Fall 2012 ECN104 Midterm Exam
Version A
Fall 2012 ECN104 Midterm Exam
Fall 2012 Midterm Exam Multiple Choice Identify the choice that best completes the statement or answers the question. ____
1. What could be one result of a cold snap in Florida? a. an increase in the price of oranges b. an increase in migrant farm workers' wages c. an increase in farm machinery prices d. an increase in the price of diesel fuel used in farming
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2. When a consumer experiences a price increase for an inferior good, which of the following situations is possible? a. The income effect is less than the substitution effect and the demand curve will be upward sloping. b. The income effect is less than the substitution effect but the substitution effect is positive and the demand curve will be upward sloping. c. The income effect is greater than the substitution effect and the demand curve will be upward sloping. d. The income effect is greater than the substitution effect and the demand curve will be downward sloping.
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3. When will a decrease in supply cause the largest increase in price? a. when both supply and demand are inelastic b. when both supply and demand are elastic c. when demand is inelastic and supply is elastic d. when demand is elastic and supply is inelastic
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4. Which is true in the circular-flow diagram? a. households are sellers in the resource market. b. firms are buyers in the product market. c. spending on goods and services flows from firms to households. d. firms are sellers in the resource market and the product market.
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5. You have decided to purchase a new Mustang convertible. A friend tells you that Ford will stop offering a $3000 rebate on Mustangs starting next month. As a result of this information, what will happen to your demand curve for Mustangs? a. curve will be unaffected b. shifts left today c. shifts right today d. could shift either right or left
Figure 6-8
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6. Refer to Figure 6-8. What is the share of the tax burden that buyers would pay? a. $1.00 per unit b. $1.50 per unit c. $2.00 per unit d. $3.00 per unit
____
7. Which of the following demonstrates the law of demand? a. Jon buys more pretzels at $1.50 each since he got a $1 raise at work. b. Melissa buys fewer muffins at $0.75 each than at $1 each. c. Kendra buys fewer Snickers at $0.60 each since the price of Milky Ways fell to $0.50 each. d. Dave buys more donuts at $0.25 each than at $0.50 each.
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8. Goods X and Y are perfect complements. If the price of good Y falls, what will the substitution effect acting by itself do? a. It will cause consumers to buy more of good Y and less of good X. b. It will cause consumers to buy more of good X and less of good Y. c. It will not affect the amount of goods X and Y that consumers buy. d. It will affect the amount of goods X and Y that consumers buy, but in an unpredictable way.
Figure 21-10
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9. Refer to Figure 21-9. If point B is the consumer's optimum and the price of chocolate chips is $3 per bag, what is the price of a bag of marshmallows? a. $1.50 b. $2.70 c. $3 d. $6 Figure 21-7
____ 10. Refer to Figure 21-7. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, what change forces the consumer to move to point A? a. a decrease in the price of yogurt b. an increase in the price of yogurt c. a decrease in the price of granola bars d. an increase in the price of granola bars ____ 11. An upward-sloping individual labour supply curve is indicative of which of the following? a. an upward-sloping demand for leisure b. dominant income effects c. dominant substitution effects d. individuals that reduce work effort (hours) as income rises
____ 12. The substitution effect of an increase in the interest rate could cause an increase in which of the following? a. consumption when young and savings when young b. consumption when young and savings when old c. consumption when old and savings when young d. savings when old and consumption when old Figure 4-2
____ 13. Refer to Figure 4-2. What could cause the shift from D1 to D? a. a decrease in the price of a complement b. a decrease in the price of a substitute c. an increase in technology d. an increase in price ____ 14. Refer to Figure 4-2. What could cause the shift from D to D1? a. a decrease in the price of a substitute b. an increase in technology c. a decrease in the price of a complement d. an increase in price
Figure 21-2
____ 15. Refer to Figure 21-2. Which of the graphs in the figure reflects an increase in the price of good Y only? a. graph (a) b. graph (b) c. graph (c) d. graph (d) ____ 16. The substitution effect of a wage decrease, in the work-leisure model, applies when the worker chooses which of the following options? a. He wishes to work more but be less productive. b. He wishes to work more. c. He wishes to work less. d. He is indifferent between working more or less. ____ 17. A highly bowed inward set of indifference curves represents the two goods as which of the following types? a. very poor substitutes b. very poor complements c. perfect complements d. perfect substitutes
Figure 5-10
____ 18. Refer to Figure 5-10. What is the elasticity of supply between points D and E? a. 0.34 b. 1.26 c. 0.53 d. 1.89 ____ 19. What is the difference between slope and elasticity? a. Slope measures changes in quantity demanded more accurately than elasticity. b. There is no difference between slope and elasticity calculations. c. Slope measures actual changes and elasticity measures percentage changes. d. Slope measures percentage changes and elasticity measures actual changes. ____ 20. For what reason are production possibilities frontiers usually bowed outward? a. increasing opportunity cost b. decreasing opportunity cost c. increasing productivity d. constant opportunity cost
Figure 2-3
____ 21. Refer to Figure 2-3. At which point or points can the economy NOT produce? a. point A b. point C c. point A, C d. point A, C, D ____ 22. You love peanut butter. You hear on the news that 50% of the peanut crop in North America has been wiped out, which will cause the price to double by the end of the year. What happens as a result? a. You decide to give up peanut butter completely. b. Your demand for peanut butter will increase by the end of the year. c. Your demand for peanut butter falls as you look for a substitute good. d. Your demand for peanut butter increases today. ____ 23. What can good assumptions do? a. allow economists to see the 'big picture' instead of only small segments b. cause economists to leave out important variables that make their theories worthless c. simplify the complex world and make it easier to understand d. further complicate an already difficult topic ____ 24. The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1 per pound is levied on the buyers of caviar. Who would we expect to have to pay most of these taxes? a. the sellers of salt and the sellers of caviar b. the buyers of salt and the sellers of caviar c. the buyers of salt and the buyers of caviar d. the sellers of salt and the buyers of caviar
Figure 6-11
____ 25. Refer to Figure 6-11. In which market will the majority of a tax be paid by the buyer? a. market (a) b. market (b) c. market (c) d. impossible to determine Figure 2-8
____ 26. Refer to Figure 2-8. What is the opportunity cost of moving from point A to point B? a. the difference between the 20 barrels you get and the 8 bathtubs you give up b. 8 bathtubs c. the difference between the 8 bathtubs you get and the 20 barrels you give up d. 20 barrels
____ 27. What does a bowed in indifference curve reflect? a. a consumer's unwillingness to substitute one good for another b. a consumer's desire to specialize in the consumption of one good over another c. a consumer's decreasing willingness to give up a good that she has in abundance d. a consumer's increasing willingness to give up a good that she has in abundance Table 4-1 The table shows individual demand schedules for a market. Price of the Good Aaron Angela $0.00 20 16 0.50 18 12 1.00 14 10 1.50 12 8 2.00 6 6 2.50 0 4
Austin 10 6 2 0 0 0
Alyssa 8 6 5 4 2 0
____ 28. Refer to Table 4-1. What happens if the price increases from $1.00 to $1.50? a. The quantity demanded in the market decreases by 2 units. b. The quantity demanded in the market decreases by 7 units. c. The market demand increases by 20 units. d. Individual demands will increase. Figure 4-3
____ 29. Refer to Figure 4-3. The graph shows the demand for cigarettes. Which most likely happened? a. Mandatory health warnings were placed on cigarette packages. b. The price of marijuana rose. c. A tax was placed on cigarettes. d. Several foreign countries banned Canadian cigarettes in their countries. ____ 30. If an increase in the price of a good results in an increase in total revenue for the firm, what must the supply of the good be? a. inelastic b. Nothing can be said about price elasticity of supply from the information given. c. unit elastic d. elastic
____ 31. Complete the following: Two goods are substitutes if a decrease in the price of one good a. reduces the quantity demanded of the other good. b. increases the quantity demanded of the other good. c. reduces the demand for the other good. d. increases the demand for the other good. ____ 32. The local pizza restaurant makes such great bread sticks that consumers do not respond much to a change in the price. If the owner is interested only in increasing revenue, what should he do? a. He should lower the price of the bread sticks. b. He should leave the price of the bread sticks alone. c. He should raise the price of the bread sticks. d. He should reduce costs. ____ 33. When a production possibilities frontier is linear, what does it show? a. that resources are perfectly shiftable from the production of one good to another b. an example of increasing opportunity cost c. An example of decreasing opportunity cost d. a truer picture of real life than a bowed out production possibilities frontier ____ 34. In the work-leisure model, the income effect of a wage increase is when the worker chooses which of the following options? a. She wishes to work more. b. She is indifferent between working more or less. c. She wishes to work more but be less productive. d. She wishes to work less. Figure 21-6
____ 35. Refer to Figure 21-6. Which of the following is correct at point B? a. MRSXY = PX/PY b. MRSXY < PX/PY c. MRSXY > PX/PY d. MRSXY > PY/Px ____ 36. When demand is elastic, what is the price elasticity, and how will price and total revenue behave? a. greater than 1, and price and total revenue will move in the same direction b. less than 1, and price and total revenue will move in the same direction c. greater than 1, and price and total revenue will move in opposite directions d. less than 1, and price and total revenue will move in opposite directions
____ 37. When will buyers of a product pay the majority of a tax placed on a product? a. when supply is more elastic than demand b. when demand is more elastic than supply c. when the tax is placed on the buyer of the product d. when the tax is placed on the seller of the product ____ 38. If wheat farmers know that the demand for wheat is inelastic, and they want to increase their total revenue, what should they all do? a. They should use better machinery. b. They should plant more wheat so that they would be able to sell more each year. c. They should reduce the number of acres they plant in wheat. d. They should increase spending on fertilizer in an attempt to produce more on the acres they farm. Figure 4-4
____ 39. Refer to Figure 4-4. Which graph could be used to show the result of 5 percent of the country's smokers deciding to stop smoking? a. b. b. a. c. c. d. Each graph could be used to show the result. ____ 40. Assume that the demand and supply curves for cars are elastic. If the government imposes a $500 tax on the buyer of each car, what can we assume will happen to the price of a car? a. The equilibrium price of a car will decrease by less than $500. b. The equilibrium price of a car will not change, since both curves are elastic. c. The equilibrium price of a car will decrease by more than $500. d. The equilibrium price of a car will decrease by exactly $500.
Figure 5-11
____ 41. Refer to Figure 5-11. When a new, more productive strawberry plant was developed, causing supply to increase, what happened to strawberry farmers, and why? a. They were hurt, since both price and total revenue fell due to an elastic demand curve. b. They were helped, since although price fell, total revenue increased, due to an elastic demand curve. c. They were hurt, since both price and total revenue fell due to an inelastic demand curve. d. They were helped, since although price fell, total revenue increased, due to an inelastic demand curve. Figure 6-9
____ 42. Refer to Figure 6-9. What is the share of the tax burden per unit that sellers would pay? a. $4.00 b. $6.00 c. $8.00 d. $10.00 ____ 43. What will happen if a newly imposed minimum wage is set above the equilibrium wage in a labour market? a. Workers earning more than the minimum wage will be worse off. b. Every worker who is earning a wage below the minimum will be better off. c. The equilibrium wage in the market will rise. d. Some workers will get a raise and some workers will lose their jobs.
____ 44. Lead is an important input in the production of crystal. If the price of lead decreases, all else equal, what would we expect? a. the supply of crystal to increase b. the supply of crystal to be unaffected c. the supply of lead to increase d. the supply of crystal to decrease Figure 6-7
____ 45. Refer to Figure 6-7. Which panel(s) best represent(s) a binding rent control in the short run? a. panel (a) b. panel (b) c. neither panel d. both panels ____ 46. Jonathan is planning ahead for retirement and must decide how much to spend and how much to save while he is working in order to have money to spend when he retires. When the income effect dominates the substitution effect, how is an increase in the interest rate likely to influence saving? a. It is likely to decrease saving now and increase saving later. b. It is likely to have no effect on saving. c. It is likely to increase saving. d. It is likely to decrease saving.
Figure 2-4
____ 47. Refer to Figure 2-4. What is the opportunity cost in terms of toothbrushes of getting 10 additional toasters by moving from point B to point A? a. 20 toothbrushes b. zero, since the economy has the additional resources to produce 10 additional toasters c. 5 toothbrushes d. 10 toothbrushes ____ 48. What does a market demand curve reflect? a. when the buyers are willing to buy the most b. the fact that the level of income is inversely related to quantity demanded c. how much all buyers are willing and able to buy at each possible price d. how quantity demanded changes when the number of buyers changes ____ 49. If a study by the CMA found that brown sugar caused weight loss while white sugar caused weight gain, what would we see? a. no change in either demand because weight loss is not a nonprice determinant of demand b. an increase in demand for brown sugar, but no change in the demand for white sugar. c. a decrease in the demand for white sugar, but no change in the demand for brown sugar d. an increase in demand for brown sugar and a decrease in demand for white sugar ____ 50. A fall in the price of widgets leads consumers to buy more widgets. What can we conclude from this information? a. Widgets are inferior goods. b. The slope of the budget constraint has changed. c. Widgets are Giffen goods. d. Widgets are normal goods. ____ 51. What happens as elasticity rises? a. The supply curve gets steeper. b. Quantity supplied responds less to a change in price. c. Elasticity gets closer to zero. d. The supply curve gets flatter.
Table 5-1 Income $30 000 $40 000
Quantity of Good X Purchased 2 5
Quantity of Good Y Purchased 20 10
____ 52. Refer to Table 5-1. Which of the following best describes Good Y? a. price inelastic b. a normal good c. an inferior good d. not related to income Figure 21-3
____ 53. Refer to Figure 21-3. In graph (b), what is the price of good X relative to good Y (i.e., PX/PY)? a. 1/4 b. 1/3 c. 3/4 d. 3/1 ____ 54. What can the cross-price elasticity of demand tell us? a. whether goods are normal or inferior b. whether goods are complements or substitutes c. whether goods are elastic or inelastic d. whether goods are luxuries or necessities ____ 55. What does a budget constraint show? a. the purchases made by consumers b. the consumption bundles that a consumer can afford c. the prices that a consumer chooses to pay for products he consumes d. the bundles of consumption that makes a consumer equally happy
Figure 5-8
____ 56. Refer to Figure 5-8. Between point A and point B, what do we know? a. the slope is equal to –2/3 and elasticity is equal to 1/4 b. the slope is equal to –3/2 and elasticity is equal to 1/4 c. the slope is equal to –1/4 and elasticity is equal to 3/2 d. the slope is equal to –1/4 and elasticity is equal to 2/3 Figure 2-10
____ 57. Refer to Figure 2-10. What could have caused the movement from point B to point C? a. a change in income b. a change in the cost of producing roses c. a change in the price of roses d. inflation ____ 58. What is an example of a perfectly competitive market? a. soybean market b. cable TV market c. new car market d. blue jean market
Figure 5-5
____ 59. Refer to Figure 5-5. When price falls from point $40 to $30, what do we know about demand? a. It must be unit elastic, since total revenue decreases from $9000 to $8000. b. It must be inelastic, since total revenue increases from $8000 to $9000. c. It must be elastic, since total revenue increases from $8000 to $9000. d. It must be inelastic, since total revenue decreases from $9000 to $8000. ____ 60. On what does a consumer’s choice of goods depend? a. her budget constraint and income b. her preferences and income c. her budget constraint and preferences d. her demand and supply
Fall 2012 Midterm Exam Answer Section MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41.
A C A A C C D C A D C C A A C C A C C A C D C B B D D B C B C C A D C C A C C A C
42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.
B D A A D B C D B D C B B B C A A C C
Fall 2012 ECN104 Midterm Exam
Fall 2012 Midterm Exam Multiple Choice Identify the choice that best completes the statement or answers the question. ____
1. What could be one result of a cold snap in Florida? a. an increase in the price of oranges b. an increase in migrant farm workers' wages c. an increase in farm machinery prices d. an increase in the price of diesel fuel used in farming
____
2. When a consumer experiences a price increase for an inferior good, which of the following situations is possible? a. The income effect is less than the substitution effect and the demand curve will be upward sloping. b. The income effect is less than the substitution effect but the substitution effect is positive and the demand curve will be upward sloping. c. The income effect is greater than the substitution effect and the demand curve will be upward sloping. d. The income effect is greater than the substitution effect and the demand curve will be downward sloping.
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3. When will a decrease in supply cause the largest increase in price? a. when both supply and demand are inelastic b. when both supply and demand are elastic c. when demand is inelastic and supply is elastic d. when demand is elastic and supply is inelastic
____
4. Which is true in the circular-flow diagram? a. households are sellers in the resource market. b. firms are buyers in the product market. c. spending on goods and services flows from firms to households. d. firms are sellers in the resource market and the product market.
____
5. You have decided to purchase a new Mustang convertible. A friend tells you that Ford will stop offering a $3000 rebate on Mustangs starting next month. As a result of this information, what will happen to your demand curve for Mustangs? a. curve will be unaffected b. shifts left today c. shifts right today d. could shift either right or left
Figure 6-8
____
6. Refer to Figure 6-8. What is the share of the tax burden that buyers would pay? a. $1.00 per unit b. $1.50 per unit c. $2.00 per unit d. $3.00 per unit
____
7. Which of the following demonstrates the law of demand? a. Jon buys more pretzels at $1.50 each since he got a $1 raise at work. b. Melissa buys fewer muffins at $0.75 each than at $1 each. c. Kendra buys fewer Snickers at $0.60 each since the price of Milky Ways fell to $0.50 each. d. Dave buys more donuts at $0.25 each than at $0.50 each.
____
8. Goods X and Y are perfect complements. If the price of good Y falls, what will the substitution effect acting by itself do? a. It will cause consumers to buy more of good Y and less of good X. b. It will cause consumers to buy more of good X and less of good Y. c. It will not affect the amount of goods X and Y that consumers buy. d. It will affect the amount of goods X and Y that consumers buy, but in an unpredictable way.
Figure 21-10
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9. Refer to Figure 21-9. If point B is the consumer's optimum and the price of chocolate chips is $3 per bag, what is the price of a bag of marshmallows? a. $1.50 b. $2.70 c. $3 d. $6 Figure 21-7
____ 10. Refer to Figure 21-7. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, what change forces the consumer to move to point A? a. a decrease in the price of yogurt b. an increase in the price of yogurt c. a decrease in the price of granola bars d. an increase in the price of granola bars ____ 11. An upward-sloping individual labour supply curve is indicative of which of the following? a. an upward-sloping demand for leisure b. dominant income effects c. dominant substitution effects d. individuals that reduce work effort (hours) as income rises
____ 12. The substitution effect of an increase in the interest rate could cause an increase in which of the following? a. consumption when young and savings when young b. consumption when young and savings when old c. consumption when old and savings when young d. savings when old and consumption when old Figure 4-2
____ 13. Refer to Figure 4-2. What could cause the shift from D1 to D? a. a decrease in the price of a complement b. a decrease in the price of a substitute c. an increase in technology d. an increase in price ____ 14. Refer to Figure 4-2. What could cause the shift from D to D1? a. a decrease in the price of a substitute b. an increase in technology c. a decrease in the price of a complement d. an increase in price
Figure 21-2
____ 15. Refer to Figure 21-2. Which of the graphs in the figure reflects an increase in the price of good Y only? a. graph (a) b. graph (b) c. graph (c) d. graph (d) ____ 16. The substitution effect of a wage decrease, in the work-leisure model, applies when the worker chooses which of the following options? a. He wishes to work more but be less productive. b. He wishes to work more. c. He wishes to work less. d. He is indifferent between working more or less. ____ 17. A highly bowed inward set of indifference curves represents the two goods as which of the following types? a. very poor substitutes b. very poor complements c. perfect complements d. perfect substitutes
Figure 5-10
____ 18. Refer to Figure 5-10. What is the elasticity of supply between points D and E? a. 0.34 b. 1.26 c. 0.53 d. 1.89 ____ 19. What is the difference between slope and elasticity? a. Slope measures changes in quantity demanded more accurately than elasticity. b. There is no difference between slope and elasticity calculations. c. Slope measures actual changes and elasticity measures percentage changes. d. Slope measures percentage changes and elasticity measures actual changes. ____ 20. For what reason are production possibilities frontiers usually bowed outward? a. increasing opportunity cost b. decreasing opportunity cost c. increasing productivity d. constant opportunity cost
Figure 2-3
____ 21. Refer to Figure 2-3. At which point or points can the economy NOT produce? a. point A b. point C c. point A, C d. point A, C, D ____ 22. You love peanut butter. You hear on the news that 50% of the peanut crop in North America has been wiped out, which will cause the price to double by the end of the year. What happens as a result? a. You decide to give up peanut butter completely. b. Your demand for peanut butter will increase by the end of the year. c. Your demand for peanut butter falls as you look for a substitute good. d. Your demand for peanut butter increases today. ____ 23. What can good assumptions do? a. allow economists to see the 'big picture' instead of only small segments b. cause economists to leave out important variables that make their theories worthless c. simplify the complex world and make it easier to understand d. further complicate an already difficult topic ____ 24. The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1 per pound is levied on the buyers of caviar. Who would we expect to have to pay most of these taxes? a. the sellers of salt and the sellers of caviar b. the buyers of salt and the sellers of caviar c. the buyers of salt and the buyers of caviar d. the sellers of salt and the buyers of caviar
Figure 6-11
____ 25. Refer to Figure 6-11. In which market will the majority of a tax be paid by the buyer? a. market (a) b. market (b) c. market (c) d. impossible to determine Figure 2-8
____ 26. Refer to Figure 2-8. What is the opportunity cost of moving from point A to point B? a. the difference between the 20 barrels you get and the 8 bathtubs you give up b. 8 bathtubs c. the difference between the 8 bathtubs you get and the 20 barrels you give up d. 20 barrels
____ 27. What does a bowed in indifference curve reflect? a. a consumer's unwillingness to substitute one good for another b. a consumer's desire to specialize in the consumption of one good over another c. a consumer's decreasing willingness to give up a good that she has in abundance d. a consumer's increasing willingness to give up a good that she has in abundance Table 4-1 The table shows individual demand schedules for a market. Price of the Good Aaron Angela $0.00 20 16 0.50 18 12 1.00 14 10 1.50 12 8 2.00 6 6 2.50 0 4
Austin 10 6 2 0 0 0
Alyssa 8 6 5 4 2 0
____ 28. Refer to Table 4-1. What happens if the price increases from $1.00 to $1.50? a. The quantity demanded in the market decreases by 2 units. b. The quantity demanded in the market decreases by 7 units. c. The market demand increases by 20 units. d. Individual demands will increase. Figure 4-3
____ 29. Refer to Figure 4-3. The graph shows the demand for cigarettes. Which most likely happened? a. Mandatory health warnings were placed on cigarette packages. b. The price of marijuana rose. c. A tax was placed on cigarettes. d. Several foreign countries banned Canadian cigarettes in their countries. ____ 30. If an increase in the price of a good results in an increase in total revenue for the firm, what must the supply of the good be? a. inelastic b. Nothing can be said about price elasticity of supply from the information given. c. unit elastic d. elastic
____ 31. Complete the following: Two goods are substitutes if a decrease in the price of one good a. reduces the quantity demanded of the other good. b. increases the quantity demanded of the other good. c. reduces the demand for the other good. d. increases the demand for the other good. ____ 32. The local pizza restaurant makes such great bread sticks that consumers do not respond much to a change in the price. If the owner is interested only in increasing revenue, what should he do? a. He should lower the price of the bread sticks. b. He should leave the price of the bread sticks alone. c. He should raise the price of the bread sticks. d. He should reduce costs. ____ 33. When a production possibilities frontier is linear, what does it show? a. that resources are perfectly shiftable from the production of one good to another b. an example of increasing opportunity cost c. An example of decreasing opportunity cost d. a truer picture of real life than a bowed out production possibilities frontier ____ 34. In the work-leisure model, the income effect of a wage increase is when the worker chooses which of the following options? a. She wishes to work more. b. She is indifferent between working more or less. c. She wishes to work more but be less productive. d. She wishes to work less. Figure 21-6
____ 35. Refer to Figure 21-6. Which of the following is correct at point B? a. MRSXY = PX/PY b. MRSXY < PX/PY c. MRSXY > PX/PY d. MRSXY > PY/Px ____ 36. When demand is elastic, what is the price elasticity, and how will price and total revenue behave? a. greater than 1, and price and total revenue will move in the same direction b. less than 1, and price and total revenue will move in the same direction c. greater than 1, and price and total revenue will move in opposite directions d. less than 1, and price and total revenue will move in opposite directions
____ 37. When will buyers of a product pay the majority of a tax placed on a product? a. when supply is more elastic than demand b. when demand is more elastic than supply c. when the tax is placed on the buyer of the product d. when the tax is placed on the seller of the product ____ 38. If wheat farmers know that the demand for wheat is inelastic, and they want to increase their total revenue, what should they all do? a. They should use better machinery. b. They should plant more wheat so that they would be able to sell more each year. c. They should reduce the number of acres they plant in wheat. d. They should increase spending on fertilizer in an attempt to produce more on the acres they farm. Figure 4-4
____ 39. Refer to Figure 4-4. Which graph could be used to show the result of 5 percent of the country's smokers deciding to stop smoking? a. b. b. a. c. c. d. Each graph could be used to show the result. ____ 40. Assume that the demand and supply curves for cars are elastic. If the government imposes a $500 tax on the buyer of each car, what can we assume will happen to the price of a car? a. The equilibrium price of a car will decrease by less than $500. b. The equilibrium price of a car will not change, since both curves are elastic. c. The equilibrium price of a car will decrease by more than $500. d. The equilibrium price of a car will decrease by exactly $500.
Figure 5-11
____ 41. Refer to Figure 5-11. When a new, more productive strawberry plant was developed, causing supply to increase, what happened to strawberry farmers, and why? a. They were hurt, since both price and total revenue fell due to an elastic demand curve. b. They were helped, since although price fell, total revenue increased, due to an elastic demand curve. c. They were hurt, since both price and total revenue fell due to an inelastic demand curve. d. They were helped, since although price fell, total revenue increased, due to an inelastic demand curve. Figure 6-9
____ 42. Refer to Figure 6-9. What is the share of the tax burden per unit that sellers would pay? a. $4.00 b. $6.00 c. $8.00 d. $10.00 ____ 43. What will happen if a newly imposed minimum wage is set above the equilibrium wage in a labour market? a. Workers earning more than the minimum wage will be worse off. b. Every worker who is earning a wage below the minimum will be better off. c. The equilibrium wage in the market will rise. d. Some workers will get a raise and some workers will lose their jobs.
____ 44. Lead is an important input in the production of crystal. If the price of lead decreases, all else equal, what would we expect? a. the supply of crystal to increase b. the supply of crystal to be unaffected c. the supply of lead to increase d. the supply of crystal to decrease Figure 6-7
____ 45. Refer to Figure 6-7. Which panel(s) best represent(s) a binding rent control in the short run? a. panel (a) b. panel (b) c. neither panel d. both panels ____ 46. Jonathan is planning ahead for retirement and must decide how much to spend and how much to save while he is working in order to have money to spend when he retires. When the income effect dominates the substitution effect, how is an increase in the interest rate likely to influence saving? a. It is likely to decrease saving now and increase saving later. b. It is likely to have no effect on saving. c. It is likely to increase saving. d. It is likely to decrease saving.
Figure 2-4
____ 47. Refer to Figure 2-4. What is the opportunity cost in terms of toothbrushes of getting 10 additional toasters by moving from point B to point A? a. 20 toothbrushes b. zero, since the economy has the additional resources to produce 10 additional toasters c. 5 toothbrushes d. 10 toothbrushes ____ 48. What does a market demand curve reflect? a. when the buyers are willing to buy the most b. the fact that the level of income is inversely related to quantity demanded c. how much all buyers are willing and able to buy at each possible price d. how quantity demanded changes when the number of buyers changes ____ 49. If a study by the CMA found that brown sugar caused weight loss while white sugar caused weight gain, what would we see? a. no change in either demand because weight loss is not a nonprice determinant of demand b. an increase in demand for brown sugar, but no change in the demand for white sugar. c. a decrease in the demand for white sugar, but no change in the demand for brown sugar d. an increase in demand for brown sugar and a decrease in demand for white sugar ____ 50. A fall in the price of widgets leads consumers to buy more widgets. What can we conclude from this information? a. Widgets are inferior goods. b. The slope of the budget constraint has changed. c. Widgets are Giffen goods. d. Widgets are normal goods. ____ 51. What happens as elasticity rises? a. The supply curve gets steeper. b. Quantity supplied responds less to a change in price. c. Elasticity gets closer to zero. d. The supply curve gets flatter.
Table 5-1 Income $30 000 $40 000
Quantity of Good X Purchased 2 5
Quantity of Good Y Purchased 20 10
____ 52. Refer to Table 5-1. Which of the following best describes Good Y? a. price inelastic b. a normal good c. an inferior good d. not related to income Figure 21-3
____ 53. Refer to Figure 21-3. In graph (b), what is the price of good X relative to good Y (i.e., PX/PY)? a. 1/4 b. 1/3 c. 3/4 d. 3/1 ____ 54. What can the cross-price elasticity of demand tell us? a. whether goods are normal or inferior b. whether goods are complements or substitutes c. whether goods are elastic or inelastic d. whether goods are luxuries or necessities ____ 55. What does a budget constraint show? a. the purchases made by consumers b. the consumption bundles that a consumer can afford c. the prices that a consumer chooses to pay for products he consumes d. the bundles of consumption that makes a consumer equally happy
Figure 5-8
____ 56. Refer to Figure 5-8. Between point A and point B, what do we know? a. the slope is equal to –2/3 and elasticity is equal to 1/4 b. the slope is equal to –3/2 and elasticity is equal to 1/4 c. the slope is equal to –1/4 and elasticity is equal to 3/2 d. the slope is equal to –1/4 and elasticity is equal to 2/3 Figure 2-10
____ 57. Refer to Figure 2-10. What could have caused the movement from point B to point C? a. a change in income b. a change in the cost of producing roses c. a change in the price of roses d. inflation ____ 58. What is an example of a perfectly competitive market? a. soybean market b. cable TV market c. new car market d. blue jean market
Figure 5-5
____ 59. Refer to Figure 5-5. When price falls from point $40 to $30, what do we know about demand? a. It must be unit elastic, since total revenue decreases from $9000 to $8000. b. It must be inelastic, since total revenue increases from $8000 to $9000. c. It must be elastic, since total revenue increases from $8000 to $9000. d. It must be inelastic, since total revenue decreases from $9000 to $8000. ____ 60. On what does a consumer’s choice of goods depend? a. her budget constraint and income b. her preferences and income c. her budget constraint and preferences d. her demand and supply
Fall 2012 Midterm Exam Answer Section MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41.
A C A A C C D C A D C C A A C C A C C A C D C B B D D B C B C C A D C C A C C A C
42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.
B D A A D B C D B D C B B B C A A C C
