Practice Exam 1 - Principles of Economics | ECON 2005, Exams of Microeconomics

Download Practice Exam 1 - Principles of Economics | ECON 2005 and more Exams Microeconomics in PDF only on Docsity! Name: ________________________ Class: ___________________ Date: __________ ID: A 1 Spring2010MT1 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Substitutes are pairs of products with a. positive price elasticity of demand b. positive income elasticity of demand c. negative income elasticity of demand d. negative cross-price elasticity of demand e. positive cross-price elasticity of demand Exhibit 2-7 ____ 2. Current production at which labeled point in Exhibit 2-7 would lead to the largest outward shift in the production possibilities frontier in a later year? a. point b because this point represents greater total production than the other two points b. point a because this point represents a greater consumption level than point b c. point c because this point represents a greater consumption level than the other two points d. point c because this point represents greater production of capital than the other two points e. point b because this point represents greater production of capital than point c ____ 3. If the value of the price elasticity of demand is -0.2, this means that a a. 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded b. 100 percent decrease in price causes a 200 percent increase in quantity demanded c. 20 percent decrease in price causes a 1 percent increase in quantity demanded d. 5 percent decrease in price causes a 1 percent increase in quantity demanded e. 0.2 percent decrease in price causes a 1 percent increase in quantity demanded Name: ________________________ ID: A 2 ____ 4. On a production possibilities frontier, the opportunity cost of one more unit of a commodity per time period is measured by the a. amount of satisfaction it gives consumers b. monetary price of the commodity c. amount of tax paid to government for production, sale, and use of the commodity d. amount of the other commodity that must be sacrificed e. amount of unemployed resources that must be used ____ 5. Opportunity cost is defined a. as the value of all alternatives not chosen b. as the value of the best alternative not chosen c. as the difference between the benefits from a choice and the costs of that choice d. as the difference between the benefits from a choice and the benefits from the next best alternative e. only in terms of money spent ____ 6. As the use of Blu-rays (a substitute for DVDs) becomes more widespread, we would expect all of the following except one. Which is the exception? a. Firms will move their resources away from DVD production to Blu-ray production. b. The prices of DVDs will decrease. c. The demand curve for DVD players will shift leftward. d. The demand curve for DVDs will shift leftward. e. The supply curve of DVD players will shift rightward. ____ 7. If an economy is operating at a point inside the production possibilities frontier, then a. unlimited resources must satisfy scarce desires b. some of the nation's resources are unemployed c. society is paying too much for wages d. there is a scarcity of human resources relative to human wants therefore society must have some mechanism for making choices e. the production decisions are made by the government ____ 8. Suppose a market is in equilibrium and then a price ceiling is established below the equilibrium price. Which of the following will happen? a. the quantity sold will rise b. the market will remain in equilibrium c. quantity demanded will decrease d. a shortage will develop e. a surplus will develop ____ 9. Which of the following would cause both the equilibrium price and equilibrium quantity of cookies to decrease? a. a rise in consumer incomes b. a rise in the price of milk (a complement) c. a drop in the price of cookie dough d. a rise in the price of cookie dough e. a rise in the price of crackers (a substitute) Name: ________________________ ID: A 5 ____ 19. If Debby is willing to pay $50 for a pair of shoes but only has to pay $20 because the shoes are on sale, then her consumer surplus on that pair of shoes is a. $25 b. $30 c. $50 d. $70 e. $20 ____ 20. If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, a. supply is elastic b. supply is inelastic c. supply is unit elastic d. demand is elastic e. demand is inelastic ____ 21. If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is a. inelastic b. perfectly inelastic c. perfectly elastic d. elastic e. unit elastic ____ 22. If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours, then a. Sarah has an absolute and a comparative advantage in shoemaking b. Sarah has a comparative advantage in shoemaking c. Daniel has a comparative advantage in shoemaking d. Daniel has an absolute and a comparative advantage in shoemaking e. Sarah has an absolute advantage in shoemaking Exhibit 6-3 Scones Total Utility Marginal Utility 1 10 - 2 18 - 3 24 6 4 28 - 5 30 2 ____ 23. In Exhibit 6-3, the marginal utility of consuming the second scone is a. 12 b. 6 c. 8 d. 9 e. 19 Name: ________________________ ID: A 6 ____ 24. The effect of a decrease in the price of iPods, other things constant, is likely to be best represented by which of the following? a. a rightward shift of the demand curve b. a movement leftward along the demand curve c. a leftward shift of the supply curve d. a movement rightward along the demand curve e. a leftward shift of the demand curve ____ 25. Which of the following would not shift the production possibilities frontier? a. a war that destroyed many buildings b. shutting down a functioning factory c. a decrease in the size of the labor force d. an increase in worker training e. a technological improvement that improved fuel efficiency in cars ____ 26. When price increases, consumer surplus a. becomes negative b. remains constant c. may increase or decrease d. decreases e. increases ____ 27. Which of the following will cause demand to be relatively elastic? a. The good involves a relatively small portion of the consumers' budget b. The time interval is relatively short c. There are few substitutes d. There are many good substitutes e. The good is considered a necessity Name: ________________________ ID: A 7 Exhibit 6-13 ____ 28. Which area in Exhibit 6-13 represents producer surplus at market equilibrium? a. area a b. areas a + b + c c. area b d. areas a + b e. area c Exhibit 6-8 QA MUA QB MUB 1 24 1 48 2 22 2 44 3 18 3 36 4 12 4 24 ____ 29. Exhibit 6-8 indicates the marginal utilities that Sharrona receives from consuming different amounts of goods A and B. If the price of A is $2 per unit and the price of B is $4 per unit, what combination of A and B would maximize Sharrona's total utility if her budget is $10? a. 1 unit of A; 2 units of B b. 2 units of each c. 5 units of A; 0 units of B d. 1 unit of each e. 3 units of A; 1 unit of B ____ 30. If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the value of price elasticity of demand is a. -2 1/3 b. -1/4 c. -2/3 d. -1/3 e. -3 ID: A 1 Spring2010MT1 Answer Section MULTIPLE CHOICE 1. ANS: E PTS: 1 DIF: Moderate NAT: Analytic LOC: Elasticity TOP: Cross-Price Elasticity of Demand 2. ANS: D PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Understanding and applying economic models TOP: What Can Shift the Production Possibilities Frontier? 3. ANS: D PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Elasticity TOP: Calculating Price Elasticity of Demand 4. ANS: D PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Scarcity, tradeoffs, and opportunity cost TOP: Shape of the Production Possibilities Frontier 5. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost 6. ANS: E PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Supply and demand TOP: Changes in the Prices of Alternative Goods 7. ANS: B PTS: 1 DIF: Easy NAT: Reflective Thinking LOC: Scarcity, tradeoffs, and opportunity cost TOP: Shape of the Production Possibilities Frontier 8. ANS: D PTS: 1 DIF: Hard NAT: Analytic LOC: Markets, market failure, and externalities TOP: Price Ceilings 9. ANS: B PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Markets, market failure, and externalities TOP: Shifts of the Demand Curve 10. ANS: D PTS: 1 DIF: Easy NAT: Analytic LOC: Utility and consumer choice TOP: The Law of Diminishing Marginal Utility 11. ANS: B PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Supply and demand TOP: Changes in Technology 12. ANS: D PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Utility and consumer choice TOP: The Utility-Maximizing Conditions 13. ANS: A PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Markets, market failure, and externalities TOP: Market Equilibrium 14. ANS: B PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Gains from trade, specialization and trade TOP: Absolute Advantage versus Comparative Advantage 15. ANS: C PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Gains from trade, specialization and trade TOP: Absolute Advantage versus Comparative Advantage 16. ANS: D PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Utility and consumer choice TOP: Consumer Surplus 17. ANS: E PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Elasticity TOP: Cross-Price Elasticity of Demand 18. ANS: E PTS: 1 DIF: Moderate NAT: Analytic LOC: Scarcity, tradeoffs, and opportunity cost TOP: CASE STUDY: The Opportunity Cost of College ID: A 2 19. ANS: B PTS: 1 DIF: Easy NAT: Reflective Thinking LOC: Utility and consumer choice TOP: Market Demand and Consumer Surplus 20. ANS: A PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Elasticity TOP: Price Elasticity of Supply 21. ANS: D PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Elasticity TOP: Calculating Price Elasticity of Demand 22. ANS: E PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Gains from trade, specialization and trade TOP: Absolute Advantage versus Comparative Advantage 23. ANS: C PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Utility and consumer choice TOP: Units of Utility 24. ANS: D PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Supply and demand TOP: The Demand Schedule and Demand Curve 25. ANS: B PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Understanding and applying economic models TOP: What Can Shift the Production Possibilities Frontier? 26. ANS: D PTS: 1 DIF: Easy NAT: Analytic LOC: Utility and consumer choice TOP: Consumer Surplus 27. ANS: D PTS: 1 DIF: Hard NAT: Analytic LOC: Elasticity TOP: Price Elasticity and the Linear Demand Curve 28. ANS: C PTS: 1 DIF: Moderate NAT: Reflective Thinking LOC: Utility and consumer choice TOP: Market Demand and Consumer Surplus 29. ANS: A PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Utility and consumer choice TOP: The Utility-Maximizing Conditions 30. ANS: D PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Elasticity TOP: Calculating Price Elasticity of Demand 31. ANS: C PTS: 1 DIF: Moderate NAT: Analytic LOC: Markets, market failure, and externalities TOP: Simultaneous Shifts of Demand and Supply Curves 32. ANS: C PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Elasticity TOP: Price Elasticity and the Linear Demand Curve 33. ANS: E PTS: 1 DIF: Easy NAT: Reflective Thinking LOC: Supply and demand TOP: Changes in the Prices of Other Goods 34. ANS: E PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Elasticity TOP: Elasticity and Total Revenue 35. ANS: A PTS: 1 DIF: Hard NAT: Reflective Thinking LOC: Scarcity, tradeoffs, and opportunity cost TOP: Shape of the Production Possibilities Frontier 36. ANS: E PTS: 1 DIF: Moderate NAT: Analytic LOC: Elasticity TOP: Income Elasticity of Demand 37. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Utility and consumer choice TOP: The Utility-Maximizing Conditions 38. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market Equilibrium 39. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Supply and demand TOP: Changes in the Prices of Other Goods 40. ANS: C PTS: 1 DIF: Easy NAT: Reflective Thinking LOC: Elasticity TOP: Calculating Price Elasticity of Demand