Figure: Price Control

Transcription

1 Name: Date: 1. When the demand for foods low in carbohydrates began to increase, in the short run the price elasticity of supply was lower than it will be in the long run. This is because: A) in the short run, some food producers did not have as much time to produce lowcarb foods as they will have in the long run. B) in the short run, prices tend to stay constant. C) in the short run, inputs are more available to produce these foods than in the long run. D) in the long run, the price elasticity of supply tends to be perfectly inelastic. 2. The opportunity cost of something is: A) less during periods of falling prices. B) greater during periods of rising prices. C) equal to the money cost. D) what is given up to acquire it. Use the following to answer question 3: Figure: Price Control 3. (Figure: Price Control) In the graph, an effective price ceiling would be the price indicated at and a would exist as the difference between. A) point b; surplus; points f and e B) point b; shortage; points f and e C) point d; shortage; points i and h D) point d; surplus; points e and h Version 1 Page 1

2 4. Economists say an economy is efficient when: A) output is distributed equitably. B) all opportunities to make some people worse off without making other people better off have been taken. C) all opportunities to make some people better off without making other people worse off have been taken. D) the problem of scarcity is eliminated. 5. When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe: A) pizza is a normal good and a luxury. B) pizza is a normal good and a necessity. C) pizza is an inferior good since his expenditure rose by less than the increase in income. D) demand for pizza is price-elastic. 6. Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy pairs of shoes and her total consumer surplus equals. A) 4; $110 B) 3; $80 C) 4; $80 D) 3; $230 Version 1 Page 2

3 Use the following to answer question 7: Figure: Consumer Surplus 7. (Figure: Consumer Surplus) In the figure, when the price falls from $30 to $25, consumer surplus for a total consumer surplus of. A) increases by $25; $74 B) decreases by $15; $34 C) increases by $15; $64 D) increases by $5; $54 8. The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that: A) electricity and natural gas are complements. B) one of the two goods is inferior while the other is normal, but we need additional information to determine which of them is inferior. C) electricity and natural gas are substitutes. D) natural gas and electricity are both normal goods. Version 1 Page 3

4 Use the following to answer question 9: Figure: Gain in Producer Surplus 9. (Figure: Gain in Producer Surplus) Which of the following area(s) represent producer surplus when the price is equal to P2? A) D, E, and F B) B and C C) D and E D) A, B, and C 10. Peanut butter and jelly are complements. If there is a decrease in the price of jelly, producer surplus in the peanut butter market: A) may change, but it is impossible to tell if it will increase or decrease. B) will increase. C) will not change. D) will decrease. Use the following to answer question 11: Version 1 Page 4

5 11. (Table: Production Possibilities Schedule II) If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is units of consumer goods per period. A) 0 B) 8 C) 14 D) If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand using the midpoint method is: A) B) -1. C) 0. D) The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following except: A) inefficiently low quality. B) wasted resources. C) the temptation to break the law by selling below the legal price. D) inefficient allocation of sales among sellers. 14. Alison has a linear production possibility frontier in the production of bracelets and necklaces. In one hour, she can produce 5 bracelets or 10 necklaces. What is the opportunity cost for her to make one necklace? A) 10 necklaces B) 2 necklaces C) 0.50 bracelet D) 5 bracelets 15. An economy is efficient if it is: A) possible to produce more of all goods and services. B) possible to produce more of one good without producing less of another. C) not possible to produce more of one good without producing less of another good. D) producing at a combination of goods that lies between the production possibilities curve and the origin. Version 1 Page 5

6 Use the following to answer question 16: 16. (Table: Comparative Advantage I) Finland has a comparative advantage in producing: A) neither cell phones nor herring. B) herring only. C) cell phones only. D) both cell phones and herring. Use the following to answer question 17: Figure: Supply and Demand in the Orange Juice Market 17. (Figure: Supply and Demand in the Orange Juice Market) A reputable scientist asserts in a major scientific publication that drinking orange juice will increase your life span. We can expect the new equilibrium point in the orange juice market to be at: A) E. B) D. C) B. D) A. Version 1 Page 6

7 18. Scarcity in economics means: A) the wants of people are limited. B) there must be poor people in rich countries. C) not having sufficient resources to produce all the goods and services we want. D) economists are clearly not doing their jobs. 19. When building a model, economists: A) simplify reality in order to highlight what really matters. B) attempt to duplicate reality in all its complexity. C) ignore the facts, and instead try to determine what the facts should be. D) are careful to avoid the scientific method. 20. Which of the following is most likely to shift the supply of milk to the right? A) an increase in household income and milk is a normal good B) a decrease in the price of feed given to dairy cows C) a tax on each gallon of milk produced D) the bankruptcy of many small dairy farms 21. A local restaurant has estimated that the price elasticity of demand for meals is equal to -2. If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by and total revenue to. A) 5%; stay constant B) 10%; fall C) 10%; increase D) 2.5%; fall 22. Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the: A) demand for oranges will decrease. B) demand for oranges will increase. C) demand for clementines will decrease. D) demand for clementines will increase. 23. Government may choose to impose a price floor if: A) demanders can make strong moral or political arguments for higher prices. B) suppliers can make strong moral or political arguments for higher prices. C) demanders can make a strong moral or political argument for lower prices. D) suppliers can make strong moral or political arguments for lower prices. Version 1 Page 7

8 Use the following to answer question 24: Figure: Demand and Supply of Gasoline 24. (Figure: Demand and Supply of Gasoline) Given the initial equilibrium of S1 and D, any price lower than will create pressure for the price to. A) $3.00; rise B) $2.00; fall C) $2.50; rise D) $2.50; fall 25. 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 be able to purchase more of the good after the price ceiling is imposed. B) consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price. C) producers will respond to the lower price and therefore offer more units for sale. D) it will not be binding. 26. The demand curve for videos has shifted to the right. What could have caused it? A) a fall in the price of videos B) an increase in the price of videos C) an increase in the supply of videos D) an increase in the incomes of buyers Version 1 Page 8

9 27. Coffee and tea are substitutes. If there is an increase in the price of coffee, total surplus in the tea market: A) may change, but we cannot determine the change without more information. B) will not change. C) will decrease. D) will increase. 28. A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was: A) zero. B) The cost is impossible to determine. C) $260. D) whatever she would have done with those 48 hours. 29. One of the ways rent control is inefficient is that it leads to: A) markets that maximize total surplus. B) higher-quality apartments. C) high opportunity costs associated with wasted time. D) the construction of more apartments. Use the following to answer question 30: Figure: Tom's Production Possibilities Version 1 Page 9

10 30. (Figure: Tom's Production Possibilities) In the figure, which point or points would represent (an) efficient combination(s) of coconuts and fish that Tom could choose to produce? A) A only B) A and B C) B and C D) D only Version 1 Page 10

11 Part II: Problem (10 pts) 31. In the figures on the next page, you are given the supply and demand curves for Beef and Pork products. a. Using the graphs on the next page, identify the equilibrium prices and quantities in each market. Be sure to label your answers carefully! b. Assume that corn is an input in the production of Beef, but not in the production of Pork. Also, assume that Beef and Pork are viewed as substitutes by consumers. i. What impact would an increase in the price of corn have on the equilibrium quantities supplied and quantities demanded in the markets for beef and pork products? Illustrate these changes using the graph. ii. What happens to consumer and producer surplus in the Pork market as a result of the increase in the price of corn? Illustrate this using the graph.

12 Price Beef Market Supply Demand Quantity Price Pork Market Supply Demand Quantity