microeconomics essay and multiple choice

1.

People have to make choices because:

A)

people’s income is unlimited.

B)

resources are scarce.

C)

people’s wants are unlimited.

D)

both (B) and (C).

2.

An airline is offering free round-trip tickets to Paris to the first 600 people who enter the airline’s office on the March 31. You want to take advantage of this offer and, to be sure you get the ticket, you arrive at the airline’s office 24 hours before the give away starts. Assume you get the ticket, the total cost of the ticket to you is:

A)

zero.

B)

the market value of the ticket.

C)

the value of your time in line waiting to get the ticket.

D)

the value of your time waiting in line plus the market value of the ticket.

3.

You study eight hours for your economics exam. Then you are considering studying the ninth hour.

A)

You should study the ninth hour so long as the benefit of that extra hour of study exceeds its cost.

B)

The decision process for this situation is an example of marginal analysis.

C)

You should not study the ninth hour since the gain is not going to be large enough.

D)

All of the above.

4.

All points on the production possibilities frontier represent:

A)

impossible production points.

B)

unemployment of resources.

C)

feasible production points.

D)

all of the above.

5.

The law of demand states that, other things equal:

A)

as the price increases, the quantity demanded will increase.

B)

as the price decreases, the demand curve will shift to the right.

C)

as the price increases, the demand will decrease.

D)

as the price increases, the quantity demanded will decrease.

6.

Which of the following factors cause a movement along the demand curve for pizza?

A)

Change in the price of hamburger.

B)

Change in the price of pizza.

C)

Change in the population

D)

All of the above.

7.

During the last month, whenever you washed your car it rained the same day. From this experience you conclude that to prevent raining all you should do is not to wash your car. This is an example of:

A)

Fallacy of composition.

B)

Fallacy of causation.

C)

Fallacy of logic.

D)

All of the above.

8.

Which one of the followings will not cause a shift in the demand for soft drink?

A)

Consumers’ income.

B)

Number of people in the market.

C)

Price of sugar (an ingredient, in making soft drink).

D)

A surge in popularity of soft drink.

9.

If goods A and Z are complements, an increase in the price of good Z will:

A)

increase demand for good A.

B)

decrease demand for good A.

C)

decrease demand for good Z.

D)

both (B) and (C).

10.

Assume that peanut butter is an inferior good. What do you suppose would happen to the demand for peanut butter as incomes fall during bad economic times?

A)

The demand will decrease.

B)

The demand will increase.

C)

The demand will not change.

D)

There is not enough information to determine the direction of the demand’s move.

11.

Over the past several years, consumer tastes for tattoos have increased. This means that:

A)

quantity demanded for tattoos has decreased.

B)

demand for tattoos has increased.

C)

demand for tattoos has decreased.

D)

supply of tattoos has increased.

12.

More police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. Then, we can conclude that:

A)

the equilibrium price of bulletproof vests will increase and the direction of the equilibrium quantity will be indeterminate.

B)

the equilibrium quantity of bulletproof vests will increase and the direction of the equilibrium price will be indeterminate.

C)

both equilibrium price and quantity will increase.

D)

both equilibrium price and quantity will decrease.

13.

An increase in the price of cotton will:

A)

increase the supply of cotton shirts.

B)

decrease the supply of cotton shirts.

C)

not shift the supply of cotton shirts.

D)

decrease the demand for cotton shirts.

14.

When the market for a product is at equilibrium:

A)

there is no tendency for price to change.

B)

the quantity demanded for that product equals its quantity supplied.

C)

there is no shortage or excess in that market.

D)

all of the above are true.

15.

A rancher in Oklahoma decides to raise the price of her beef by 20%. If the demand for beef is perfectly elastic, this rancher’s quantity demanded will:

A)

fall to zero.

B)

not change.

C)

fall slightly.

D)

increase slightly.

16.

Which of the following will NOT cause an increase in the supply of cornflakes?

A)

An increase in the price of cornflakes

B)

A cost-saving improvement in the technology of cornflakes production.

C)

A reduction in the price of corn (raw material).

D)

The expectation by producers that the price of cornflakes will fall in the future.

17.

The demand for water is likely to be very price inelastic because:

A)

expenditure on water constitutes a small portion of consumers’ budget.

B)

there is no good substitute for water.

C)

water is considered to be a necessity.

D)

all of the above are correct.

18.

Suppose that to control rising health costs the government sets the maximum price for a routine visit to a doctor’s office at $50. If the current market equilibrium price for such a visit is $80 then:

A)

more people will want to visit the doctor.

B)

same number of people will go to the doctor.

C)

more people will be able to see the doctor, since the price is lower.

D)

fewer people will be able to see the doctor.

19.

Over the past few years the technology associated with producing flat-panel televisions has improved. As a result

A)

The supply of flat-panel televisions will increase and their prices will increase.

B)

The supply of flat-panel televisions will decrease and their prices will increase.

C)

The supply of flat-panel televisions will increase and their prices will decrease.

D)

The demand for flat-panel televisions will increase and their prices will increase.

20.

The price elasticity of demand for skiing lessons in New Hampshire is greater than one (1). This means that the demand for skiing lessons in New Hampshire is:

A)

relatively price elastic

B)

relatively price inelastic

C)

unitary price elastic

D)

perfectly price elastic

21.

The price elasticity of demand:

A)

measures the responsiveness of quantity demanded to a percentage change in price.

B)

measures the responsiveness of price to a percentage change in quantity demanded.

C)

measures the extent to which prices are flexible and respond to market forces.

D)

measures the responsiveness of demand when price is held constant.

22.

A new diet which results in weight loss becomes popular. The key to the diet is to eat more red meat and less carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect:

A)

an increase in the demand and price of red meat.

B)

an increase in the demand for red meat and a decrease in its price.

C)

a decrease in the demand and price of red meat.

D)

a decrease in the demand for red meat and increase in its price.

23.

The equilibrium price and quantity for DVD rentals in Collegetown is:

A)

$5 and 50

B)

$3 and 30

C)

$9 and 90

D)

$6 and 40.

24.

In this market, if price is set at $7, then:

A)

there will be a surplus of 20.

B)

there will be a shortage of 20.

C)

there will be a shortage of 40.

D)

there will be a surplus of 40.

25.

In this market, if the price is set at $4, then:

A)

there will be a surplus of 20.

B)

there will be a shortage of 20.

C)

there will be a surplus of 10

D)

there will be a shortage of 10.