Download PART 1 - MULTIPLE CHOICE 1 - ) What is the most accurate

PART 1 - MULTIPLE CHOICE
1 - ) What is the most accurate definition of the study of economics? Economics is the
study of
a.
b.
c.
d.
The distribution of surplus goods to those in need.
Affluence in a morally bankrupt world.
Ways to reduce wants to eliminate the problem of scarcity.
The choices we make because of scarcity.
2 - ) Which of the following is a positive statement?
a.
b.
c.
d.
Unemployment and inflation are equally important problems.
Growth of an economy should be supplemented with more equal income distribution.
Turkey’s textile exports have decreased 5% compared to previous year.
The scope of economics must be enlarged to analyze economic phenomena more
adequately.
3 - ) Suppose that an economist says that “Ceteris paribus, the lower the price of oranges,
the larger the amount of oranges purchased.” This statement indicates that
a. The quantity of oranges purchased determines the price of oranges.
b. Economists can conduct controlled laboratory experiments.
c. One can not generalize about the relationship between the price of orange and quantity
purchased.
d. The supply of oranges determines the price of oranges.
e. All factors other than the price of oranges ( for instance, consumer tastes and incomes)
are assumed to be constant.
4 - ) Which one of the following does not represent the concept of “opportunity cost”?
a. A decision given by Michael to decrease his current expenditures to save more.
b. Public policy in the state of Washington to reduce timber production so that more
wildlife species will be preserved.
c. A decision by a company to increase advertising expense for a new board game by
decreasing its budget for telephone expense.
d. All of the above situations represent the concept of “opportunity cost.”
5 - ) The production possibilities frontier represents
a. Combination of goods and services for which consumers are indifferent.
b. The maximum combination of goods and services that can be produced with fixed
resources and technology.
c. The maximum amount of labor and capital available to society.
d. The maximum rate of growth of capital and labor in a country.
6 - ) Consider the graphs below
Decide which of the statements below is false;
a.
b.
c.
d.
Graph 1 represents the improvement in technology of producing B
Graph 2 represents the improvement in technology of producing A
Graph 2 represents the change in distribution of resources in favor of B
Graph 3 represents overall increase in resources
7- ) Consider a constant-slope production possibility frontier with a vertical intercept of 50
apples and a horizontal intercept of 25 oranges. The opportunity cost of increasing orange
production from 11 to 12 is
a.
b.
c.
d.
3
Can not be determined from the given information.
5
2
8 - ) If a household reduces his/her demand for good A when his/her income increases, for
this household good A is
a.
b.
c.
d.
substitute good
complementary good
normal good
inferior good
9 - ) Assume that sugar and tea are complementary goods. If the price of sugar increases,
then
a.
b.
c.
d.
e.
The quantity demanded of sugar increases.
The demand curve for sugar shifts leftward.
The quantity demanded of tea increases.
The demand curve for tea shifts leftward.
Neither the demand curves for sugar or tea shifts.
10 - ) The demand and supply curves for apples in Turkey are given by the following
equations: Qd=100 – 10P, Qs=-20 + 30P. What is the equilibrium price?
a. 2
b. 3
c. 5
d. 8
11 - ) Market supply and demand schedules for electric drills are listed in the table below.
Answer the following two questions according to the table.
Price ($)
10
20
30
40
50
60
70
Quantity Demanded
(in 1000s)
32
28
24
20
16
12
8
Quantity Supplied
(in 1000s)
4
7
10
13
16
19
22
Which of the following statements is true about electric drills’ market?
a.
b.
c.
d.
The equilibrium price for electric drills is 40 $.
The amount of excess supply is 14$ when the price is 30$.
The amount of excess demand is 7$ when the price is 60$.
There is only one price level where no excess demand/excess supply occurs and this
price level is 50$.
12 - ) Suppose that the government imposes a price ceiling of 60$. What is the most likely
result?
a. The market would reach a new equilibrium at a price of 60$.
b. There would be no change in the price.
c. There would be excess supply in the market.
d. An underground, or black, market would emerge where this product would be sold at a
price above 60$.
13 - ) If when the price of beef rises by 1%, the quantity demanded of beef falls by 3%,
the demand for beef is
a.
b.
c.
d.
-3 elastic.
-3 inelastic.
-1/3 inelastic
None of the above.
14 - ) Linda’s income has just risen from 950$ per week to 1050$ per week. As a result,
she decides to double the number of movies she goes each week. Linda’s demand for
movies is
a. Income elastic.
b. Difficult to comprehend if she is rational.
c. Income inelastic.
d. Price elastic.
e. Price inelastic.
15- ) According to the table presented below, which of the following statement is true?
a.
b.
c.
d.
Company/Product Banana
Strawberry
A
4
12
B
10
5
A has an absolute advantage in banana production over B.
B has a comparative advantage in strawberry production over A.
A has both absolute and comparative advantage in strawberry production over B.
B has a absolute advantage in strawberry production over A.
PART 2 - ESSAY QUESTIONS
1- ) Suppose the demand and supply schedules for hamburger in the canteen are as
follows:
Price (TL)
5
10
15
20
30
Quantity Demanded
(unit / week)
5
4
3
2
0
Quantity Supplied
(unit / week)
1
2
3
4
6
a. Derive demand and supply functions and graph demand and supply curves. Label the
each axes carefully.
b. Find the equilibrium price and quantity for hamburger.
c. What will happen in the hamburger market at the price level of 20 TL?
d. Assume that the consumers have increased their interest in hamburger and as a result
quantity demanded increased by 2 unit/week at each and all levels of price. Derive the
new demand function, find new equilibrium price and quantity and show the new
equilibrium on the graph.
e. Starting with the original demand and supply figures, suppose that the price of cheese
(an input in the production of hamburger) falls such that at each price, quantity
supplied increased by 4 units. Derive the new supply function, calculate new
equilibrium quantity and price and show the new equilibrium on the graph.
2- ) For each of the four cases below, draw a rough sketch of demand and supply curves
to illustrate the case. Label your curves D and S for the original demand and supply
curves and D1 and/or S1 for the new curves. Label your axes P for price and Q for
quantity. Use P0 for Q0 for original equilibrium values and P1 and Q1 for new values.
a. The price of fish rises as new evidence links excessive beef consumption to heart
attacks.
b. Cigarette sales fall in response to an increase in the cigarette tax.
c. The government requires warning labels on beer bottles and cans, informing
consumers of the dangers of alcohol consumption. At the same time, six large foreign
producers start selling their beer in the United States.
3 - ) State the sign (i.e., positive or negative) and possible magnitudes (e.g., greater than
one, less than 1, very large, very small) along with a brief explanation for the following:
a. Cross-price elasticity of demand for compact disks with respect to compact disk
players.
b. The price elasticity of supply for eggs.
c. The income elasticity of demand for Hayashi shampoo.
d. The cross-price elasticity of demand for American cars with respect to the price of
Japanese cars.
e. The own price elasticity of demand for insulin.
PART 3 – TRUE / FALSE
1.
2.
3.
4.
Three main concerns of microeconomics are unemployment, inflation and growth.
The quantity demand for apple is inversely related to its price.
An increase in income will always lead to an increase in demand.
If beer and wine are substitutes, a price increase by wine retailers will shift the
demand curve for beer downwards.
5. An increase in the price of Pepsi would increase the quantity demanded of Cokes but
not the demand of Cokes. (Pepsi and Coke are substitutes.)
6. If an economy can use its resources efficiently it can produce at a point which lies
outside the PPF.
7. Equilibrium price is the price where no excess supply or excess demand occurs.
8. The difference between the maximum amount a person is willing to pay for a good
and its current price is consumer surplus.
9. Positive cross-price elasticity indicates that an increase in the price of X causes a
decline in the demand for Y.
10. If the income elasticity of good X is negative, this implies that X is a normal good.