Micro Exam 1

40 Questions

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Economy Quizzes & Trivia

Questions and Answers
  • 1. 
    The most fundamental economic problem is?
    • A. 

      Business

    • B. 

      Government

    • C. 

      Scarcity

    • D. 

      The fact the US buys more goods from foreigners than we sell to foreigners

  • 2. 
    In the circular flow of income:
    • A. 

      Households are always buyers, firms are always sellers

    • B. 

      Households are buyers in the product markets, firms are buyers in resource markets.

    • C. 

      Households are sellers in the product markets. firms are sellers in resource markets

    • D. 

      Households buy only from other households

  • 3. 
    For an economist, the cost of something is:
    • A. 

      The amount of money you paid for it

    • B. 

      What you gave up to get it

    • C. 

      Always equal to its market value

    • D. 

      The amount of capital needed to produce it

  • 4. 
    When you purchase a product, the opportunity cost of that product is:
    • A. 

      The dollar amount that you pay for it

    • B. 

      The value of another product that you could have purchased instead of this one

    • C. 

      Greater if you are rich

    • D. 

      Zero if the product satisfies your need

  • 5. 
    The production possibilities curve shows that:
    • A. 

      An economy that is operating efficiently can have more of one good without giving up some of another good

    • B. 

      If we work hard, nothing is impossible

    • C. 

      Some of one good must be given up to get more of another good assuming that the economy is operating efficiently

    • D. 

      None of the above

  • 6. 
    A major technological advance would be represented on a production possibilities curve by a (an):
    • A. 

      Movement of the production possibilities curve toward a point outside the curve

    • B. 

      Movement toward the curve from a point inside the curve

    • C. 

      Outward shift of the curve

    • D. 

      Inward shift of the curve

  • 7. 
    The law of demand says that:
    • A. 

      Poor people demand more than rich people

    • B. 

      It is illegal for a firm to raise the price of a product that has a strong demand

    • C. 

      People must pay for what they buy

    • D. 

      Everything else being the same, the higher price the lower the quantity demanded

  • 8. 
    All of the following are likely to cause an increase in the supple of beef except:
    • A. 

      An increase in the number of cattle ranchers

    • B. 

      An increase in the demand for leather goods

    • C. 

      Increase in the demand for chicken

    • D. 

      A fall in the price of feed grain that is fed to cattle

  • 9. 
    An increase in price and decrease in quantity are consistent with a:
    • A. 

      Leftward shift in demand and no shift in supply

    • B. 

      Leftward shift in supply and no shift in demand

    • C. 

      Rightward shift in supply and a rightward shift in demand

    • D. 

      Rightward shift in supply and a leftward shift in demand

  • 10. 
    In the mid-1990s, the wall street journal reported a renewed interest in eating caviar. At the same time the supply of russian caviar was shrinking following the collapse of soviet communism . What was the most likely effect of these events on the price and quantity go caviar sold?
    • A. 

      Price rose and quantity sold fell

    • B. 

      Price rose and the effect on quantity of caviar sold is ambiguous

    • C. 

      price fell and the effect on the quantity of caviar sold is ambiguous

    • D. 

      Price fell and quantity sold rose

  • 11. 
    Assuming that bus travel is an inferior good, a decrease in consumer income, other things being equal will cause:
    • A. 

      An upward movement along the demand curve for air travel

    • B. 

      A downward movement along the demand curve for bus travel

    • C. 

      A rightward shift in the demand curve for bus travel

    • D. 

      No change in the demand curve for bus travel

  • 12. 
    In the market for chocolate chips an decrease in demand will result in:
    • A. 

      A decrease in price and an unchanged quantity

    • B. 

      An increase un both price and quantity

    • C. 

      An increase in price and a decrease in quantity

    • D. 

      A decrease in both price and quantity

  • 13. 
    Assuming that soybeans and tobacco can both be grown on the same land, a decrease  in the market price of tobacco  other things being equal causes a (an):
    • A. 

      Rightward shift of the supply curve for tobacco

    • B. 

      Upward movement along the supply curve for soybeans

    • C. 

      Rightward shift in the supply curve for soybeans

    • D. 

      Leftward shift in the supply curve for soybeans

  • 14. 
    If the price of a good or services decreases, then the demand curve for a complementary good or service will:
    • A. 

      Increase

    • B. 

      Remain the same

    • C. 

      Decrease

    • D. 

      Increase initially and then decrease

  • 15. 
    Consider the following diagram. Suppose that initially the demand curve for shrimp was like D, and the quantity demanded  was at point A . Now if there is an decrease in the price of shrimp then  ( but other things that may affect the demand for shrimp are unchanged) then this could be described by:
    • A. 

      A movement from a point A to a point like B

    • B. 

      A movement from point a to a point like C

    • C. 

      A shift of the demand curve from D1 to one like D2

    • D. 

      A shift of the demand curve from A to one like D3

  • 16. 
    Consider the four diagrams above. Floods in the U.S. Midwest the early 1990s reduced the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?
    • A. 

      I

    • B. 

      II

    • C. 

      III

    • D. 

      IV

  • 17. 
    A hurricane heavily damaged many oil refineries in the Gulf Coast. Shortly thereafter the price of gasoline rose significantly. These events suggest that a (an.):
    • A. 

      Drop in the supply of gasoline caused the price of gasoline to rise

    • B. 

      Increase in the supply of gasoline caused the price of gasoline to rise

    • C. 

      Increase in demand caused caused the price the price of gasoline to rise

    • D. 

      Decrease in demand caused the price of gasoline to rise

  • 18. 
    Assume that the equilibrium price for a good is $10. If the market price is $15 a:
    • A. 

      Shortage causes the price to fall toward $10

    • B. 

      Shortage causes the price to rise above $15

    • C. 

      Surplus causes the price to fall toward $10

    • D. 

      Surplus causes the price to rise toward $10

  • 19. 
    If in the market for oranges the equilibrium quantity has risen but equilibrium price had stayed the same , then:
    • A. 

      The demand and supply of oranges must have risen

    • B. 

      The demand for oranges must have risen but the supply must have fallen

    • C. 

      The demand and supply of oranges must have fallen

    • D. 

      The supply of oranges must have risen but the demand must have fallen

  • 20. 
    The government imposes a price ceiling below the equilibrium price. the price ceiling will cause:
    • A. 

      Quantity demanded to decrease

    • B. 

      Quantity supplied to increase

    • C. 

      A surplus of the good

    • D. 

      A shortage of the good

  • 21. 
    The government decides to impose a price ceiling on a good, because it thinks the market-determined price is "too high" if the government imposes the price ceiling below the equilibrium price :
    • A. 

      Consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price

    • B. 

      Producers will respond to the lower price and therefore offer fewer units for sale

    • C. 

      Consumers will purchase less of the good after the price ceiling is imposed

    • D. 

      All of the above will occur

  • 22. 
    The price elasticity of demand for a good is an attempt to measure:
    • A. 

      Consumer response to a price change

    • B. 

      The change in the amount purchased resulting from a change in consumer income

    • C. 

      The change in the price of a good resulting from a change in the cost of production

    • D. 

      The variability of price ( for any good ) over a period of one year

  • 23. 
    A sporting goods store observes that as they reduce the price of squash balls from $5 to $4, their quantity demanded rises from 200 to 220. The price elasticity of demand of squash balls can be estimated to be about
    • A. 

      0.1

    • B. 

      0.4

    • C. 

      2.3

    • D. 

      5

  • 24. 
    • A. 

      If elasticity is greater than one, a decline in price decreases total revenue

    • B. 

      If elasticity is greater than one a rise in price lowers the total revenue

    • C. 

      If elasticity is less than one a decline in price increases total revenue

    • D. 

      If elasticity is less than one a rise in price lowers total revenue

  • 25. 
    • A. 

      A

    • B. 

      B

    • C. 

      C

    • D. 

      None of the above

  • 26. 
    Suppose the price elasticity for demand for fishing lures equals 1 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should...
    • A. 

      Lower the prices in each state

    • B. 

      Raise price in each state

    • C. 

      Lower prices in South Carolina and raises prices in Alabama

    • D. 

      Leave prices unchanged in South Carolina and raises prices in Alabama

  • 27. 
    The price elasticity of demand is calculated by which of the following?
    • A. 

      Percentage change in price divided by the absolute change in quantity demanded

    • B. 

      Absolute change in price divided by the absolute change in quantity demanded

    • C. 

      Percentage change in quantity demanded divided by the absolute change in price

    • D. 

      Percentage change in quantity demanded divided by the percentage change in price

  • 28. 
    If the own price elasticity of demand is -1.8 , then?
    • A. 

      10 percent change in price will cause less than 10 percent change in quantity demanded

    • B. 

      $1 change in price will cause 1.8 unit change in quantity demanded

    • C. 

      10 percent change in price will cause more than 10 percent change in quantity demanded

    • D. 

      $10 increase in price will cause total expenditure to decrease by $18

  • 29. 
    Joe cut the prices in his shoe store by 20 %. The total revenue he received rose by 10% Based in those facts which is the strongest statement one could make:
    • A. 

      Demand curve was a straight line

    • B. 

      The price elasticity go demand was equal to minus 0.5

    • C. 

      The demand for the shoes he was selling was elastic

    • D. 

      The price elasticity of demand was zero

  • 30. 
    For which of the following pairs is the  cross-price elasticity of demand most likely to be positive?
    • A. 

      Classes/textbooks

    • B. 

      Coffee/cream

    • C. 

      Pepsi/Coke

    • D. 

      Tennis rackets/ tennis balls

  • 31. 
    If a good has very few substitutes  , its price elasticity  will be:
    • A. 

      Constant

    • B. 

      Larger than if there existed many close substitutes

    • C. 

      Smaller than is there existed many close substitutes

    • D. 

      Unit-elastic

  • 32. 
    The formula for the income elasticity of demand is:
    • A. 

      (Percentage change in income)/ (Percentage change in demand)

    • B. 

      (Absolute increase in income)/( Absolute increase in demand)

    • C. 

      (Percentage change in demand)/ (Percentage change in income)

    • D. 

      (Absolute increase in demand)/ (Absolute increase in income)

  • 33. 
    If the income elasticity of demand for eggs is zero then,
    • A. 

      People never buy eggs

    • B. 

      People will buy one more egg when their income is increased by 100%

    • C. 

      People will buy the same amount of eggs when their income is increases

    • D. 

      Eggs are given free to people with no income

  • 34. 
    When there is an increase in income, the percent change in the quantity demanded for food eaten away from home rises more than the the percent change in income. This means that food eaten away from the home is a:
    • A. 

      Inferior good

    • B. 

      Normal good

    • C. 

      Complement of food eaten at home

    • D. 

      None of the above

  • 35. 
    If two goods are complementary , their cross price elasticity of demand is:
    • A. 

      Positive

    • B. 

      Negative

    • C. 

      Zero

    • D. 

      Equal to 1

  • 36. 
    The economic effects of the minimum wage law can be analyzed by considering  minimum wage as:
    • A. 

      A sort of price ceiling in the labor market

    • B. 

      A sort of price floor in the labor market

    • C. 

      A kind of tax

    • D. 

      A way to eliminate unemployment

  • 37. 
    When the government imposes a tax in a market and collects the tax from  the producers:
    • A. 

      The price of the good rises by the full amount of the tax

    • B. 

      The supply curve shifts up by the full amount of the tax

    • C. 

      The supply curve shifts down by the full amount of the tax

    • D. 

      Both the demand and supply curves shift up by the full amount of the tax

  • 38. 
    The burden of a sales tax would fall on:
    • A. 

      Only the sellers

    • B. 

      Only the buyers

    • C. 

      Generally both the sellers and the buyers

    • D. 

      The sellers or the buyers, depending on who would send the check to the government

  • 39. 
    • A. 

      Theres is an decrease in producer surplus

    • B. 

      There is an decrease in consumer surplus

    • C. 

      There is an decrease in total surplus

    • D. 

      None of the above

  • 40. 
    If demand is perfectly  inelastic , the burden of a tax on suppliers is borne:
    • A. 

      Entirely by the suppliers

    • B. 

      Entirely by the consumers

    • C. 

      Mostly by the suppliers and partly by the consumers if the demand curve is inelastic

    • D. 

      Partly by the suppliers and mostly by the consumers if the demand curve is elastic