Download Miami Dade College ECO 2023 Principles of Microeconomics

Miami Dade College
ECO 2023 Principles of Microeconomics – Summer B 2014
Practice Test #2
1. Consumer surplus is the difference between the:
A) minimum price the buyer is willing to pay and the market price.
B) maximum price the buyer is willing to pay and the market price.
C) minimum price the seller is willing to pay and the market price.
D) maximum price the seller is willing to pay and the market price.
2. Producer surplus is the difference between the:
A) minimum price the buyer is willing to accept and the market price.
B) maximum price the buyer is willing to accept and the market price.
C) market price and the minimum price the seller is willing to accept.
D) maximum price the seller is willing to accept and the market price.
3. Suppose that a customer's willingness to pay for a product is $79, and the seller's
willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?
A) $4
B) $11
C) $15
D) $21
4. Suppose that a customer's willingness to pay for a product is $5, and the seller's
willingness to sell is $2. If the negotiated price is $3:
A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.
5. Suppose that a customer's willingness to pay for a product is $120, and the seller's
willingness to sell is $110. If the negotiated price is $119:
A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.
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Use the following to answer questions 6 & 7:
Figure: Understanding Surplus and Efficiency
6. (Figure: Understanding Surplus and Efficiency) In the graph, what is the sum of
consumer and producer surplus?
A) $30
B) $140
C) $50
D) $0
7. (Figure: Understanding Surplus and Efficiency) In the graph, what is the efficient level
of output?
A) 0
B) 5
C) 10
D) 14
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Use the following to answer question 8:
Figure: Determining Total Surplus
8. (Figure: Determining Total Surplus) In the graph, total consumer surplus is shown by
area:
A) acdf.
B) bcde.
C) bce.
D) abe.
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Use the following to answer question 9:
Figure: Determining Surplus and Loss
Format: Multiple Choice
Difficulty: M
Skill Descriptor: Analytical Thinking
Topic: Using Consumer and Producer Surplus: The Gains from Trade
9. (Figure: Determining Surplus and Loss) In the graph, how much is deadweight loss at a
price of $12?
A) $0
B) $60
C) $80
D) $70
10. Which of the following activities typically generates an external cost?
A) flu vaccine
B) traffic congestion
C) public education
D) scientific research
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11. A market with external costs:
A) tends to overproduce goods.
B) usually collapses.
C) produces the socially desirable output.
D) tends to underproduce goods.
12. The best definition of externalities is:
A) the cost associated with consumption of one more unit.
B) accurate information.
C) the economic effects of individual actions on third parties.
D) the right to own private property.
13. In a market-based economy, producers will tend to seek less competition because it:
A) enables lower prices.
B) enables higher prices
C) supports quality improvements.
D) increases product variety.
14. Mr. Smith, who knows the proposed site of a major new highway, buys a ranch from
Mr. Jones, who never reads the newspapers. This is an example of:
A) asymmetric information.
B) adverse selection.
C) moral hazard.
D) opportunity cost.
15. A legal maximum price that can be charged for a product or service is known as a(n):
price ceiling.
A) price ceiling.
B) price floor.
C) illegitime price.
D) non-agreed price.
16. A(n) _________________ is the minimum legal price that can be charged for a product.
A) price ceiling
B) price floor
C) equilibrium price
D) rent control
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17. Implementing a price ceiling can cause:
A) a shortage.
B) poverty.
C) a surplus.
D) scarcity.
18. If a price floor is set above the equilibrium price in the market, consumer surplus will
be:
A) higher than it would be without the price floor.
B) lower than it would be without the price floor.
C) the same as it would be without the price floor.
D) impossible to calculate.
19. Price elasticity of demand measures how:
A) consumers respond to a change in income.
B) consumers respond to a change in price.
C) sellers respond to a change in revenues.
D) sellers respond to a change in price.
20. Price elasticity of demand can be found by using which of the following formulas?
A) quantity demanded divided by price
B) change in quantity demanded divided by a change in price
C) percentage change in quantity demanded divided by change in price
D) percentage change in quantity demanded divided by percentage change in price
21. If ED = 4, then:
A) a price increase of 1% will reduce quantity demanded by 4%.
B) a price increase of 1% will increase quantity demanded by 4%.
C) a price decrease of 1% will decrease quantity demand by 4%.
D) the slope of the demand curve is equal to 4.
22. If the price of gasoline increases 10% and quantity demanded decreases by 5%, then the
demand curve for gasoline is:
A) inelastic.
B) elastic.
C) unitary elastic.
D) a perfect substitutable good.
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23. When consumers are very loyal to a particular product and the product's price increases,
the producer's total revenue:
A) increases.
B) decreases.
C) stays the same.
D) The answer cannot be determined based on the information provided.
24. When there are many substitutes for a product and there is a price increase for the
product, what happens to total revenue?
A) It increases.
B) It decreases.
C) It stays the same.
D) The answer cannot be determined from the information provided.
25. Cross elasticity of demand is defined as percentage change in:
A) quantity demanded of one product divided by the percentage change in the price
of another product.
B) quantity demanded of one product divided by the percentage change in the price
of the same product.
C) the price of one product divided by the percentage change in quantity demanded
of another product.
D) the price of one product divided by the percentage change in quantity demanded
of the same product.
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26. If the price of a product falls by 15%, and the quantity supplied falls by 25%, we can
say that the elasticity of supply is:
A) inelastic.
B) unitary elastic.
C) elastic.
D) perfectly elastic.
Use the following to answer question 27:
Figure: Interpreting Short-Run Supply Curves
27. (Figure: Interpreting Short-Run Supply Curves) In the graph, which of the curves
would be MOST likely to depict a supply curve in the short run?
A) curve a
B) curve b
C) curve c
D) curve d
28. Which of the following represents a market period?
A) spring peach harvest in central Texas
B) three years in the oil industry
C) two years in the honey industry
D) one year in the laptop computer industry
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Use the following to answer questions 29 & 30:
Figure: Impact of Tax on Market Equilibrium
29. (Figure: Impact of Tax on Market Equilibrium) In the graph, implementing a tax:
A) lowers equilibrium price from $6 to $4 and lowers equilibrium quantity from 120
to 100.
B) lowers equilibrium price from $10 to $6 and lowers equilibrium quantity from 120
to 100.
C) raises equilibrium price from $6 to $10 and lowers equilibrium quantity from 120
to 100.
D) raises equilibrium price from $6 to $10 and raises equilibrium quantity from 100
to 120.
30. (Figure: Impact of Tax on Market Equilibrium) In the graph, how much is the
deadweight loss created by the tax?
A) $20
B) $26
C) $60
D) $120
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Use the following to answer question 31:
Figure: Determining Tax Burdens
31. (Figure: Determining Tax Burdens) In the graph, the original market price is $4. The
graph depicts a tax of ______ with a corresponding deadweight loss of ______.
A) $6; $3
B) $3; $150
C) $6; 50 units
D) $3; $75
32. A budget line shows:
A) production possibilities.
B) consumption possibilities.
C) societal demands for goods.
D) unlimited income.
33. Suppose the price of a taco is $1 and the price of a soft drink is $2. If Mehmet has $5,
then he can buy:
A) four tacos and two soft drinks.
B) three tacos and two soft drinks.
C) four tacos and one soft drink.
D) three tacos and one soft drink.
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Use the following to answer question 34:
Figure: Bowling and Chinese Buffet
34. (Figure: Bowling and Chinese Buffet) Bill can consume 10 Chinese buffets or go
bowling five times this month (or specific other combinations). This graph represents
Bill's:
A) utility curve.
B) demand curve.
C) production possibility frontier.
D) budget line.
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Use the following to answer question 35:
Figure: Quarts of Milk and Jars of Honey
35. (Figure: Quarts of Milk and Jars of Honey) If the price of milk in the figure decreases,
the budget line shifts from ______ to ______.
A) 3; 1
B) 3; 2
C) 2; 1
D) 1; 2
36. An increase in the price of both goods has a similar effect to a(n) _______________ in
income, making the budget line _____________________.
A) increase; expand outward
B) increase; contract inward
C) decrease; expand outward
D) decrease; contract inward
37. When economists refer to _____, they are referring to a hypothetical measure of
consumer satisfaction.
A) surplus
B) indifference
C) marginal cost
D) utility
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38. _____ is the satisfaction received from consuming one additional unit of a good or
service.
A) Net utility
B) Total utility
C) Marginal utility
D) Consumption
39. Marginal utility is NOT:
A) measured in utils.
B) a measure of satisfaction.
C) the same for all units of commodity consumed.
D) used to explain how consumers make decisions.
40. Marginal utility:
A) is always positive.
B) is the same for all units of a commodity consumed.
C) declines with each additional unit consumed.
D) is the sum of all the total utilities.
41. Kama gets 180 total utils from taking three yoga classes this month. The additional
utility derived from taking a fourth yoga class this month is 40 utils. Which of the
following statements would be TRUE?
A) The total utility from taking four yoga classes will be 140 utils.
B) The marginal utility from the fifth yoga class will be greater than 40 utils but less
than 220 utils.
C) The marginal utility of the third yoga class will be greater than 40 utils.
D) The marginal utility from the second yoga class will be less than 40 utils.
42. Bob loves to eat blue jelly beans. He gets 50 units of utility for the first jelly bean, 40
for the second, 30 for the third, 20 for the fourth, and an additional 10 for the fifth. For
the first jelly bean, the marginal utility is _________, and the total utility for eating five
is ________.
A) 50; 150
B) 50; 140
C) 140; 50
D) 50; 20
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Use the following to answer question 43:
Q
0
1
2
3
4
5
TU
0
25
B
53
D
71
MU
—
A
15
C
10
E
43. (Table) The table shows the total utility and marginal utility for ice cream consumption.
In the table, the value for B is:
A) 35.
B) 40.
C) 45.
D) 50.
Use the following to answer question 44:
Bottles of
Root Beer
1
2
3
4
5
Total Utility
20
Marginal
Utility
20
18
53
70
11
6
14
Use the following to answer question 69:
Number of Movie
Tickets
0
1
2
3
4
5
Total Utility
0
60
90
110
125
135
Marginal
Utility
44. (Table) Fill in the marginal utilities for the table. Marginal utility falls by ______ when
the number of movie tickets purchased increases from 2 to 3.
A) $60
B) $10
C) $30
D) $0
45. (Table) The table shows the total and the marginal utility for bottles of root beer.
Referring to the table, the marginal utility of the third bottle of beer will be _____ units
of utility.
A) 16
B) 15
C) 14
D) 12
46. Bayram had the opportunity to choose between two investments. The first investment
was described as having a 30% chance of succeeding, while the second investment was
described as having a 70% chance of failing. Bayram opted for the first investment,
because he thought it sounded less risky than the second investment. The chances of
succeeding and failing are the same for the two investments, which implies Bayram is
subject to:
A) a framing bias.
B) overvaluing the present relative to the future.
C) overconfidence.
D) a sunk cost fallacy.
47. Jackie put a $400 deposit on a new sofa. Now she has found a different sofa that she
likes better, but she still plans to buy the first one so as not to lose her deposit. Jackie is
subject to:
A) a framing bias.
B) overvaluing the present relative to the future.
C) overconfidence.
D) a sunk cost bias.
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48. The Lake Wobegon effect refers to the tendency of people to think that they are above
average in some capacity relative to others. The expression comes from Garrison
Keillor's assertion that all the children in the fictional town of Lake Wobegon are above
average. This type of thinking is an example of:
A) a framing bias.
B) altruism.
C) a sunk cost fallacy.
D) overconfidence.
49. Many workers know they should save for retirement, but they put off doing so. They
reason that there is plenty of time to do so in the future when their bills aren't as high as
they are now. Unfortunately, the future time when they save for retirement never comes.
What psychological factor associated with behavioral economics explains this behavior?
A) a sunk cost fallacy
B) overvaluing the present relative to the future
C) overconfidence
D) a framing bias
50. People contribute to disaster relief even when they do not know anyone who has been
affected by the disaster. What psychological factor associated with behavioral
economics explains this behavior?
A) a framing bias
B) altruism
C) a sunk cost fallacy
D) overconfidence
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ANSWER KEY
1. B
2. C
3. B
4. B
5. D
6. C
7. C
8. C
9. D
10. B
11. A
12. C
13. B
14. A
15. A
16. B
17. A
18. B
19. B
20. D
21. A
22. A
23. A
24. B
25. A
26. C
27. A
28. A
29. C
30. C
31. D
32. B
33. D
34. D
35. D
36. D
37. D
38. C
39. C
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40. C
41. C
42. A
43. B
44. B
45. B
46. A
47. D
48. D
49. B
50. B
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