then both countries could be made better off by participating in trade at a price of a. 1 rose for 5 daffodils. b. 5 roses for 1 daffodil. c. 1 rose for 3 daffodils. d. 3 roses for 1 daffodil. e. No trade could make both countries better off.
c. 1 rose for 3 daffodils.
Below is a table showing the MC and MB for product A: Quantity 1 2 3 4 5 MB 15 10 8 7 2 MC 6 7 7 8 9 Use the Marginal Principle to determine how much of A will be consumed. a. 5, as you get total benefits of $42 versus a total cost of $37 b. 4, as you get an average benefit of $10 versus an average cost of $7. c. 3 d. 1, as you get a net benefit of $9.
c. 3
Which of the following will increase the demand for tea? a. A blight destroys 30% of the tea crop in India. b. Wonderful weather doubles the usual tea crop. c. A rise in the price of coffee. d. New technology allows tea to be made more cheaply. e. All of the above.
c. A rise in the price of coffee.
Which of the following would not be expected to shift down the demand for peanut butter? a. An increase in the price of jelly (a complement). b. A decrease in the price of tuna (a substitute). c. An increase in the price of peanut butter. d. The discovery that peanut butter causes cancer. e. All would reduce the demand for peanut butter
c. An increase in the price of peanut butter.
Use the graph on Questions 3: #23 What area(s) show(s) total surplus at the equilibrium price? a. A+B b. A+B+C+D c. B+C d. B+C+G+F e. B
c. B+C
Suppose you sell jewelry boxes, and a business consultant you have hired determines that demand for your product is elastic. If you want to increase your total revenue, you should therefore: a. Keep the price as it is. b. Raise the price. c. Lower prices. d. None of the above.
c. Lower prices.
Which of the following will increase the supply of photocopiers? a. A fall in the price of photocopy paper (a complement). b. A rise in the price of scanners (a substitute). c. New technology that makes it possible to manufacture photocopiers much more cheaply. d. All of the above.
c. New technology that makes it possible to manufacture photocopiers much more cheaply.
Is the noise of jet engines a negative externality for baggage handlers at airports? a. Yes, because even with protection devices, their hearing may be damaged. b. Yes, because the costs are greater than the benefits. c. No, because they are paid to live with the noise. d. No, unless it leaves them with permanent hearing loss.
c. No, because they are paid to live with the noise.
Which of the following is the most plausible explanation for supply and demand decreasing of an NBA basketball game? a. The price of the contract for basketball players rose while the price of basketballs fell. b. The price of the contract for basketball players fell while demander's income increased, and NBA basketball in a normal good. c. The price of the contract for basketball players rose while the price of NHL hockey games (a substitute) fell. d. The price of the contract for hockey players rose while the cost of basketball jerseys fell.
c. The price of the contract for basketball players rose while the price of NHL hockey games (a substitute) fell.
Use the graph on Questions 3: #26 A surplus (excess supply) of bottles will occur if: a. a minimum price of $2 is established. b. a maximum price of $2 is established. c. a minimum price of $5 is established. d. a maximum price of $5 is established.
c. a minimum price of $5 is established.
How will the elasticity of the demand curve of soap change after it becomes a common knowledge that bacteria and other organisms cause and spread disease? a. become more elastic b. no change in elasticity c. become more inelastic d. Cannot be determined
c. become more inelastic
The real cost of any action a. depends upon the number of suppliers b. is the cost to consumer plus the cost to producer c. is the value of the alternative sacrificed d. All of the above
c. is the value of the alternative sacrificed
The government recognizes that the price of roses has increased at absolutely the worst time for consumers. So, it passes a law that no more than $1.50 can be charged for each rose (instead of the $5 being charged now). The most likely outcome is: a. consumers will buy more roses. b. suppliers will sell more roses. c. it will be harder to find roses in florist's shop. d. the demand for roses will become more elastic.
c. it will be harder to find roses in florist's shop.
A firm faces the following demand schedule: Price | Quantity $20 10 $19 20 $18 30 $17 40 $16 50 The firm is considering changing the price from $16 to $17. If it does so a. its total revenue will increase, because the percent increase in price is greater than the percent decrease in quantity demanded. b. its total revenue will increase, because the percent increase in price is less than the percent decrease in quantity demanded. c. its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded. d. its total revenue will decrease, because the percent increase in price is greater than the percent decrease in quantity demanded.
c. its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded.
Attempting to correct a negative externality through regulation a. will always make things better. b. can't make things worse. c. might make things better or worse, depending upon how the regulation is set. d. is always a bad idea. e. is the preferred approach of economists.
c. might make things better or worse, depending upon how the regulation is set.
The price of ham rises sharply. What happens to the equilibrium price and quantity of cheese (ham and cheese are complements)? a. price rises, quantity falls. b. price rises, quantity rises. c. price falls, quantity falls. d. price falls, quantity rises.
c. price falls, quantity falls.
Marginal benefits are the benefits a. that your activity provides to society b. that exceed the marginal costs c. that arise from a small increase in the activity d. that are always equal to the price you must pay to engage in the activity
c. that arise from a small increase in the activity
If you've purchased an all you can eat ticket to a clam roast for $25, good economic thinking would tell you to take one last plateful if a. the value of that plateful to you is greater than $25 b. the value of that plateful to you is greater than or equal to $1 and you've already taken 24 platefuls that you value at $1 each. c. the value of that plateful to you is greater than zero. d. none of the above.
c. the value of that plateful to you is greater than zero.
If India can make 10 roses or 40 daffodils and Nepal can make 5 roses or 10 daffodils, then a. no trade is possible, since India is better at producing both roses and daffodils. b. trade would make both countries better off if India specializes in roses and Nepal in daffodils. c. trade would make both countries better off if Nepal specialized in roses and India in daffodils. d. Nepal should buy both daffodils and roses from India.
c. trade would make both countries better off if Nepal specialized in roses and India in daffodils.
According to the theory of comparative advantage, a country will export a good only if a. it can produce the good using less labor than other countries b. its producers pay low wages c. what it gives up to produce the good is less than what importers give up. d. its labor force is more productive than those of importing countries e. All of the above
c. what it gives up to produce the good is less than what importers give up.
Suppose Kris can pick either 2 pounds of coffee or 4 pounds of nuts in one hour. Tom can pick either 1 pound of coffee or 1 pound of nuts in one hour. What is Kris' opportunity cost of gathering 1 pound of nuts? a. 1 pound of coffee b. 2 pounds of coffee c. ½ a pound of coffee d. 4 pounds of coffee
c. ½ a pound of coffee
The ultimate cost of any choice is a. the dollars expended. b. what someone else would be willing to pay. c. the after-tax cost. d. the highest-valued alternative forgone
d. the highest-valued alternative forgone
Below is a table showing the MC and MB for product A: Quantity 1 2 3 4 5 MB 15 10 8 7 2 MC 6 7 7 8 9 If these benefits and costs are yours, how much will you be willing to pay for a meal pass that will allow you to consume all that you want? (Hint: For all you can eat, your MC = 0 for each piece of A. So, your willingness to pay for the meal pass should be the sum of marginal benefits of quantities of A consumed as long as MB > 0). a. $ 8 b. $ 15 c. $ 33 d. $ 42
d. $ 42
If Gary sells a shirt for $40, and his producer surplus from the sale is $23, his opportunity cost of producing the shirt must have been a. $63. b. $40. c. $23. d. $17.
d. $17.
You see this deal at the supermarket: one frozen pizza for $3.00, two for $5.00. Your marginal cost for the second pizza is a. $ 5 b. $ 3 c. $2.50 d. $2.00
d. $2.00
A perfectly competitive industry is characterized by which of the following properties? [(i) through (iv) are the characteristics; you will choose from options a, b, c, or d as your answer.] (i) Many buyers and sellers. (ii) Individual producers face perfectly inelastic demand curves for their products. (iii) Goods offered for sale are largely identical with a large number of substitutes. (iv) Producers are price takers. a. (i), (ii), and (iv). b. (i) only. c. (i), (ii), and (iii). d. (i), (iii), and (iv). e. (i), (ii), (iii), and (iv).
d. (i), (iii), and (iv).
Which of the following are examples of scarce goods? a. Pepsi b. Insulin c. Platinum d. All of the above e. Just b and c
d. All of the above
Suppose that after some months, the law is deemed unconstitutional. The new rule states that if commuters want the paint factory to stop emissions, they have to pay the factory owner to do so. The commuters get together and offer the paint factory owner a payment equal to the full cost of all their additional commuting time. As a result: a. the externality is internalized. b. the efficient (surplus maximizing) quantity of paint will be produced. c. the paint company bears all the costs of its production decision. d. All of the above. e. None of the above.
d. All of the above.
Suppose that the odor emitted by a paint factory is so bad that the commuters have to make extra long trips to avoid driving by the factory. A law is passed that requires paint factories to reimburse commuters for the additional commute time. If the costs of the additional commute times are accurately measured, a. the externality is internalized. b. the efficient (surplus maximizing) quantity of paint will be produced. c. the paint company bears all the costs of its production decision. d. All of the above. e. Only a and b.
d. All of the above.
The demand curve shows _______ and the supply curve shows ______. a. how much potential buyers value the good; the willingness of potential sellers to sell the good. b. the marginal benefit of the good to demanders; the marginal cost of the good to suppliers. c. the quantity that will be bought at each price; the quantity that will be sold at each price. d. All of the above.
d. All of the above.
The economic way of thinking would lead us to conclude that obesity rates would rise if a. food becomes easier to prepare. b. food prices in the grocery store drop. c. exercise becomes more difficult to engage in. d. All of the above. e. Just a and b.
d. All of the above.
Which of the following is characteristic of the market equilibrium? a. Those most willing to pay obtain the goods. b. Those with the lowest costs sell the goods. c. The gains from trade are as large as possible. d. All of the above.
d. All of the above.
Which the following are marginal benefits associated with studying economics for an extra hour? a. A higher grade in your economics class. b. A higher overall GPA. c. A better chance of getting a good job after graduation. d. All of the above.
d. All of the above.
Use the graph on Questions 3: #23 At the equilibrium price, what is the consumer surplus and what is the producer surplus? a. Consumer surplus : A+B+C+D and Producer surplus : E+F+G+H b. Consumer surplus : C and Producer surplus : B c. Consumer surplus : A+H and Producer surplus : D+E d. Consumer surplus : B and Producer surplus : C
d. Consumer surplus : B and Producer surplus : C
In a graph, if the negatively-sloped line shifts to the left and the positively-sloped line has also shifted left, then what does the graph show has happened in the market? a. Demand has increased; supply has decreased. b. Demand has decreased; supply has increased. c. Demand has increased; supply has increased. d. Demand has decreased; supply has decreased
d. Demand has decreased; supply has decreased
What would happen in the market for news programs if the salaries of news anchors fall while the price of newspapers rises? a. Equilibrium price increases, but the impact on equilibrium quantity would be uncertain. b. Equilibrium price decreases, but the impact on equilibrium quantity would be uncertain. c. Both equilibrium price and quantity would increase. d. Equilibrium quantity increases, but the impact on equilibrium price would be uncertain. e. Equilibrium quantity decreases, but the impact on equilibrium price would be uncertain
d. Equilibrium quantity increases, but the impact on equilibrium price would be uncertain.
Use the graph on Questions 3: #26 The size of the surplus in the market for bottles will be: a. Q2 - Q1. b. Q3 - Q1. c. Q4 - Q1. d. Q5 - Q2. e. Q3 - Q2.
d. Q5 - Q2.
If equilibrium price has fallen from $5.50 to $4.75 while equilibrium quantity has risen from 10,000 to 12,000, we would know that a. Demand has decreased. b. Demand has increased c. Supply has decreased. d. Supply has increased.
d. Supply has increased.
When a good is taxed, and we have perfectly inelastic supply curve, and a negatively sloped demand curve, which of the following is true? a. The burden of the tax is equally shared by both producers and consumers. b. The burden of the tax is unequally shared by both producers and consumers. c. The entire burden of the tax is borne by the consumers. d. The entire burden of the tax is borne by the producers.
d. The entire burden of the tax is borne by the producers.
If you decide to go to a movie this evening rather than study economics, you thereby demonstrate that a. you don't care about getting good grades b. you hate economics c. you would rather have fun than fulfill your responsibilities d. at the margin, you value two hours of movie watching more than two hours of studying economics e. none of the above.
d. at the margin, you value two hours of movie watching more than two hours of studying economics
A firm faces the following demand schedule: Price | Quantity $20 10 $19 20 $18 30 $17 40 $16 50 The firm is considering changing the price from $16 to $17. Demand is: a. upward sloping. b. equal to supply. c. going down. d. elastic. e. inelastic.
d. elastic.
The demand curve represents _____ while the supply curve represents _____. a. increases, decreases b. decreases, increases c. prices, quantities d. marginal benefits, marginal costs
d. marginal benefits, marginal costs
An externality arises when a. the government is unable to intervene in the operation of a market. b. markets are not able to reach equilibrium. c. a firm sells its product in a foreign market. d. one person's actions affect the well-being of others without their consent. e. someone ends up paying more for a good than they want.
d. one person's actions affect the well-being of others without their consent.
If equilibrium price in a market has risen from $10 to $25 and the equilibrium quantity has fallen from 50,000 to 35,000, we would know that a. demand has increased. b. supply has increased. c. demand has decreased. d. supply has decreased
d. supply has decreased
If someone tells you that they "can't live without" something, what would you assume? a. that their demand is likely to be elastic. b. that the law of demand won't apply to them. c. that they have excess demand. d. that their demand is likely to be inelastic.
d. that their demand is likely to be inelastic.
In order to benefit yoga instructors, "upon whom the health of our great country depends", the government decides to subsidize yoga classes. The effect of this subsidy would be: a. an increase in the number of yoga classes offered. b. a higher price received by yoga instructors per student taught. c. a bill for taxpayers. d. a deadweight loss. e. All of the above. f. None of the above.
e. All of the above.
Which of the following will increase the market price of coffee? a. The discovery that coffee cures cancer. b. A terrible storm in Brazil that destroys half the coffee crop. c. An increase in the price of tea (a substitute). d. A fall in the price of creamer (a complement). e. All of the above.
e. All of the above.
Suppose a law requires employers to provide health insurance coverage for "contract employees" (i.e., workers on short-term contracts), "because contract employees deserve health insurance too!" What would our economic model lead us to predict? a. Firms would use fewer contract employees b. Firms would reduce the amount they pay contract employees c. Most current contract employees would be made better off d. All of the above e. Just a and b
e. Just a and b
The marginal costs of your European vacation include a. your passport application fee if you wouldn't have gotten a passport otherwise b. your plane ticket to Europe. c. all the food you consume in general to stay alive. d. All of the above e. Just a and b.
e. Just a and b
People who are willing to stand in long lines at the movie ticket counter to get a lower price are a. not rational b. haven't evaluated the marginal cost of the time they give up c. would give up any amount of time to save a little money d. All of the above e. None of the above
e. None of the above
By keeping the prices of medical services "affordable" by mandating a lower price, the programs for the treatment of elderly people helps to ensure which of the following? a. Those who value the treatment most will get it first. b. There are a large number of doctors ready and willing to treat the elderly people. c. No one has to wait in lines to get the treatment that he/she wants. d. All of the above. e. None of the above.
e. None of the above.
If the equilibrium price in the market for burgers is $9 and the government sets a price ceiling of $12, then: a. there will be a shortage. b. quantity supplied will permanently exceed the quantity demanded. c. quantity demanded will permanently exceed the quantity supplied. d. All of the above. e. None of the above.
e. None of the above.
Victoria Valley Vineyards, a South Carolina wine producer, has spent years perfecting the taste of their white wines. After spending millions of dollars in expenditure, they produce a Signature Chardonnay that is voted in the state - the best ever produced. However, wine drinkers are shocked by the exorbitant price which is almost four times higher than other competitor wines. Observing all these, as economists, we can conclude that: a. the Vineyard's new wine results in positive externalities for the wine drinkers who purchase it. b. the extremely high price of the Vineyard's new wine results in negative externalities for the wine drinkers who purchase it. c. the high development costs paid by the Vineyard will result in negative externalities if the Vineyard cannot sell enough wines to recoup its investments. d. All of the above. e. None of the above.
e. None of the above.
You were considering renting a car and driving to New York for Christmas. Which of the following would be considered as Marginal costs for you in making your decision? a. The car rental price b. Price of gasoline c. The enjoyment of driving d. All of the above e. Only a and b
e. Only a and b
A demand curve indicates the value consumers get from a good. It is measured as a. the benefits people receive less the cost. b. the quantity people will buy at various prices. c. the prices people prefer to pay. d. All of the above. e. Only b and c.
e. Only b and c.
Which of the following is likely to have the least elastic supply? a. Coca Cola b. Soft drinks c. automobiles. d. Computers e. Paintings by Michelangelo.
e. Paintings by Michelangelo.
If a supplier can sell as much as it wants at $10 per unit, but none at all at $10.01, we know that the demand it faces is: a. Elastic. b. Inelastic c. Unit elastic d. Perfectly inelastic e. Perfectly elastic
e. Perfectly elastic
Use the graph on Questions 3: #26 If a minimum price of $2 is established, the size of the surplus in the market for bottles will be: a. Q4 - Q1. b. Q5 - Q2. c. Q3 - Q2. d. There will be a shortage rather than a surplus. e. There will be neither a shortage nor a surplus.
e. There will be neither a shortage nor a surplus.
If you pay $400 for a season pool pass at a private club, the marginal cost to you of swimming on any given weekday will be a. $400. b. $10 if you swim 40 times. c. $20 if the swim season lasts twenty weeks. d. $3 if the swim season lasts twenty-one weeks and there are seven days in a week e. Zero
e. Zero
Which of the following options is a True statement? a. A positive statement involves value judgement b. A positive statement is just a straight fact while a normative statement involves value judgement c. A normative statement may hold for some people but may not be true in the mind of others. d. All of the above e. None of the above f. Just b and c
f. Just b and c
See the graph on Questions 3: #9 If the supply curve including social cost is B and the supply curve reflecting private cost alone is S, then there must be _____________ and as a result, the amount of good produced is _______ from the society's point of view. a. a positive externality ; efficient. b. a positive externality ; too less. c. a positive externality ; too much. d. a negative externality ; efficient. e. a negative externality ; too less. f. a negative externality ; too much.
f. a negative externality ; too much.
Now suppose that Congress decides, instead, to raise the price of yoga classes through a minimum price law (a price floor). The effect of the law will be: a. an increase in the number of yoga classes offered. b. a higher price received by yoga instructors per student taught. c. a deadweight loss. d. an increase in the number of students taking yoga classes. e. All of the above. f. All are true except option a. g. All are true except option d.
g. All are true except option d.
