Econ Exam 1 (Non-graph Questions)

21 Questions | Total Attempts: 39

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Econ Quizzes & Trivia

Ch. 1-7, 9


Questions and Answers
  • 1. 
    Senator Smith wants to increase taxes on people with high incomes & use it to help the poor. Senator john argues this would discourage successful people from working & make society worse off. An economist would say:
    • A. 

      Agree with senator smith

    • B. 

      A good decision requires both viewpoints

    • C. 

      We should agree with senator Jones

    • D. 

      There are no tradeoffs between equity and efficiency

  • 2. 
    When computing the opportunity cost of attending a concert you should include:
    • A. 

      The price you pay for the ticket and the value of your time

    • B. 

      Neither the price of the ticket nor the value of your time

    • C. 

      The value of your time, but not the price you pay for the ticket

    • D. 

      The price you pay for the ticket, but not the value of your time

  • 3. 
    In a market economy, supply and demand determine:
    • A. 

      The price each good is sold at, but not the quantity sold

    • B. 

      Both the quantity and supply of the good

    • C. 

      Neither the quantity or the price at which it's sold

    • D. 

      The quantity, but not the price it's sold at

  • 4. 
    A competitive market is one in which…
    • A. 

      Many sellers, each seller can set the price of the product

    • B. 

      Only one seller, many buyers

    • C. 

      Many sellers that compete in a way that some sellers are being forced out of the market

    • D. 

      So many buyers and sellers that each has a negligable impact on the product's price

  • 5. 
    An early frost in the vineyards of Napa Valley causes:
    • A. 

      An increase in supply, decrease in price

    • B. 

      A decrease in demand, decreasing price

    • C. 

      A decrease in supply, increasing price

    • D. 

      An increase in demand, increasing price

  • 6. 
    Studies show beef is harmful to our health. As a result, there is less beef produced. Which explains the decrease in production?
    • A. 

      Beef producers, concerned about health, produce less beef

    • B. 

      Customers, concerned with their health, decrease demand for beef, lowering the equilibrium price, making it less attractive to produce

    • C. 

      Protestors have made it hard for buyers & sellers to meet in the marketplace

    • D. 

      Gov't officials, concerned about health, ordered producers to produce less beef

  • 7. 
    Elasticity is:
    • A. 

      The study of how the allocation of resources affect economic well-being

    • B. 

      Measure of how much buyers & sellers respond to changes in market conditions

    • C. 

      The maximum amount that a buyer will pay for a good

    • D. 

      The value of everything a seller must give up to produce a good

  • 8. 
    Goods with many close substitutes tend to have
    • A. 

      Negative income elasticities of demand

    • B. 

      More elastic demands

    • C. 

      Price elasticities of demand that are unit elastic

    • D. 

      Less elastic demands

  • 9. 
    If the price elasticity of demand for a good is 0.4, a 10% price increase results in a
    • A. 

      4% decrease in quantity demanded

    • B. 

      0.4% decrease in quantity demanded

    • C. 

      40% decrease in quantity demanded

    • D. 

      2.5% decrease in quantity demanded

  • 10. 
    The flatter the demand curve through a given point, the
    • A. 

      Greater the price elasticity of demand at that point

    • B. 

      Closer the price elasticity of demand will be to the slope of the curve

    • C. 

      Greater the absolute value of the change in total revenue when there's a movement from that point upword and to the left along the demand curve

    • D. 

      Smaller the price elasticity of demand at that point

  • 11. 
    A legal maximum on a good's price is called a price
    • A. 

      Support

    • B. 

      Floor

    • C. 

      Subsidy

    • D. 

      Celing

  • 12. 
    The demand for noodles is elastic, and the demand for cigarettes is inelastic and the supply of cigs is elastic. If a tax were levied on the sellers of both commodities, we would expect that the
    • A. 

      Burden of both taxes falls more heavily on the buyers than the sellers

    • B. 

      Noodle burden falls more heavily on the buyers, and the cigarette burden falls more on the buyers

    • C. 

      Burden of noodles falls more on the sellers, and cigarette burden falls more on the buyers

    • D. 

      Burden of both taxes falls more heavily on the sellers

  • 13. 
    In 1990, Congress passed a lxury tax on yachts, furs, jewelry, etc. The goal of the tax was to
    • A. 

      Force producers of luxury goods to reduce employment

    • B. 

      Prevent wealthy people from buying luxuries

    • C. 

      Raise revenue from the wealthy

    • D. 

      Limit exports of luxury goods to other countries

  • 14. 
    The burden of luxury tax falls
    • A. 

      More on the poor

    • B. 

      More on the rich

    • C. 

      More on the middle class

    • D. 

      Equally on the rich, middle class, and the poor

  • 15. 
    Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 to 25 units. Using the midpoint method,
    • A. 

      The cross-price elasticity of demand is 1.0 and X & Y are compliments

    • B. 

      The cross-price elasticity of demand is 1.0 and X & Y are substitutes

    • C. 

      The cross-price elasticity of demand is -1.0 and X & Y are substitutes

    • D. 

      The cross-price elasticity of demand is -1.0 and X & Y are compliments

  • 16. 
    An advance in farm technology that increases market supply is
    • A. 

      Good for farmers because it raises prices for their products but bad for consumers because it raises food prices

    • B. 

      Good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption

    • C. 

      Bad for farmers because total revenue will fall and bad for consumers because farmers will increase the food price to get revenue

    • D. 

      Bad for farmers because total revenue will fall but good for consumers because prices of food will fall

  • 17. 
    The law of supply states, other things equal
    • A. 

      When the price of a good falls, the supply of the good rises

    • B. 

      When the price of a good rises, the quantity supplied rises

    • C. 

      When the price of a good rises, the supply falls

    • D. 

      When the price of a good falls, the quantity supplied rises

  • 18. 
    Suppose demand for a good increases and the supply decreases. What would happen in the market for the good?
    • A. 

      Equilibrium price decreases, but the imact on equilibrium quantity would be ambiguous

    • B. 

      Equilibrium price increases, but the imact on equilibrium quantity would be ambiguous

    • C. 

      Equilibrium price decreases, but the imact on equilibrium price would be ambiguous

    • D. 

      Equilibrium price increases, but the imact on equilibrium price would be ambiguous

  • 19. 
    • A. 

      Prices will rise

    • B. 

      Prices will fall

    • C. 

      Price will stay the same

    • D. 

      The price change will be ambiguous

  • 20. 
    What will happen to the equilibrium price and quantity of new cars if the price of gas rises, price of steel rises, public transportation is cheaper and more comfortable, and auto-workers negotiate higher wages?
    • A. 

      Price will fall and the effect on quantity is ambiguous

    • B. 

      Price will rise and the effect on quantity is ambiguous

    • C. 

      Quantity will fall and the effect on price is ambiguous

    • D. 

      Quantity will rise and the effect on price is ambiguous

  • 21. 
    Which of the following events would most likely increase the price of a new house?
    • A. 

      Higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, and increases in population and expectations of higher house prices in the future

    • B. 

      Lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartment rents, and increases in population and expectations of higher house prices in the future

    • C. 

      Lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apartment rents, and decreases in population and expectations of higher house prices in the future

    • D. 

      Higher wages for carpenters, lower wood prices, decreases in consumer incomes, lower apartment rents, and decreases in population and expectations of lower house prices in the future