Download Micterm Exam

Multiple Choice
1. The production possibilities frontier is
a. a map which shows the frontier beyond which agriculture is unprofitable.
b. a map which shows areas of the world in which capitalist production is now
possible.
c. a graph that shows the various combinations of output the economy can possibly
produce given the available resources and technology.
d. a graph which shows the various combinations of resources that can be used to
produce a given level of output
2. The slope of the line is calculated by
a. change in y / change in x.
b. change in x / change in y.
c. x / y.
d. x + y.
3. A competitive market is
a. a market is which there are many buyers and many sellers so that each has a
negligible impact on price.
b. a market where consumers cannot freely interact with sellers.
c. a market where suppliers are under no government restriction.
d. a market with many buyers but few sellers.
4. Which of the following would NOT be a determinant of demand?
a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
5. What is the law of demand?
a. When the price of a good or service rises, buyers respond by purchasing more.
b. When income levels increase, buyers respond by purchasing more.
c. When buyer tastes for the good increase, they purchase more of the good.
d. When the price of a good falls, buyers respond by purchasing more.
6. Holding the nonprice determinants of supply constant, a change in price would
a. result in a change is supply.
b. result in a movement along a stable sup0plycurve.
c. result in a shift of demand.
d. have no effect on the quantity supplied.
7. Economists compute the price elasticity of demand as
a. the percentage change in the price divided by the percentage change in quantity
demanded.
b. the percentage change in the quantity demanded divided by the percentage change
in price.
c. the change in quantity demanded divided by the change in the price.
d. the percentage change in the quantity demanded divided by the percentage change
in income.
8. Supply tends to be less price elastic in the long run.
a. less price elastic in the long run
b. more price elastic in the long run
c. perfectly price inelastic in the long run.
d. perfectly price inelastic in the short run.
9. Price controls are
a. usually enacted when policymakers believe that the market price of a good or
service is unfair to buyers or sellers.
b. used to make markets more efficient.
c. nearly always effective in eliminating inequities.
d. established by firms with monopoly power.
10. Under rent control, bribery is a mechanism to
a. bring the total price of an apartment (including the bribe) closer to the
equilibrium price.
b. allocate housing to the poorest individuals in the market.
c. force the total price of n apartment (including the bribe) to be less tan the market
price.
d. allocate housing to the most deserving tenants. .
11. Assume that Jane cleans Joe’s house weekly for $80. Joe would be wiling to pay as
much as $100 weekly to have his house cleaned. Jane’s opportunity cost is $70. If
Jane cleans Joe’s house, the producer surplus is
a. $100.
b. $80.
c. $70.
d. $10.
12. IF the supply of land is fixed, a tax on land would be paid
a. entirely by the landowners.
b. entirely by the renters or users of the land.
c. partly by landowners and partly by land users.
d. only by workers.
13. A budget constraint
a. represents the bundles of consumption that makes a consumer equally happy.
b. shows the consumption bundles that a consumer can afford.
c. reflects the desire by consumers to increase their income.
d. shows the prices that a consumer cheeses to pay for products he consumes.
14. Which of the following statements is true?
a. Consumers must purchase some of each good available.
b. Consumers cannot consume at points outside their budget constraint.
c. Optimizing consumers spend half of their income on each of two goods.
d. Consumers cannot consume at points inside their budget constraint.
15. The slope of an indifference curve is
a. constant.
b. the marginal rate of substitution.
c. positive, since indifference curves slope upward.
d. is the same as the slope of the budget constraint at every point.
16. A good is considered a normal good when
a. an increase in income decreases consumption of the good.
b. the average consumer chooses to consume the good over other similar goods.
c. an increase in income increases consumption of the good.
d. the average consumer chooses to consume this good at a level consistent with
most other goods.
1.
Using indifference cuves and budget constraints, graphically illustrate the
substitution and income effect that would result from a chage in the price of one
good.
2.
Why do economists use assumptions which are not true?
3.
Other things being equal, explain the effect each of the following will have on
either the demand or supply of corn. Explain also what the effect will be on
equilibrium price and quantity.
A.
Corn is now considered by doctors to be the most healthy vegetable.
B.
There is a decline in the amount of land used to grow corn,
C.
Producers expect the price of corn to fall in the future.
D.
The price of peas, a substitute for corn, goes up.
E.
Corn is a normal good and incomes fall.
4.
How do the effects of rent control differ in the short run and the long run?
5.
What is the total surplus in a market, and why might it be a good measure of
economic well-being? Using a demand-supply diagram, show the areas representing
total surplus.
6.
Using the graph shown for cases of Coke, calculate each of the following.
A.
equilibrium price
B.
equilibri quantity
C.
consumer surplus
D.
producer surplus
Now suppose that the government imposes a $2.00 tax per case on the sellers of
Coke. Show this on the graph and calculate each of the following after the tax is
imposed.
E.
price paid by buyers
F.
price received by sellers
G.
consumer surplus
H.
producer surplus
I.
government revenue
J.
deadweight loss
Use the graph below to fill in the following table.