Augusta State University | Hull College of Business ...
Augusta State University | Hull College of Business | Spring 2011 | ECON4999 | Dr. Brauer | Pretest #1 Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If the demand for a good increases when people's incomes increase, A) the good is a substitute good for an inferior good. B) the law of demand is violated. C) the good is a normal good. D) the good's demand curve must be slope upward. E) the good is an inferior good.
1)
2) Suppose that tattoos gained immense popularity with retired people as well as college students. This gain in popularity best reflects which of the following influences on buying plans? A) preferences B) the price of a complement good C) income D) expectations E) the price of a substitute good
2)
3) Teenagers drink more soda than other age groups. If the number of teenagers increases, everything else remaining the same, A) market demand for soda decreases. B) market demand for soda does not change. C) there is a movement along the market demand curve for soda. D) market demand for soda increases. E) None of the above answers is correct because the effect on the demand depends whether the supply curve shifts rightward, leftward, or not at all.
3)
4) The law of supply states that other things remaining the same, a decrease in the price of a kayak leads to A) a decrease in the quantity of kayaks supplied. B) an increase in the supply of kayaks. C) a decrease in the supply of kayaks. D) an increase in the quantity of kayaks supplied. E) an increase in the supply of kayaks and a decrease in the quantity of kayaks supplied.
4)
5) Which of the following shifts the supply curve of popcorn leftward? A) a decrease in the cost of producing popcorn B) a decrease in the price of popcorn C) an increase in the price of popcorn D) a technological development in the production of popcorn E) a decrease in the number of popcorn suppliers
5)
1
6) The above figure illustrates the market for corn. If point "a" represents the original equilibrium and point "b" the new equilibrium, which of the following could have caused the change? A) an increase in consumers' income if corn is a normal good B) an increase in consumers' income if corn is an inferior good C) an increase in consumers' preferences for corn D) an improvement in the technology of producing corn E) an increase in labor costs of producing corn
6)
Price Quantity demanded Quantity supplied (dollars per gallon) (gallons of gasoline) (gallons of gasoline) 3.73 337,982 441,074 3.68 396,398 428,008 3.65 412,031 412,031 3.62 417,899 391,665 7) The table above shows the situation in the gasoline market in Tulsa, Oklahoma. If the price of a gallon of gasoline is $3.65, then A) there is a shortage of gasoline in Tulsa. B) the gasoline market in Tulsa is in equilibrium. C) there is a surplus of gasoline in Tulsa. D) without more information we cannot determine if there is a surplus, a shortage, or an equilibrium in the gasoline market in Tulsa. E) there is neither a surplus nor a shortage but the market is NOT in equilibrium.
7)
8) Which of the following lower the equilibrium price of a canoe? A) an increase in the quantity of canoes supplied B) an increase in the supply of canoes C) an increase in the demand for canoes D) a decrease in the supply of canoes E) Both answers A and B are correct.
8)
2
9) If both producers and consumers believe that a product's price will rise in the future, then at the present, demand ________ and supply ________. A) decreases; increases B) increases; increases C) does not change; does not change D) decreases; decreases E) increases; decreases
9)
10) The above figures show the market for HD televisions. If the price of the LCD screens used to produce these televisions falls, which figure shows the effect of this change in price? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.
10)
11) The above figures show the market for HD televisions. If the technology used to produce these televisions advances so that productivity increases, which figure shows the effect of this change? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.
11)
3
12) Consider the market for peanut butter. If there is a decrease in the price of deli turkey slices (a substitute in consumption for peanut butter) along with a decrease in the price of peanut brittle (a substitute in production for peanut butter), the A) equilibrium quantity of peanut definitely decreases. B) equilibrium quantity of peanut butter definitely increases. C) equilibrium price of peanut butter definitely falls. D) equilibrium price of peanut butter definitely rises. E) equilibrium price of peanut butter might rise or fall.
12)
13) When the percentage change in the quantity demanded equals the percentage change in price, then demand is A) irrelevant. B) unit elastic. C) inelastic. D) elastic. E) undefined.
13)
14) If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded, the price elasticity of demand equals A) 0.75. B) 1.33. C) 4.00. D) 3.44. E) None of the above answers are correct.
14)
15) In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B? A) 1.00 B) 0.13 C) 0.05 D) 2.33 E) 0.43
15)
4
16) Which of the following explains why supply is more elastic as more time passes? A) It is difficult or impossible to increase the quantity produced in a short period of time. B) Consumers have more time to search for substitutes. C) The supply curve becomes generally steeper as more time passes. D) Sellers try to take advantage of a high price in the short term. E) There is no explanation for this phenomenon.
16)
17) If a firm supplies 200 units at a price of $50 and 100 units at a price of $40, using the midpoint method, what is the price elasticity of supply? A) 3.00 B) 8.50 C) 0.33 D) 1.00 E) 5.00
17)
18) If the price of a a good increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is A) less than one and supply is inelastic. B) negative and supply is inelastic. C) greater than one and supply is elastic. D) less than one and supply is elastic. E) greater than one and supply is inelastic.
18)
19) If Microsoft wanted to prove to the Justice Department that its Windows software has many substitutes that personal computer owners can use, Microsoft hopes to find A) a negative income elasticity for Windows. B) that the demand for Windows' is inelastic. C) a large positive value for the cross elasticity of Windows and other software. D) a positive income elasticity for Windows. E) that the demand for Windows is elastic.
19)
20) The income elasticity of demand is A) zero for an inferior good. B) less than one for an income elastic normal good. C) positive for a normal good. D) Only answers A and B are correct. E) Answers A, B, and C are correct.
20)
21) When income increases from $20,000 to $30,000 the number of home delivered pizzas per year increases from 22 to 40. The income elasticity of demand for home delivered pizza equals A) 0.58. B) 0.69. C) 2.86. D) 1.45. E) 0.40.
21)
22) Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500. Using the midpoint method, the elasticity of demand equals A) 2.10. B) 0.72. C) 1.11. D) 0.90. E) None of the above answers is correct.
22)
5
23) The total revenue test says that if a price decrease leads to A) an increase in total revenue, demand is income elastic. B) a decrease in total revenue, demand is price inelastic. C) a decrease in total revenue, supply is price elastic. D) a decrease in total revenue, supply is price inelastic. E) a decrease in total revenue, demand is income inelastic.
23)
24) A ________ curve means that ________. A) horizontal supply; elasticity of supply is infinite B) horizontal demand; a change in price does not change total revenue C) vertical demand; a change in price does not change total revenue D) horizontal demand; the elasticity of demand is less than 1 E) horizontal supply; elasticity of demand is infinite
24)
25) When the market price rises, the consumers' consumer surplus ________. When the market price falls, the consumers' consumer surplus ________. A) decreases; increases B) decreases; decreases C) increases; increases D) does not change; increases E) increases; decreases
25)
26) The difference between the marginal benefit from a new pair of shoes and the price of the new pair of shoes is A) what we have to pay. B) the consumer's expenditure on the shoes. C) what we get. D) the consumer surplus from that pair of shoes. E) the price when the marginal benefit is maximized.
26)
27) The additional cost a producer incurs from producing one more unit of a product is referred to as the A) consumer surplus. B) marginal cost. C) marginal profit. D) marginal utility. E) marginal benefit.
27)
28) The supply curve is upward sloping because of A) increasing marginal cost. B) decreasing marginal benefit. C) increasing total cost. D) decreasing marginal cost. E) increasing marginal benefit.
28)
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29) The figure above shows the market for tires. According to the figure, the government collects ________ per month in total tax revenue A) $600 million B) $900 million C) $2,000 million D) $1,200 million E) None of the above answers is correct.
29)
30) The deadweight loss from a tax is called the A) marginal benefit of the tax. B) excess burden of the tax. C) net gain from taxation. D) marginal cost of the tax. E) net loss from taxation.
30)
31) A price ceiling A) is an illegal price. B) is the maximum price that can legally be charged. C) is the price that exists in a black market. D) Both answers A and B are correct. E) Both answers B and C are correct.
31)
32) A rent ceiling set below the equilibrium rent A) creates a situation in which the quantity demanded of housing is greater than quantity supplied. B) ensures that landlords earn a reasonable rate of profit on apartments. C) ensures the availability of enough low-rent apartments in a city. D) results in all renters and potential renters being better off. E) eliminates discrimination by landlords.
32)
7
33) Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the A) price of milk remains $4 per gallon. B) quantity supplied of milk falls short of the quantity demanded. C) demand decreases. D) quantity supplied of milk exceeds the quantity demanded. E) supply increases.
33)
Wage rate Quantity demanded Quantity supplied (dollars per hour) (workers) (workers) 12 400 1000 11 600 900 10 800 800 9 1000 700 8 1200 500 34) The labor demand and labor supply schedules are given in the table above. If a minimum wage of $9 per hour is imposed, A) a shortage of 300 workers occurs. B) the quantity demanded is 1,000 workers. C) there is unemployment of 700 workers. D) a surplus of 300 workers occurs. E) there is no surplus or shortage of workers.
34)
35) A nation will export a good if its A) no-trade, domestic quantity is less than the world quantity. B) no-trade, domestic quantity is greater than the world quantity. C) no-trade, domestic price is less than the world price D) no-trade, domestic price is greater than the world price. E) no-trade, domestic price is equal to the world price.
35)
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36) The above figure shows the U.S. market for wheat. With international trade, the price of wheat in the United States is ________ per ton and the United States ________ wheat. A) $16; exports B) $16; imports C) $14; does not trade D) $14; imports E) $14; exports
9
36)
37) The above figure shows the U.S. market for wheat. With no international trade, consumer surplus is equal to ________ and producer surplus is equal to ________. A) area E + area F; area A B) area B + area C + area D; area E + area F C) area A; area B + area C + area E + area F D) area A + area B + area C; area E + area F E) area A + area B + area C + area D; area E + area F
37)
38) When a nation exports a good, its ________ surplus increases, and when it imports a good, its ________ surplus increases. A) consumer; consumer B) producer; consumer C) total; consumer D) producer; producer E) consumer; producer
38)
39) If an import quota is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________. A) increase; decrease B) increase; not change C) increase; increase D) decrease; decrease E) decrease; increase
39)
10
40) The above figure shows the U.S. market for 1 carat diamonds. With free trade, the United States produces ________ diamonds and imports ________ diamonds. A) 500,000; 400,000 B) 300,000; 600,000 C) 0; 900,000 D) 100,000; 800,000 E) 100,000; 900,000
11
40)
Answer Key Testname: ECON4999_SPRING2011_PRE1
1) C
11) C
Topic: Changes in demand, normal good Skill: Level 1: Definition Section: Checkpoint 4.1 AACSB: Reflective thinking
Topic: Changes in supply, productivity Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
2) A
12) C
Topic: Changes in demand, preferences Skill: Level 2: Using definitions Section: Checkpoint 4.1 AACSB: Reflective thinking
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Analytical reasoning
3) D
13) B
Topic: Changes in demand, number of buyers Skill: Level 3: Using models Section: Checkpoint 4.1 AACSB: Reflective thinking
Topic: Unit elastic demand Skill: Level 1: Definition Section: Checkpoint 5.1 AACSB: Analytical reasoning
4) A
14) A
Topic: Law of supply Skill: Level 2: Using definitions Section: Checkpoint 4.2 AACSB: Reflective thinking
Topic: Price elasticity of demand, formula Skill: Level 3: Using models Section: Checkpoint 5.1 AACSB: Analytical reasoning
5) E
15) E
Topic: Shifts of the supply curve Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
Topic: Price elasticity of demand, formula Skill: Level 3: Using models Section: Checkpoint 5.1 AACSB: Analytical reasoning
6) D
16) A
Topic: Shifts of the supply curve, productivity Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
Topic: Factors that influence the price elasticity of supply Skill: Level 2: Using definitions Section: Checkpoint 5.2 AACSB: Reflective thinking
7) B
17) A
Topic: Market equilibrium Skill: Level 3: Using models Section: Checkpoint 4.3 AACSB: Analytical reasoning
Topic: Price elasticity of supply, formula Skill: Level 3: Using models Section: Checkpoint 5.2 AACSB: Analytical reasoning
8) B
18) A
Topic: Effects of an increase in supply Skill: Level 3: Using models Section: Checkpoint 4.3 AACSB: Reflective thinking
Topic: Price elasticity of supply, formula Skill: Level 2: Using definitions Section: Checkpoint 5.2 AACSB: Analytical reasoning
9) E
19) C
Topic: Changes in both demand and supply, expected future price Skill: Level 4: Applying models Section: Checkpoint 4.3 AACSB: Analytical reasoning
Topic: Cross elasticity of demand, substitutes Skill: Level 4: Applying models Section: Checkpoint 5.3 AACSB: Reflective thinking
20) C
10) C
Topic: Income elasticity of demand, normal good Skill: Level 2: Using definitions Section: Checkpoint 5.3 AACSB: Reflective thinking
Topic: Changes in supply, prices of resources Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
12
Answer Key Testname: ECON4999_SPRING2011_PRE1
21) D
31) B
Topic: Income elasticity of demand, formula Skill: Level 3: Using models Section: Checkpoint 5.3 AACSB: Analytical reasoning
Topic: Price ceiling Skill: Level 1: Definition Section: Checkpoint 7.2 AACSB: Analytical reasoning
22) D
32) A
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Analytical reasoning
Topic: Rent ceiling, shortages Skill: Level 3: Using models Section: Checkpoint 7.2 AACSB: Analytical reasoning
23) B
33) D
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Reflective thinking
Topic: Price floor, surplus Skill: Level 4: Applying models Section: Checkpoint 7.3 AACSB: Analytical reasoning
24) A
34) E
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Reflective thinking
Topic: Minimum wage, employment Skill: Level 4: Applying models Section: Checkpoint 7.3 AACSB: Analytical reasoning
25) A
35) C
Topic: Consumer surplus Skill: Level 3: Using models Section: Checkpoint 6.2 AACSB: Analytical reasoning
Topic: Exports Skill: Level 2: Using definitions Section: Checkpoint 8.1 AACSB: Analytical reasoning
26) D
36) A
Topic: Consumer surplus Skill: Level 1: Definition Section: Checkpoint 6.2 AACSB: Reflective thinking
Topic: Exports Skill: Level 3: Using models Section: Checkpoint 8.1 AACSB: Analytical reasoning
27) B
37) D
Topic: Marginal cost Skill: Level 1: Definition Section: Checkpoint 6.3 AACSB: Reflective thinking
Topic: Gains from exports Skill: Level 3: Using models Section: Checkpoint 8.2 AACSB: Analytical reasoning
28) A
38) B
Topic: Supply curve and the marginal cost curve Skill: Level 2: Using definitions Section: Checkpoint 6.3 AACSB: Reflective thinking
Topic: Gains from trade Skill: Level 2: Using definitions Section: Checkpoint 8.2 AACSB: Analytical reasoning
29) A
39) D
Topic: Tax incidence Skill: Level 4: Applying models Section: Checkpoint 7.1 AACSB: Analytical reasoning
Topic: Effects of quotas Skill: Level 4: Applying models Section: Checkpoint 8.3 AACSB: Analytical reasoning
30) B
40) D
Topic: Deadweight loss, excess burden Skill: Level 1: Definition Section: Checkpoint 7.1 AACSB: Analytical reasoning
Topic: International trade Skill: Level 3: Using models Section: Checkpoint 8.3 AACSB: Analytical reasoning
13
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If the demand for a good increases when people's incomes increase, A) the good is a substitute good for an inferior good. B) the law of demand is violated. C) the good is a normal good. D) the good's demand curve must be slope upward. E) the good is an inferior good.
1)
2) Suppose that tattoos gained immense popularity with retired people as well as college students. This gain in popularity best reflects which of the following influences on buying plans? A) preferences B) the price of a complement good C) income D) expectations E) the price of a substitute good
2)
3) Teenagers drink more soda than other age groups. If the number of teenagers increases, everything else remaining the same, A) market demand for soda decreases. B) market demand for soda does not change. C) there is a movement along the market demand curve for soda. D) market demand for soda increases. E) None of the above answers is correct because the effect on the demand depends whether the supply curve shifts rightward, leftward, or not at all.
3)
4) The law of supply states that other things remaining the same, a decrease in the price of a kayak leads to A) a decrease in the quantity of kayaks supplied. B) an increase in the supply of kayaks. C) a decrease in the supply of kayaks. D) an increase in the quantity of kayaks supplied. E) an increase in the supply of kayaks and a decrease in the quantity of kayaks supplied.
4)
5) Which of the following shifts the supply curve of popcorn leftward? A) a decrease in the cost of producing popcorn B) a decrease in the price of popcorn C) an increase in the price of popcorn D) a technological development in the production of popcorn E) a decrease in the number of popcorn suppliers
5)
1
6) The above figure illustrates the market for corn. If point "a" represents the original equilibrium and point "b" the new equilibrium, which of the following could have caused the change? A) an increase in consumers' income if corn is a normal good B) an increase in consumers' income if corn is an inferior good C) an increase in consumers' preferences for corn D) an improvement in the technology of producing corn E) an increase in labor costs of producing corn
6)
Price Quantity demanded Quantity supplied (dollars per gallon) (gallons of gasoline) (gallons of gasoline) 3.73 337,982 441,074 3.68 396,398 428,008 3.65 412,031 412,031 3.62 417,899 391,665 7) The table above shows the situation in the gasoline market in Tulsa, Oklahoma. If the price of a gallon of gasoline is $3.65, then A) there is a shortage of gasoline in Tulsa. B) the gasoline market in Tulsa is in equilibrium. C) there is a surplus of gasoline in Tulsa. D) without more information we cannot determine if there is a surplus, a shortage, or an equilibrium in the gasoline market in Tulsa. E) there is neither a surplus nor a shortage but the market is NOT in equilibrium.
7)
8) Which of the following lower the equilibrium price of a canoe? A) an increase in the quantity of canoes supplied B) an increase in the supply of canoes C) an increase in the demand for canoes D) a decrease in the supply of canoes E) Both answers A and B are correct.
8)
2
9) If both producers and consumers believe that a product's price will rise in the future, then at the present, demand ________ and supply ________. A) decreases; increases B) increases; increases C) does not change; does not change D) decreases; decreases E) increases; decreases
9)
10) The above figures show the market for HD televisions. If the price of the LCD screens used to produce these televisions falls, which figure shows the effect of this change in price? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.
10)
11) The above figures show the market for HD televisions. If the technology used to produce these televisions advances so that productivity increases, which figure shows the effect of this change? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.
11)
3
12) Consider the market for peanut butter. If there is a decrease in the price of deli turkey slices (a substitute in consumption for peanut butter) along with a decrease in the price of peanut brittle (a substitute in production for peanut butter), the A) equilibrium quantity of peanut definitely decreases. B) equilibrium quantity of peanut butter definitely increases. C) equilibrium price of peanut butter definitely falls. D) equilibrium price of peanut butter definitely rises. E) equilibrium price of peanut butter might rise or fall.
12)
13) When the percentage change in the quantity demanded equals the percentage change in price, then demand is A) irrelevant. B) unit elastic. C) inelastic. D) elastic. E) undefined.
13)
14) If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded, the price elasticity of demand equals A) 0.75. B) 1.33. C) 4.00. D) 3.44. E) None of the above answers are correct.
14)
15) In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B? A) 1.00 B) 0.13 C) 0.05 D) 2.33 E) 0.43
15)
4
16) Which of the following explains why supply is more elastic as more time passes? A) It is difficult or impossible to increase the quantity produced in a short period of time. B) Consumers have more time to search for substitutes. C) The supply curve becomes generally steeper as more time passes. D) Sellers try to take advantage of a high price in the short term. E) There is no explanation for this phenomenon.
16)
17) If a firm supplies 200 units at a price of $50 and 100 units at a price of $40, using the midpoint method, what is the price elasticity of supply? A) 3.00 B) 8.50 C) 0.33 D) 1.00 E) 5.00
17)
18) If the price of a a good increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is A) less than one and supply is inelastic. B) negative and supply is inelastic. C) greater than one and supply is elastic. D) less than one and supply is elastic. E) greater than one and supply is inelastic.
18)
19) If Microsoft wanted to prove to the Justice Department that its Windows software has many substitutes that personal computer owners can use, Microsoft hopes to find A) a negative income elasticity for Windows. B) that the demand for Windows' is inelastic. C) a large positive value for the cross elasticity of Windows and other software. D) a positive income elasticity for Windows. E) that the demand for Windows is elastic.
19)
20) The income elasticity of demand is A) zero for an inferior good. B) less than one for an income elastic normal good. C) positive for a normal good. D) Only answers A and B are correct. E) Answers A, B, and C are correct.
20)
21) When income increases from $20,000 to $30,000 the number of home delivered pizzas per year increases from 22 to 40. The income elasticity of demand for home delivered pizza equals A) 0.58. B) 0.69. C) 2.86. D) 1.45. E) 0.40.
21)
22) Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500. Using the midpoint method, the elasticity of demand equals A) 2.10. B) 0.72. C) 1.11. D) 0.90. E) None of the above answers is correct.
22)
5
23) The total revenue test says that if a price decrease leads to A) an increase in total revenue, demand is income elastic. B) a decrease in total revenue, demand is price inelastic. C) a decrease in total revenue, supply is price elastic. D) a decrease in total revenue, supply is price inelastic. E) a decrease in total revenue, demand is income inelastic.
23)
24) A ________ curve means that ________. A) horizontal supply; elasticity of supply is infinite B) horizontal demand; a change in price does not change total revenue C) vertical demand; a change in price does not change total revenue D) horizontal demand; the elasticity of demand is less than 1 E) horizontal supply; elasticity of demand is infinite
24)
25) When the market price rises, the consumers' consumer surplus ________. When the market price falls, the consumers' consumer surplus ________. A) decreases; increases B) decreases; decreases C) increases; increases D) does not change; increases E) increases; decreases
25)
26) The difference between the marginal benefit from a new pair of shoes and the price of the new pair of shoes is A) what we have to pay. B) the consumer's expenditure on the shoes. C) what we get. D) the consumer surplus from that pair of shoes. E) the price when the marginal benefit is maximized.
26)
27) The additional cost a producer incurs from producing one more unit of a product is referred to as the A) consumer surplus. B) marginal cost. C) marginal profit. D) marginal utility. E) marginal benefit.
27)
28) The supply curve is upward sloping because of A) increasing marginal cost. B) decreasing marginal benefit. C) increasing total cost. D) decreasing marginal cost. E) increasing marginal benefit.
28)
6
29) The figure above shows the market for tires. According to the figure, the government collects ________ per month in total tax revenue A) $600 million B) $900 million C) $2,000 million D) $1,200 million E) None of the above answers is correct.
29)
30) The deadweight loss from a tax is called the A) marginal benefit of the tax. B) excess burden of the tax. C) net gain from taxation. D) marginal cost of the tax. E) net loss from taxation.
30)
31) A price ceiling A) is an illegal price. B) is the maximum price that can legally be charged. C) is the price that exists in a black market. D) Both answers A and B are correct. E) Both answers B and C are correct.
31)
32) A rent ceiling set below the equilibrium rent A) creates a situation in which the quantity demanded of housing is greater than quantity supplied. B) ensures that landlords earn a reasonable rate of profit on apartments. C) ensures the availability of enough low-rent apartments in a city. D) results in all renters and potential renters being better off. E) eliminates discrimination by landlords.
32)
7
33) Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the A) price of milk remains $4 per gallon. B) quantity supplied of milk falls short of the quantity demanded. C) demand decreases. D) quantity supplied of milk exceeds the quantity demanded. E) supply increases.
33)
Wage rate Quantity demanded Quantity supplied (dollars per hour) (workers) (workers) 12 400 1000 11 600 900 10 800 800 9 1000 700 8 1200 500 34) The labor demand and labor supply schedules are given in the table above. If a minimum wage of $9 per hour is imposed, A) a shortage of 300 workers occurs. B) the quantity demanded is 1,000 workers. C) there is unemployment of 700 workers. D) a surplus of 300 workers occurs. E) there is no surplus or shortage of workers.
34)
35) A nation will export a good if its A) no-trade, domestic quantity is less than the world quantity. B) no-trade, domestic quantity is greater than the world quantity. C) no-trade, domestic price is less than the world price D) no-trade, domestic price is greater than the world price. E) no-trade, domestic price is equal to the world price.
35)
8
36) The above figure shows the U.S. market for wheat. With international trade, the price of wheat in the United States is ________ per ton and the United States ________ wheat. A) $16; exports B) $16; imports C) $14; does not trade D) $14; imports E) $14; exports
9
36)
37) The above figure shows the U.S. market for wheat. With no international trade, consumer surplus is equal to ________ and producer surplus is equal to ________. A) area E + area F; area A B) area B + area C + area D; area E + area F C) area A; area B + area C + area E + area F D) area A + area B + area C; area E + area F E) area A + area B + area C + area D; area E + area F
37)
38) When a nation exports a good, its ________ surplus increases, and when it imports a good, its ________ surplus increases. A) consumer; consumer B) producer; consumer C) total; consumer D) producer; producer E) consumer; producer
38)
39) If an import quota is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________. A) increase; decrease B) increase; not change C) increase; increase D) decrease; decrease E) decrease; increase
39)
10
40) The above figure shows the U.S. market for 1 carat diamonds. With free trade, the United States produces ________ diamonds and imports ________ diamonds. A) 500,000; 400,000 B) 300,000; 600,000 C) 0; 900,000 D) 100,000; 800,000 E) 100,000; 900,000
11
40)
Answer Key Testname: ECON4999_SPRING2011_PRE1
1) C
11) C
Topic: Changes in demand, normal good Skill: Level 1: Definition Section: Checkpoint 4.1 AACSB: Reflective thinking
Topic: Changes in supply, productivity Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
2) A
12) C
Topic: Changes in demand, preferences Skill: Level 2: Using definitions Section: Checkpoint 4.1 AACSB: Reflective thinking
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Analytical reasoning
3) D
13) B
Topic: Changes in demand, number of buyers Skill: Level 3: Using models Section: Checkpoint 4.1 AACSB: Reflective thinking
Topic: Unit elastic demand Skill: Level 1: Definition Section: Checkpoint 5.1 AACSB: Analytical reasoning
4) A
14) A
Topic: Law of supply Skill: Level 2: Using definitions Section: Checkpoint 4.2 AACSB: Reflective thinking
Topic: Price elasticity of demand, formula Skill: Level 3: Using models Section: Checkpoint 5.1 AACSB: Analytical reasoning
5) E
15) E
Topic: Shifts of the supply curve Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
Topic: Price elasticity of demand, formula Skill: Level 3: Using models Section: Checkpoint 5.1 AACSB: Analytical reasoning
6) D
16) A
Topic: Shifts of the supply curve, productivity Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
Topic: Factors that influence the price elasticity of supply Skill: Level 2: Using definitions Section: Checkpoint 5.2 AACSB: Reflective thinking
7) B
17) A
Topic: Market equilibrium Skill: Level 3: Using models Section: Checkpoint 4.3 AACSB: Analytical reasoning
Topic: Price elasticity of supply, formula Skill: Level 3: Using models Section: Checkpoint 5.2 AACSB: Analytical reasoning
8) B
18) A
Topic: Effects of an increase in supply Skill: Level 3: Using models Section: Checkpoint 4.3 AACSB: Reflective thinking
Topic: Price elasticity of supply, formula Skill: Level 2: Using definitions Section: Checkpoint 5.2 AACSB: Analytical reasoning
9) E
19) C
Topic: Changes in both demand and supply, expected future price Skill: Level 4: Applying models Section: Checkpoint 4.3 AACSB: Analytical reasoning
Topic: Cross elasticity of demand, substitutes Skill: Level 4: Applying models Section: Checkpoint 5.3 AACSB: Reflective thinking
20) C
10) C
Topic: Income elasticity of demand, normal good Skill: Level 2: Using definitions Section: Checkpoint 5.3 AACSB: Reflective thinking
Topic: Changes in supply, prices of resources Skill: Level 3: Using models Section: Checkpoint 4.2 AACSB: Analytical reasoning
12
Answer Key Testname: ECON4999_SPRING2011_PRE1
21) D
31) B
Topic: Income elasticity of demand, formula Skill: Level 3: Using models Section: Checkpoint 5.3 AACSB: Analytical reasoning
Topic: Price ceiling Skill: Level 1: Definition Section: Checkpoint 7.2 AACSB: Analytical reasoning
22) D
32) A
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Analytical reasoning
Topic: Rent ceiling, shortages Skill: Level 3: Using models Section: Checkpoint 7.2 AACSB: Analytical reasoning
23) B
33) D
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Reflective thinking
Topic: Price floor, surplus Skill: Level 4: Applying models Section: Checkpoint 7.3 AACSB: Analytical reasoning
24) A
34) E
Topic: Integrative Skill: Level 3: Using models Section: Integrative AACSB: Reflective thinking
Topic: Minimum wage, employment Skill: Level 4: Applying models Section: Checkpoint 7.3 AACSB: Analytical reasoning
25) A
35) C
Topic: Consumer surplus Skill: Level 3: Using models Section: Checkpoint 6.2 AACSB: Analytical reasoning
Topic: Exports Skill: Level 2: Using definitions Section: Checkpoint 8.1 AACSB: Analytical reasoning
26) D
36) A
Topic: Consumer surplus Skill: Level 1: Definition Section: Checkpoint 6.2 AACSB: Reflective thinking
Topic: Exports Skill: Level 3: Using models Section: Checkpoint 8.1 AACSB: Analytical reasoning
27) B
37) D
Topic: Marginal cost Skill: Level 1: Definition Section: Checkpoint 6.3 AACSB: Reflective thinking
Topic: Gains from exports Skill: Level 3: Using models Section: Checkpoint 8.2 AACSB: Analytical reasoning
28) A
38) B
Topic: Supply curve and the marginal cost curve Skill: Level 2: Using definitions Section: Checkpoint 6.3 AACSB: Reflective thinking
Topic: Gains from trade Skill: Level 2: Using definitions Section: Checkpoint 8.2 AACSB: Analytical reasoning
29) A
39) D
Topic: Tax incidence Skill: Level 4: Applying models Section: Checkpoint 7.1 AACSB: Analytical reasoning
Topic: Effects of quotas Skill: Level 4: Applying models Section: Checkpoint 8.3 AACSB: Analytical reasoning
30) B
40) D
Topic: Deadweight loss, excess burden Skill: Level 1: Definition Section: Checkpoint 7.1 AACSB: Analytical reasoning
Topic: International trade Skill: Level 3: Using models Section: Checkpoint 8.3 AACSB: Analytical reasoning
13
