Download Student ID Name Microeconomics Exercises MULTIPLE CHOICE

Student ID __________________
Name ______________________
Microeconomics Exercises
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not
able to supply fruit to the market. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would
expect to see
1) _______
A) a shortage of oranges.
B) an increase in the demand for oranges.
C) the quantity demanded equal to the quantity supplied.
D) a surplus of oranges.
Figure 3-2
2) Refer to Figure 3-2. A decrease in the price of the product would be represented by a movement from
A) S1 to S2.
B) A to B.
C) B to A.
D) S2 to S1.
Figure 3-4
3) Refer to Figure 3-4. At a price of $10, how many units will be sold?
A) 200 B) 400 C) 600 D) 800
3) _______
4) Which of the following is expected to occur as the baby-boom generation ages? 4) _______
2) _______
A) The demand for baby clothes should increase.
B) The demand for prescription drugs should decrease.
C) The demand for larger houses should increase.
D) The demand for medical services should increase.
5) One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
A) the price of the good changes.
B) prices of substitutes in production change.
C) the cost of producing the good changes.
D) supplier expectations about future prices change.
5) _______
6) The demand by all the consumers of a given good or service is the ________ for the good or service.
6) _______
A) quantity demanded B) scheduled demand
C) market demand
D) law of demand
Figure 3-7
7) Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for rice.
happens in this market if buyers expect the price of rice to fall? 7) _______
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
8) Which of the following would shift the supply curve for MP3 players to the right?
A) an increase in consumer income (assuming that all MP3 players are normal goods)
B) an increase in the price of a substitute in production
C) a decrease in the price of an input used to produce MP3 players
D) a decrease in the number of firms that produce MP3 players
8) _______
What
Figure 3-2
9) Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from
A) A to B.
B) S2 to S1.
C) S1 to S2.
D) B to A.
9) _______
10) A movement along the demand curve for toothpaste would be caused by
10) ______
A) a change in the price of toothbrushes.
B) a change in the price of toothpaste.
C) a change in population.
D) a change in consumer income.
11) Which of the following statements is true? 11) ______
A) If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either
increase or decrease.
B) An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in
demand or supply.
C) If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without
knowing which change is greater.
D) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
12) Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.
Holding everything else constant, how would this affect the market for blu-ray players (a complement to LCD televisions)?
12) ______
A) The supply of blu-ray players would increase and the equilibrium price of blu-ray players would decrease.
B) The demand for blu-ray players would increase and the equilibrium price of blu-ray players would decrease.
C) The demand for blu-ray players would increase and the equilibrium price of blu-ray players would increase.
D) The demand for blu-ray players would decrease because consumers could afford to buy fewer LCD televisions and
blu-ray players.
Figure 3-7
13) Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for almonds.
Which panel best describes what happens in this market when there is an increase in the productivity of almond
harvesters?
13) ______
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
14) Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the
Ruiz family,
14) ______
A) hamburgers are normal goods and hot dogs are inferior goods.
B) hamburgers and ketchup are normal goods.
C) hamburgers and ketchup and substitutes.
D) hamburgers and ketchup are complements.
15) Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and
bananas are
15) ______
A) complements in consumption.
B) both luxury goods.
C) substitutes in consumption. D) both inferior goods.
16) Richard Tedlow of the Harvard Business School has developed a theory of the "three phases of marketing", which
provides insight into how markets for many consumer products develop over time. Which of the following is not one of
his three phases of marketing? 16) ______
A) a large number of firms, each producing a relatively small volume of goods and charging high prices
B) a rapid multiplication of products introduced by the dominant firms
C) market consolidation, with one or a few brands attaining high market shares by selling a large number of units at
lower prices
D) as the market matures, one firm takes control of all other firms, and prices once again rise
17) Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?
17) ______
A) a decrease in the cost of transporting olive oil to markets
B) research finds that consumption of olive oil reduces the risk of heart disease
C) an increase in the price of olive oil presses
D) an increase in the price of land used to plant olives
18) In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in
June, holding everything else constant? 18) ______
A) The quantity demanded decreases
C) The quantity demanded increases.
B) The demand curve shifts to the left.
D) The demand curve shifts to the right.
19) If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until 19) ______
A) the quantity demanded exceeds the quantity supplied. The market will then be in equilibrium.
B) all consumers will be able to afford the product.
C) quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
D) quantity demanded equals quantity supplied. The equilibrium price will then be lower than the market price.
Figure 3-1
20) Refer to Figure 3-1. If the product represented is an inferior good, an increase in income would be represented by a
movement from 20) ______
A) B to A.
B) D2 to D1.
SHORT ANSWER.
C) D1 to D2.
D) A to B.
Write the word or phrase that best completes each statement or answers the question.
Article Summary
In 2001, the adjustable gastric banding system, commonly known as a lap band, was approved by the FDA for use in
the United States. Surgically implanted, the lap band helps a person gradually lose and control weight by reducing
the amount of food intake. Serious medical conditions, such as diabetes and hypertension, are related to obesity, and
due to these health risks an increasing number of Americans are considering this weight-loss surgery and many
insurance policies are covering part of the cost. Over the past few years, more surgeons are performing this weight-loss
operation in the United States and in other countries. One option some Americans are considering is having the surgery done
in Mexico. Including travel and lodging expenses, the overall cost of this surgery in Mexico can be as much as 40 to 50 percent
lower than it is in the United States.
Source: Alma Orozco, "Lap Band Surgery- U.S. or Mexico," ezinearticles.com, December 20, 2008.
21) Refer to the Article Summary. Use a demand and supply graph to illustrate the effects of these two factors, health risks
due to obesity and the increase in surgeons performing this surgery, on the market for lap band surgery. 21)
_____________
TRUE/FALSE.
Write 'T' if the statement is true and 'F' if the statement is false.
22
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25
26
22) Quantity supplied refers to the amount of a good or service that a firm is willing and able to supply at a given price.
22) ______
23) Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity
supplied.
23) ______
24) In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and
quantity supplies will decrease until equilibrium is reached.
24) ______
25) A change in supply is represented by a shift of the supply curve.
25) ______
26) The income effect of a price change refers to the change in the quantity demanded of a good that results from a change
in purchasing power as a result of the price change.
26) ______
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
27) For each of the following pairs of products state which are complements, which are substitutes, and which are
unrelated.
a. Digital camera and memory stick
b. 7Up and Mountain Dew
c. Swimsuits and flip-flops
d. Tylenol and cat food
e. Photocopier and paper
28) Indicate whether each of the following situations would shift the supply curve to the left, to the right, or not at all.
a. An increase in the number of firms in the market
b. An increase in the current price of the product
c. A decrease in productivity
d. An increase in the expected future price of a product
e. A decrease in the price of an input
29) Discuss the correct and incorrect economic analysis in the following statements.
"If good weather in Hawaii creates a bumper crop of pineapples, the supply of pineapples will increase. This will result in
a price decrease, which will then cause the supply of pineapples to decrease."