Sample Exam Questions/Chapter 4

Transcription

1 Sample Exam Questions/Chapter 4 1. Along a given demand curve, an increase in the price of a good will cause consumer surplus to: A) increase. B) decrease. C) not change. D) cannot be determined without information about the supply curve. Use the following to answer question 2: Figure: Monthly Demand for Ice Cream Cones 2. (Figure: Monthly Demand for Ice Cream Cones) Look at the table Monthly Demand for Ice Cream Cones. The graph represents one individual's monthly demand for ice cream cones. At a price of $5 per cone, this individual will consume 10 cones in a month. How much consumer surplus does this consumer receive? A) $100 B) $50 C) $150 D) $ Market failure refers to a situation in which: A) markets fail to reach a fair outcome. B) markets establish a high price for necessities. C) market-determined wages are not high enough to raise all workers above the poverty line. D) markets fail to reach an efficient outcome. Page 1

2 4. Maria wants to get rid of her bookshelf. She is willing to give it away for free but her neighbor offers to pay $30 for it. Maria experiences a: A) consumer surplus gain. B) consumer surplus loss. C) producer surplus gain. D) producer surplus loss. 5. Which of the following is true when a market is in equilibrium and there is no outside intervention to change the equilibrium price? A) Total surplus is minimized. B) Inefficiency is maximized. C) No mutually beneficial trades are missed. D) Some mutually beneficial trades may be missed. 6. Anna is willing to sell her 20-year-old boat, but not for less than $2,300. For Anna, the cost of selling this boat is $2,300. A) more than B) less than C) equal to D) There is not enough information to answer the question. 7. Suppose the market demand curve for TV remotes is given by the equation Qd = 100 2P, where P is the price and Qd represents the number of TV remotes demanded. If the market price of TV remotes is $10, then the quantity demanded would equal and the value of consumer surplus will be. A) 20; $100 B) 80; $200 C) 80; $1,600 D) 20; $1,600 Page 2

3 Use the following to answer question 8: 8. (Table: Consumer Surplus) Look at the table Consumer Surplus. If the price of a ticket to see The Nutty Nutcracker is $50, Narum's consumer surplus is: A) $60. B) $50. C) $15. D) $ Which of the following is true if there is a decrease in the demand for ice cream? A) There is an increase in producer surplus. B) There is a decrease in producer surplus. C) There is no change in producer surplus. D) It's impossible to tell what will happen to producer surplus. Use the following to answer question 10: Page 3

4 10. (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $50, then Francisco's producer surplus is: A) $0. B) $40. C) $90. D) $240. Use the following to answer questions 11-12: Figure: A Market in Equilibrium 11. (Figure: A Market in Equilibrium) Look at the figure A Market in Equilibrium. At the equilibrium price, this market's total producer and consumer surplus equals the area: A) BCGD. B) AIF. C) DIF. D) AID. 12. (Figure: A Market in Equilibrium) Look at the figure A Market in Equilibrium. At the equilibrium price, this market's producer surplus is equal to the area: A) ADI. B) EHF. C) AIF. D) DIF. Page 4

5 Use the following to answer question 13: 13. (Table: Willingness to Pay for Basketball Sneakers) If the price of basketball sneakers is $125, which players will purchase sneakers? A) Jamichael and Javon B) Jamichael and Corey C) Jamichael, Corey, and Rudy D) Jamichael, Corey, Rudy, and Ray 14. The total consumer surplus for good X can be calculated in all except one of the following ways. Which is the exception? A) the sum of the individual consumer surpluses for all buyers of X B) the area below the demand curve for X and above the price of X C) the area bounded by the demand curve for X and the two axes D) the sum, for all buyers of X, of the difference between what each buyer is willing to pay for X and the amount actually paid 15. Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer trips per day and will have producer surplus equal to. A) 3; $90 B) 3; $10 C) 2; $220 D) 4; $80 Page 5

6 16. Some smaller retailers often go out of business when Walmart opens a new store. One of the reasons for this development could be that: A) Walmart practices unfair pricing methods that reduce consumer surplus over time. B) consumers in those areas receive no consumer surplus from Walmart. C) consumers in those areas receive a larger consumer surplus from shopping at Walmart than from the smaller stores. D) smaller stores increase prices to compete. Use the following to answer question 17: Figure: Monthly Supply of Bread 17. (Figure: Monthly Supply of Bread) Look at the figure Monthly Supply of Bread. The graph represents the monthly supply of bread at a local bakery. At the current price of $3 per loaf of bread, the bakery produces 120 loaves of bread per month. The producer surplus received by this bakery is equal to: A) $120. B) $60. C) $360. D) $ Economic signals: A) result in shortages and surpluses. B) interfere with the trades that can be mutually beneficial. C) guide decision makers in their transactions in the marketplace. D) never provide adequate information to consumers. Page 6

7 Answer Key 1. B 2. B 3. D 4. C 5. C 6. C 7. C 8. C 9. B 10. A 11. B 12. D 13. B 14. C 15. A 16. C 17. D 18. C Page 7