MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Transcription

1 Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Hint: draw graphs in the margins to check your answers. And remember that an increase in the supply is a rightward shift. The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. 1) In the figure above, with the tariff American consumers million shirts per year. 1) A) 32 B) 48 C) 16 D) 40 2) In the figure above, the U.S. government's revenue from the tariff is. 2) A) $32 million B) $128 million C) $48 million D) $64 million 1

2 3) The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $800, there is A) a shortage of 3,000 units of rental housing. B) a surplus of 3,000 units of rental housing. C) a shortage of 6,000 units of rental housing. D) neither a shortage nor a surplus of rental housing. 3) 4) Suppose the government imposes a price ceiling on gasoline that is less than the equilibrium price. As a result, A) the supply of gasoline will increase and the supply curve will shift rightward. B) buyers will have to spend more time searching for gasoline. C) the price of gasoline rises to the equilibrium price. D) the demand for gasoline will decrease and the demand curve will shift leftward. 4) 2

3 5) The figure shows the market for rental units in Gladstone. The market is in equilibrium. The government now introduces a rent ceiling of $500 a month. The price of a rental unit and the number of units rented. A) remains the same; remains the same B) increases by $500 per month; decreases C) decreases by $100 per month; decreases D) increases by $100 per month; increases 5) Wage rate (dollars per hour) Labor supplied (millions of workers) Labor demanded (millions of workers ) In the table above, the market is in equilibrium. Then a minimum wage is set at $11 per hour. The number of workers who lose their jobs will be A) 0. B) 1 million. C) 5 million. D) 3 million. 6) 3

4 7) In the above figure, if the minimum wage is equal to, there would be hours of labor employed. A) $6 per hour; 3,000 B) $8 per hour; 4,000 C) $8 per hour; 2,000 D) $4 per hour; 2,000 7) 8) If demand is perfectly elastic, the impact of a sales tax falls on 8) A) both the buyers and sellers. B) only the buyers. C) only the sellers. D) None of the above answers is correct. 9) The impact of a tax on sellers will be smaller the more the demand and the more the supply. A) inelastic; inelastic B) elastic; inelastic C) inelastic; elastic D) elastic; elastic 9) 4

5 10) The above figure shows the market for neckties after the government has imposed a tax. How much government revenue is generated by the tax? A) $ per month B) $1, per month C) $ per month D) $ per month 10) 11) The above figure shows the market for neckties after the government has imposed a tax. What happens to the total surplus of this market as a result of the tax? A) It increases by $50.00 per month B) It decreases by $50.00 per month C) It decreases by $ per month D) It decreases by $ per month 11) 12) Suppose penalties are imposed on both buyers and sellers of marijuana, but the cost of breaking the law to sellers is greater than that to buyers. This measure will the equilibrium price of marijuana and the equilibrium quantity of marijuana sold. (hint: draw a supply and demand graph to illustrate this change to check your answer.) A) not change; will decrease B) raise; decrease C) lower; increase D) raise; increase 12) 5

6 The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. 13) In the figure above, the tariff the domestic production of shirts in the United States by 13) per year. A) increases; 4 million B) decreases; 16 million C) decreases; 8 million D) increases; 8 million 14) In the figure above, with the tariff the United States imports million shirts per year. 14) A) 16 B) 8 C) 32 D) 24 6

7 15) The above figures show the market for oranges. Which figure shows the effect of changing consumer preferences for more orange juice and less coffee in the morning? A) Figure A B) Figure B C) Figure C D) Figure D 15) 16) The above figures show the market for oranges. Which figure shows the effect of restricting orange farmers' use of immigrant labor? A) Figure A B) Figure B C) Figure C D) Figure D 16) 17) Suppose the government establishes a price support for soybeans. The new government program will tend to A) increase the quantity demanded of soybeans. B) decrease the output of soybeans. C) increase a farmer's opportunity cost of producing other commodities (such as corn), which could be grown on the same land used to grow soybeans. D) decrease the demand for soybeans. E) do none of the above. 17) 18) Which of the following would lead to a decrease in the supply of crude oil? 18) A) An increase in the demand for crude oil B) An increase in the price of gasoline C) Favorable tax breaks for oil companies D) Both A and C. E) None of the above. 7

8 19) Cooperation among different people can occur 19) A) even if most people know almost nothing about one another. B) only if everybody knows one another personally. C) only if at least 10% of the people know one another personally. D) only if the majority of people know one another personally. 20) Suppose a 25% off sale on post-holiday merchandise creates a 50% increase in post-holiday sales. The price elasticity of demand is: A).75. B).50. C).25. D) 2.0. E) none of the above. 20) 21) Fill in the blank: Other things constant, the growing availability of college degrees being offered through online programs will tend to the price elasticity of demand for more traditional college degree programs. A) leave unchanged B) decrease C) alter for the better D) increase 21) 22) Money prices are an extremely effective device for promoting social cooperation because 22) A) they help to clarify the options available to people by making the opportunity costs of different types of production comparable in a common denominator. B) people are basically selfish. C) scarcity can be eliminated through appropriate changes in money prices. D) most people want money more than they want anything else. E) they don't change rapidly when circumstances change. 23) "Less demand causes lower prices, and lower prices cause more demand." The above statement shows A) the speaker has confused himself by saying demand in the second half of the statement when he meant quantity demanded. B) prices fluctuate in a free-market situation. C) everything depends on everything else. D) the speaker has confused himself by saying demand in the first half of the statement when he meant quantity demanded. E) economic theory can be used to prove just about anything. 23) 24) Fact: Very few skyscrapers are found on rural farmlands, far outside the city. Why? 24) A) There are far too many dangers involved. B) Skyscrapers would spoil the view of the rural landscape. C) The opportunity cost of building skyscrapers in rural areas is too high. D) As opposed to city property, farmland cannot support a skyscraper's tremendous weight per square foot. 25) What did President Ronald Reagan and Mother Teresa have in common? 25) A) They each promoted a plan to build up the American nuclear defense system. B) They each demonstrated a burning desire to directly serve the poorest of the poor. C) They were both well-known fans of the L.A. Lakers. D) They each pursued projects in which they were interested. 8

9 26) The equilibrium price in the above figure is 26) A) $2. B) $6. C) $4. D) $8. 27) Is it more efficient for a group of musicians to perform a show "unplugged" (with acoustic instruments) or with state-of-the-art electric instruments? A) It depends exclusively on the relative ratios of energy output to energy input in each instrument class. B) It depends on what the musicians are trying to accomplish. C) The use of electric instruments is more efficient because acoustic instruments have become more expensive in recent years. D) Unplugged is more efficient because the instruments are considerably less expensive to operate. 27) 28) The central problem of every economic system is to 28) A) to transform mere wants into genuine needs. B) get people to see that what is available is all that is necessary. C) increase the number of jobs available. D) redistribute income fairly. E) get people to cooperate effectively in using what is available to provide what is wanted. 29) The equilibrium price will fall and the equilibrium quantity might increase, decrease, or stay the same when the A) demand for a good increases and the supply of it decreases. B) demand for a good decreases and the supply of it increases. C) demand and the supply of a good both decrease. D) demand and the supply of a good both increase. 29) 9

10 30) "Opportunity cost" is 30) A) the monetary cost of one's actions. B) the regret one feels when making a sacrifice. C) the objective cost of one's actions. D) the value one places on the item, project, or plan he has chosen to pursue. E) none of the above. 31) People specialize in activities in which they have a comparative advantage 31) A) only if they understand the logic of comparative advantage. B) if they know they are more productive than anyone else in the particular activity. C) when they expect to obtain more of whatever they want by doing so. D) only when all of the above are true. 32) In markets free from intervention, prices tend to move towards equilibrium because of 32) A) increased demand from buyers. B) increased supply by sellers. C) the actions of buyers and sellers. D) the "helping hand" of government. 33) Which group or organization makes choices? 33) A) The Microsoft Corporation B) New York City C) The Iraqi Government D) Al Qaeda E) None of the above, only individuals choose 34) If the quantity supplied exceeds the quantity demanded, then there is 34) A) a shortage and the price is above the equilibrium price. B) a surplus and the price is above the equilibrium price. C) a surplus and the price is below the equilibrium price. D) a shortage and the price is below the equilibrium price. 35) A grower of commercial Christmas trees can raise blue spruce and Douglas fir. Therefore, an increase in the expected market price of Douglas firs tends to A) reduce the planting of blue spruce trees. B) increase the cost of planting Douglas firs. C) reduce the planting of Douglas firs. D) do none of the above. 35) 36) What effect would a simplification of federal tax law have on the cost of hiring a tax accountant? 36) A) It would have very little effect because most of the costs of becoming an accountant are sunk costs (and therefore have elastic supply). B) It would fall because tax accountants would have fewer valuable opportunities (and therefore have inelastic supply). C) It would rise because tax accountants would have to raise their prices to maintain their incomes. D) It would have no effect because only supply affects costs, not demand. 37) Will a large increase in the demand for a good cause a large increase in its price? 37) A) Not if the demand for the good is highly elastic. B) Not if the demand for the good is highly inelastic. C) Not if the supply of the good is highly inelastic. D) No; an increased demand is associated with lower prices. E) Not if the supply of the good is highly elastic. 10

11 38) When the price of a good decreases, 38) A) quantity supplied increases. B) supply increases. C) supply decreases. D) quantity supplied decreases. 39) Suppose the US economy produces two goods, automobiles and computers. Assume the economy is operating on the production possibility frontier. In 2008, it produced 50 automobiles and 100 computers. In 2009, it produced 52 automobiles and 120 computers. Which of the following events can explain the increase in production? A) Higher taxation and regulation of auto and computer manufacturers. B) A decrease in available labor. C) Immigration policies that allow more skilled workers to be employed by the auto and computer industries. D) A law that prohibits new innovations from being introduced. 39) 40) If the price of insulin were to significantly increase, more diabetics will 40) A) avoid refilling their prescriptions as often. B) adopt holistic healthcare, organic medicines, and other perceived substitutes. C) turn toward substitutes such as a better diet and exercise. D) do all of the above. E) do none of the above. 41) When a good becomes more scarce, and the government prevents sellers from raising prices, 41) A) demanders are prevented from competing against one another to obtain the good. B) there will be no rationing system to allocate the good among competing users. C) the opportunity cost to purchasers of obtaining the good will nonetheless rise as long as the quantity demanded is greater than the quantity supplied. D) the quantity purchased will be greater than the quantity supplied. 42) Rank the following goods from least to most elastic: compact cars, convertible compact cars, cars. 42) A) Convertible compact cars, compact cars, cars B) Cars, convertible compact cars, compact cars C) Cars, compact cars, convertible compact cars D) Compact cars, convertible compact cars, cars E) Compact cars, convertible compact cars, cars 43) The famous saying, "There is no such thing as a free lunch" means 43) A) we do not live in a free country. B) people do not care about others enough. C) the value of our dollar keeps declining. D) people face tradeoffs. 44) Assume foreign beer is a normal good. If the incomes of demanders increase, 44) A) demand for foreign beer will increase. B) the market output of foreign beer will increase. C) the quantity supplied of foreign beer will increase. D) all of the above will occur. E) none of the above will occur. 45) A movement from one point of a demand schedule to another is properly called a change in 45) A) tastes and preferences. B) quantity demanded. C) demand. D) the availability of substitutes. 11

12 46) Suppose a university refunds students 75% of their tuition if they drop out before the third week of class, 50% if they drop out between their third and fifth week, 25% if they drop out between their sixth and eighth week, and 0% after the eighth week. Flint paid $1,000 tuition, and is in his fourth week of class. What's his sunk cost? A) $0 B) $250 C) $500 D) $750 E) $1,000 46) 47) Rent controls unintentionally create 47) A) surpluses of rental units. B) shortages of rental units. C) market-clearing outcomes in the apartment rental market. D) scarcity of rental units. 48) A sensible buyer will want to acquire additional information before committing herself as long as the expected value of the information she is gathering A) will enable her to avoid all mistakes. B) will enable her to avoid possible mistakes she will subsequently regret having made. C) is greater than the anticipated value of the purchase. D) is greater than the expected cost of acquiring it. 48) 49) Real estate suitable for condominium development is also suitable for single-family home development. Therefore, a rise in the price of condominiums relative to single-family homes tends to A) increase the cost of building new single-family homes. B) reduce the demand for condominiums. C) increase the demand for condominiums. D) do none of the above. 49) 50) Which of the following will not change the demand for movie tickets? 50) A) A change in the cost of babysitting services B) A change in the price of movie tickets C) A change in the quality of television programs D) A change in the incomes of moviegoers E) A change in the quality of movies 12

13 Answer Key Testname: MIDTERM 1) D 2) D 3) D 4) B 5) C 6) B 7) C 8) C 9) C 10) D 11) B 12) B 13) D 14) A 15) A 16) C 17) C 18) E 19) A 20) D 21) D 22) A 23) A 24) C 25) D 26) B 27) B 28) E 29) B 30) E 31) C 32) C 33) E 34) B 35) A 36) B 37) E 38) D 39) C 40) D 41) C 42) C 43) D 44) D 45) B 46) C 47) B 48) D 49) A 50) B 13