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| 1 | |
In 1997-98 hog prices reached almost 50 cents a pound to the farmer. This was very high by normal standards and a farmer in Michigan decided to increase his hog production from 6,000 to 30,000. We might say that he was |
| | A) | moving up his supply curve. |
| | B) | shifting his supply curve to the left. |
| | C) | shifting his supply curve to the right. |
| | D) | moving down the hog demand curve. |
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| 2 | |
If the market demand for a haircut in the dorm is P = 90 – 4Q and the Supply of haircuts is 2Q the market equilibrium price and quantity respectively will be |
| | A) | 30, 15 |
| | B) | 50, 10 |
| | C) | 10, 50 |
| | D) | none of the above is correct. |
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| 3 | |
In question 2-2 if a price ceiling is put on haircuts so no student can charge more than 10 per haircut, |
| | A) | there will be a shortage of 15 haircuts |
| | B) | there will be a value of at least 70 for each haircut given. |
| | C) | there will be only 5 haircuts given. |
| | D) | all of the above will be true. |
| | E) | none of the above is correct. |
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| 4 | |
In question 2-2, if a price floor of 58 is imposed on haircuts in the dorm, which of the following is true? |
| | A) | A surplus of 21 haircuts would exist. |
| | B) | No one would get a haircut in the dorm. |
| | C) | Eight haircuts would be supplied. |
| | D) | None of the above is true. |
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| 5 | |
If the price support for tobacco has created excess supply of tobacco, and now a new report about the dangerous health risks of tobacco is published and a drought has hurt tobacco farmers, we can be sure that |
| | A) | the amount of excess supply has increased. |
| | B) | the amount of excess supply has been reduced. |
| | C) | the changed circumstances do not affect the excess supply of a price support. |
| | D) | we can not answer the question until we get more specific data. |
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| 6 | |
A minimum wage law and a rent control price have a similar effect in a markets in that they both |
| | A) | create excess supply. |
| | B) | create excess demand. |
| | C) | lead to a below equilibrium prices (wages). |
| | D) | Result in less than equilibrium quantities in their respective markets. |
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| 7 | |
When government intervenes into a market situation to make adjustments in price and quantity it would be fair to assume that |
| | A) | everyone is made worse off since there is a loss in net welfare. |
| | B) | Some are made better off and some are made worse off, but the gainer's gains outweigh the loser's loses. |
| | C) | Some are made better off and some are made worse off, but the loser's loses outweigh the gainers gains. |
| | D) | Everyone is made better off if the government's decision is a democratic one. |
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| 8 | |
If hotdogs are inferior goods, community incomes are rising, hamburger prices are falling, and hot dog casings (the synthetic skin around the hotdog) must now undergo a careful sterilization process not required before, we can conclude that |
| | A) | the quantity of hotdogs consumed will go down and the price change is indeterminate. |
| | B) | The quantity of hotdogs consumed will go down and the price of hotdogs will rise. |
| | C) | The price of hotdogs will rise and the quantity consumed will rise also. |
| | D) | Both the price of hot dogs and the quantity of hotdogs consumed will decrease. |
| | E) | The price of hotdogs will go up and the quantity consumed is indeterminate. |
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| 9 | |
Which statement is always true according to correct economic terminology assuming all else stays constant but the stated change? |
| | A) | A shift to the right of the demand curve increases the supply of a good. |
| | B) | A shift to the left of the supply curve decreases demand for a good. |
| | C) | A shift to the right of the supply curve increases the quantity supplied of the good. |
| | D) | A shift to the left of the demand curve decreases the quantity supplied of a good. |
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| 10 | |
If the equilibrium quantity is 10 and 12 are being consumed we can be sure that |
| | A) | the benefits of the last two units are less than the costs of producing those goods. |
| | B) | it would be possible for society as a whole to be better off if only 10 were produced. |
| | C) | The efficiency problem could be solved if the demand curve shifted right. |
| | D) | All of the above are true. |
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| 11 | |
In a first-come-first-serve system of allocation with prices held artificially low, supply and demand pressures are not negated because |
| | A) | people still pay the dollar value of market equilibrium price. |
| | B) | people still buy the same amount of goods as a price system provides. |
| | C) | people still pay full price according to their demand schedule by spending in money and in waiting time. |
| | D) | all of the above are true. |
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| 12 | |
The law of demand refers to the idea that people |
| | A) | buy more of a good as their income increases. |
| | B) | buy more of a good as the price of the good falls. |
| | C) | will spend all of their money on something. |
| | D) | want more of everything even if they have no money to buy anything. |
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| 13 | |
The law of supply implies that |
| | A) | the supply curve slopes upward. |
| | B) | firms are enticed to supply more output if the price is higher |
| | C) | costs of providing goods and services rise as more output is generated. |
| | D) | all of the above are true. |
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| 14 | |
Which statement is true of a typical market supply and demand situation? |
| | A) | At equilibrium supply equals demand and the quantity supplied equals the quantity demanded. |
| | B) | At a price lower than the equilibrium price, demand has increased from where it was at equilibrium. |
| | C) | At a price higher than equilibrium more goods are sold because firms find it profitable to produce more. |
| | D) | All of the above statements are true for a market situation. |
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| 15 | |
If a Big Mac sells for $3.95 and that price is a market equilibrium price, which of the following statements will be true if the mad cow disease now hits the beef market? |
| | A) | The demand for Big Macs will decrease and the quantity supplied of Big Macs will decrease. |
| | B) | The quantity demanded of Big Macs will decrease and the supply of Big Macs will decrease. |
| | C) | The supply of Big Macs will increase lowering the price and causing the quantity demanded of Big Macs to rise. |
| | D) | The supply of Big Macs will shift left and the price of Big Macs will rise significantly. |
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| 16 | |
If pizza prices fall and Big Macs and pizza are substitutes, then |
| | A) | The quantity demanded of Big Macs will fall and the supply of Big Macs will shift left. |
| | B) | The demand for Big Macs will shift left and the quantity supplied will fall. |
| | C) | The demand for Big Macs will shift right and the quantity supplied will increase. |
| | D) | The quantity demanded of Big Macs will fall and the supply of Big Macs will shift right. |
| | E) | None of the above are correct because economists assume that there is no interdependence among goods as relative prices change. |
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| 17 | |
In the early 1970s oil prices quadrupled in one year. In an article in the US News, Milton Friedman predicted that the prices would crash in the not too distant future. He based his prediction on the fact that |
| | A) | The demand curve had been artificially shifted right and would have to shift left again. |
| | B) | The supply curve had been artificially shifted left so that it overestimated the cost of supplying oil. |
| | C) | The OPEC cartel that supplied most of the oil would have compassion on the consumers and soon lower the price. |
| | D) | Political pressure would force oil producers to lower prices soon. |
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| 18 | |
If the market demand for bikes in the United States is P = 200 – 2Q and the Supply of the bikes is 2Q the market equilibrium quantity and price respectively will be |
| | A) | 50, 100 |
| | B) | 192, 4 |
| | C) | 100, 50 |
| | D) | none of the above is correct. |
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| 19 | |
Airlines increase the efficiency of the air travel industry by |
| | A) | randomly selecting who will be bumped from a flight. |
| | B) | bumping those who arrive at the gate last. |
| | C) | Bumping those who have the lowest income. |
| | D) | Offering increasing amounts of money to passengers until they have enough people willing to fly later. |
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| 20 | |
When a price support is set on agricultural goods to help the farmers, which of the following is bound to happen? |
| | A) | A shortage develops because the government action is a signal that farmers should leave the industry. |
| | B) | The supply curve shifts right as farmers produce more because of the higher price. |
| | C) | The demand curve shifts left as consumers respond to the higher price. |
| | D) | A surplus develops as consumers consume less and producers produce more. |
| | E) | All but a above are correct. |
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| 21 | |
Which of the following shifts the market supply curve in the opposite direction from the other three? |
| | A) | technological improvements |
| | B) | lower interest rates |
| | C) | an increase in the number of firms producing |
| | D) | an expectation of higher prices for the output. |
| | E) | All of the above shift the supply curve in the same direction. |
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