Download Economics 111 – Introduction to Economics

Department of Economics
College of Saint Benedict | Saint John's University
Fall Semester 2015
Louis Johnston
Economics 111 – Introduction to Economics
Quiz #2
October 30, 2015
Name:______________________________________________________________________
 Answer all questions.
 Please circle your answer to each question directly on this sheet.
1.
"Holding all other relevant factors constant, consumers will purchase more of a good as the price of the
good falls." This statement reflects the behavior underlying
a. the demand curve.
b. an increase in demand.
c. the supply curve.
d. a decrease in the demand curve.
2.
Sellers tend to offer _______ goods for sale as price increases, and so the supply curve is ______
sloping.
a. fewer; downward
b. more; downward
c. fewer; upward
d. more; upward
3.
One of the conditions that is necessary for a market to be perfectly competitive is:
a. More and better information is available to buyers than to sellers.
b. There are many sellers and few buyers.
c. The product being bought and sold is standardized.
d. Consumers display strong brand loyalty.
4.
The equilibrium price and quantity of any good or service is established by
a. the buyers alone.
b. the sellers alone.
c. government regulations.
d. both the buyers and the sellers.
Use the graph below to answer questions 5, 6, and 7
5.
In the original market equilibrium,
a. 50 cups of coffee are sold for $1.00 each.
b. 50 cups of coffee are sold for $2.50 each.
c. 40 cups of coffee are sold for $2.00 each.
d. 60 cups of coffee are sold for $1.50 each.
6.
What might cause the demand for coffee to shift from “Original Demand” to “New Demand”?
a. An expectation that coffee prices will fall in the future.
b. An increase in the price of cream.
c. A decrease in the price of tea.
d. An increase in the incomes of coffee drinkers.
7.
What might cause the supply of coffee to shift from “Original Supply” to “New Supply”?
a. A storm in South America wipes out the entire coffee crop.
b. New technology reduces the amount of coffee beans necessary to make a good-tasting pot of coffee.
c. A news report that coffee consumption greatly increases individual intelligence.
d. An increase in the price of tea.
8.
Suppose you bought a concert ticket at the box office for $50, but when you got to the concert scalpers
were selling tickets in the same seating area as yours for $25. What is probably true?
a. There is excess demand for this concert at the $50 price.
b. The ticket you bought was under-priced for the market.
c. There is an excess supply of tickets for this concert at the $50 price.
d. $50 is the equilibrium price.
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9.
In the figure above, if supply were to shift to the left, and demand were to also shift to the left, in the
new equilibrium,
a. both price and quantity would be lower.
b. both price and quantity would be higher.
c. price would be higher and quantity would be lower.
d. quantity would be lower, but the direction of the price change cannot be determined.
10.
If the price elasticity of demand for pineapple is 0.75, a 4% increase in the price of pineapple will lead to
a. a 3% decrease in the quantity demanded of pineapple.
b. a 3% increase in the quantity demanded of pineapple.
c. a 4% decrease in the quantity demanded of pineapple.
d. a 3/16% increase in the quantity demanded of pineapple.
Using the formula for the price elasticity of demand,
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑝𝑟𝑖𝑐𝑒
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
−0.75 =
⇒ 3% 𝑑𝑒𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
4%
𝐸𝐷 =
11.
An art gallery finds that when it charges $25 per person to view an exhibit, they sell 300 tickets. When
the gallery increases the price to $30 per person, they only sell 200 tickets. At the original price of $25,
the demand for this art exhibit is
a. elastic.
b. inelastic.
c. perfectly inelastic.
d. perfectly elastic.
12.
When Taylor raised the price of earrings at Taylor's Boutique, total revenue from earrings increased.
This suggests that
a. the demand for Taylor's earrings at the original price must be elastic.
b. there are too many other boutiques competing with Taylor.
c. there was excess demand for earrings at the original price.
d. the demand for Taylor's earrings at the original price was inelastic.
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13.
A price ceiling that is set below the current equilibrium price will have the following consequences:
a. There will be downward pressure on prices until quantity demanded equals quantity supplied.
b. There will be upward pressure on prices until quantity demanded equals quantity supplied.
c. There are no consequences to a binding price ceiling.
d. The quantity demanded will always exceed the quantity supplied.
14.
When looking at a supply and demand graph, you consumer surplus is located:
a. above the demand curve and below the supply curve.
b. below the demand curve and above market price.
c. to the right of equilibrium quantity and above market price.
d. above the demand curve and above the supply curve.
Use the graph below to answer questions 13 and 14:
Price per
unit
S (w/ tax)
S (w/o tax)
9.20
8.80
8.20
D
Quantity
7
8
15.
Suppose a $1 per unit tax is imposed on sellers. The new equilibrium price is ______ and the new
equilibrium quantity is ______.
a. $9.20; 7
b. $8.80; 8
c. $8.80; 7
d. $8.20; 7
16.
The deadweight loss from imposing a $1 tax on sellers is
a. 50 cents.
b. $1.
c. $3.
d. $4.50.
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