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Vesper – A.P. Microeconomics Unit II Exam

Unit II Exam

 

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

 

____    1.   The demand for a good or service is determined by

a.	those who buy the good or service.
b.	the government.
c.	the producers who create the good or service.
d.	those who supply the raw materials used in the production of the good or service.

 

 

____    2.   Which of the following is not a characteristic of a perfectly competitive market?

a.	Different sellers sell identical products.
b.	There are many sellers.
c.	Sellers almost always accept the price the market determines.
d.	All of the above are characteristics of a perfectly competitive market.

 

 

____    3.   Which of the following would not be a determinant of the demand for a particular good?

a.	prices of related goods
b.	income
c.	tastes
d.	the prices of the inputs used to produce the good

 

 

____    4.   Two goods are substitutes if a decrease in the price of one good

a.	decreases the demand for the other good.
b.	decreases the quantity demanded of the other good.
c.	increases the demand for the other good.
d.	increases the quantity demanded of the other good.

 

 

____    5.   Ford Motor Company announces that it will offer $3,000 rebates on new Mustangs starting next month. As a result of this information, today’s demand curve for Mustangs

a.	shifts to the right.
b.	shifts to the left.
c.	shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information.
d.	will not shift; rather, the demand curve for Mustangs will shift to the right next month.

 

 

____    6.   A higher price for batteries would result in a(n)

a.	increase in the demand for flashlights.
b.	decrease in the demand for flashlights.
c.	increase in the demand for batteries.
d.	decrease in the demand for batteries.

 

 

____    7.   With respect to the variables price and quantity demanded,

a.	price and quantity demanded are independent of each other.
b.	price is the dependent variable and quantity demanded is the independent variable.
c.	price is the independent variable and quantity demanded is the dependent variable.
d.	price and quantity demanded are both dependent variables, since both depend on the actions of buyers and sellers.

 

 

Figure 4-1

 

____    8.   Refer to Figure 4-1. The movement from point A to point B on the graph shows

a.	a decrease in demand.
b.	an increase in demand.
c.	a decrease in quantity demanded.
d.	an increase in quantity demanded.

 

 

 

The table shows individual demand schedules for a market.

 

Table 4-1

Price of the Good	Aaron	Angela	Austin	Alyssa
$0.00	20	16	4	8
0.50	18	12	6	6
1.00	14	10	2	5
1.50	12	8	0	4
2.00	6	6	0	2
2.50	0	4	0	0

 

 

____    9.   Refer to Table 4-1. Whose demand does not conform to the law of demand?

a.	Aaron’s
b.	Angela’s
c.	Austin’s
d.	Alyssa’s

 

 

____  10.   Refer to Table 4-1. For whom is the good a normal good?

a.	for Aaron
b.	for Austin
c.	for all of the four demanders
d.	This cannot be determined from the table.

 

 

Figure 4-2

 

____  11.   Refer to Figure 4-2. The shift from D to D₁ is called

a.	an increase in demand.
b.	a decrease in demand.
c.	a decrease in quantity demanded.
d.	an increase in quantity demanded.

 

 

____  12.   Refer to Figure 4-2. The movement from D to D₁ could be caused by

a.	an increase in price.
b.	a decrease in the price of a complement.
c.	a technological advance.
d.	a decrease in the price of a substitute.

 

 

____  13.   The side of the market that deals with the willingness and ability to produce and sell is

a.	demand.
b.	competition.
c.	supply.
d.	monopoly.

 

 

____  14.   According to the law of supply,

a.	the quantity supplied of a good is negatively related to the price of the good.
b.	when the price of a good falls, the quantity supplied of the good rises.
c.	the supply curve for a good is upward-sloping.
d.	All of the above are correct.

 

 

____  15.   A decrease in the supply of televisions is represented by

a.	a leftward shift of the supply curve for televisions.
b.	a rightward shift of the supply curve for televisions.
c.	a flattening of the supply curve for televisions.
d.	a movement down and to the left along the supply curve for televisions.

 

 

____  16.   A decrease in the number of sellers in the market causes

a.	the supply curve to shift to the left.
b.	the supply curve to shift to the right.
c.	a movement up and to the right along a stationary supply curve.
d.	a movement downward and to the left along a stationary supply curve.

 

 

____  17.   A movement along the supply curve might be caused by a change in

a.	technology.
b.	input prices.
c.	expectations about future prices.
d.	the price of the good or service that is being supplied.

 

 

____  18.   Which of the following events could shift both the demand curve and the supply curve for a good?

a.	A technological advance pertaining to the production of the good is observed.
b.	Incomes of all buyers of the good increase.
c.	The number of sellers of the good increases.
d.	Everyone revises upward their expectation of next month’s price of the good.

 

 

Figure 4-5

 

____  19.   Refer to Figure 4-5. The movement from point A to point B on the graph represents

a.	an increased willingness and ability on the part of suppliers to supply the good at each possible price.
b.	an increase in the number of suppliers.
c.	a decrease in the price of a relevant input.
d.	an increase in the price of the good that is being supplied and suppliers’ response to that price change.

 

 

____  20.   Recent forest fires in the western states are expected to cause the price of lumber to rise in the next 6 months. As a result we can expect the supply of lumber to

a.	fall in 6 months, but not now.
b.	increase in 6 months when the price goes up.
c.	fall now.
d.	increase now to meet as much demand as possible.

 

 

Figure 4-6

 

____  21.   Refer to Figure 4-6. The movement from S to S₁ could be caused by

a.	a decrease in the price of the good.
b.	an improvement in technology.
c.	an increase in income.
d.	an increase in input prices.

 

 

____  22.   Refer to Figure 4-6. Suppose the supply curves that are drawn represent supply curves for single-family residential houses. Then the movement from S to S₁ could be caused by

a.	an increase in the price of apartments (a substitute for single-family houses for many people looking for a place to live).
b.	a newly-formed expectation by house-builders that prices of houses will increase significantly in the next six months.
c.	a decrease in the price of lumber.
d.	All of the above are correct.

 

 

____  23.   If, at the current price, there is a shortage of a good,

a.	sellers are producing more than buyers wish to buy.
b.	the market must be in equilibrium.
c.	the price is below the equilibrium price.
d.	quantity demanded equals quantity supplied.

 

 

 

 

 

 

 

 

Figure 4-7

 

____  24.   Refer to Figure 4-7. At a price of $35,

a.	there would be a shortage of 400 units.
b.	there would be a surplus of 200 units.
c.	there would be a surplus of 400 units.
d.	there would be an excess supply of 200 units.

 

 

____  25.   Refer to Figure 4-7. At a price of $15,

a.	there would be a shortage of 400 units.
b.	there would be a surplus of 400 units.
c.	there would be a shortage of 200 units.
d.	there would be an excess demand of 200 units.

 

 

____  26.   Refer to Figure 4-7. At the equilibrium price,

a.	200 units would be supplied and demanded.
b.	400 units would be supplied and demanded.
c.	600 units would be supplied and demanded.
d.	600 units would be supplied, but only 200 would be demanded.

 

 

Figure 4-8

 

____  27.   Refer to Figure 4-8. If there is currently a shortage of 30 units of the good, then

a.	the law of demand predicts that the price will rise by $5 to eliminate the shortage.
b.	the law of supply predicts that the price will rise by $5 to eliminate the shortage.
c.	the law of supply and demand predicts that the price will rise by $3 to eliminate the shortage.
d.	the law of supply and demand predicts that the price will fall from its current level by an indeterminate amount, exacerbating the shortage.

 

 

 

Table 4-2

PRICE	QUANTITY DEMANDED	QUANTITY SUPPLIED
$10	10	60
$ 8	20	45
$ 6	30	30
$ 4	40	15
$ 2	50	0

 

 

____  28.   Refer to Table 4-2. If the price were $8, a

a.	surplus of 50 units would exist and price would tend to fall.
b.	surplus of 10 units would exist and price would tend to fall.
c.	surplus of 25 units would exist and price would tend to fall.
d.	shortage of 25 units would exist and price would tend to rise.

 

 

____  29.   In markets, prices move toward equilibrium because of

a.	the actions of buyers and sellers.
b.	government regulations placed on market participants.
c.	increased competition among sellers.
d.	buyers’ ability to affect market outcomes.

 

 

____  30.   If a surplus exists in a market we know that the actual price is

a.	above equilibrium price and quantity supplied is greater than quantity demanded.
b.	above equilibrium price and quantity demanded is greater than quantity supplied.
c.	below equilibrium price and quantity demanded is greater than quantity supplied.
d.	below equilibrium price and quantity supplied is greater than quantity demanded.

 

 

 

Figure 4-10

 

____  31.   Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

a.	A
b.	B
c.	C
d.	D

 

 

____  32.   Refer to Figure 4-10. Which of the four graphs illustrates an increase in quantity supplied?

a.	A.
b.	B.
c.	C.
d.	D.

 

 

____  33.   Refer to Figure 4-10. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

a.	an increase in the equilibrium quantity.
b.	an increase in the equilibrium price.
c.	an instance in which the law of demand fails to hold.
d.	All of the above are correct.

 

 

Table 4-3. The demand schedule below pertains to sandwiches demanded per week.

 

	Price	Quantity Demanded
Alfred	$3.00	3
	$5.00	1
Belinda	$3.00	4
	$5.00	2
Charissa	$3.00	3
	$5.00	x

 

 

____  34.   Refer to Table 4-3. Suppose Alfred, Belinda, and Charissa are the only demanders of sandwiches. Also suppose:

• x = 2;
• the current price of a sandwich is $5.00;
• the market quantity supplied of sandwiches is 10;
• the law of supply applies to the supply of sandwiches.

Then

a.	there is a shortage of 3 sandwiches and the price would be expected to rise from its current level of $5.00.
b.	there is a shortage of 3 sandwiches and the price would be expected to fall from its current level of $5.00.
c.	there is a surplus of 5 sandwiches and the price would be expected to rise from its current level of $5.00.
d.	there is a surplus of 5 sandwiches and the price would be expected to fall from its current level of $5.00.

 

 

____  35.   In general, elasticity is a measure of

a.	the extent to which advances in technology are adopted by producers.
b.	the extent to which a market is competitive.
c.	how fast the price of a good responds to a shift of the supply curve or demand curve.
d.	how much buyers and sellers respond to changes in market conditions.

 

 

____  36.   If a person only occasionally buys a cup of coffee, his demand for coffee is probably

a.	represented by a vertical or nearly-vertical demand curve.
b.	not easily represented by a demand schedule or demand curve.
c.	inelastic.
d.	elastic.

 

 

____  37.   There are very few, if any, good substitutes for motor oil. Therefore,

a.	the demand for motor oil would tend to be inelastic.
b.	the demand for motor oil would tend to be elastic.
c.	the demand for motor oil would tend to respond strongly to changes in prices of other goods.
d.	the supply of motor oil would tend to respond strongly to changes in people’s tastes for large cars relative to their tastes for small cars.

 

 

____  38.   If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then

a.	the demand for the good is said to be elastic.
b.	the demand for the good is said to be inelastic.
c.	the law of demand does not apply to the good.
d.	the demand curve for the good shifts only slightly in response to a change in price.

 

 

____  39.   The value of the price elasticity of demand for a good will be relatively large when

a.	there are no good substitutes available for the good.
b.	the time period in question is relatively short.
c.	the good is a luxury as opposed to a necessity.
d.	All of the above are correct.

 

 

____  40.   For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

a.	There are no close substitutes for this good.
b.	The good is a luxury.
c.	The market for the good is broadly defined.
d.	The relevant time horizon is short.

 

 

____  41.   A perfectly elastic demand implies that

a.	buyers will not respond to any change in price.
b.	any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
c.	quantity demanded and price change by the same percent as we move along the demand curve.
d.	price will rise by an infinite amount when there is a change in quantity demanded.

 

 

____  42.   An increase in price causes an increase in total revenue when

a.	demand is elastic.
b.	demand is inelastic.
c.	demand is unit elastic.
d.	All of the above are possible.

 

 

 

Figure 5-7

 

____  43.   Refer to Figure 5-7. Total revenue when the price is P₂ is represented by the area(s)

a.	B + D.
b.	A + B.
c.	C + D.
d.	D.

 

 

____  44.   Muriel’s income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income increases by 20 percent, she will buy

a.	150 percent more football tickets.
b.	50 percent more football tickets.
c.	30 percent more football tickets.
d.	20 percent more football tickets.

 

 

____  45.   Cross-price elasticity of demand measures how

a.	the price of one good changes in response to a change in the price of another good.
b.	the quantity demanded of one good changes in response to a change in the quantity demanded of another good.
c.	the quantity demanded of one good changes in response to a change in the price of another good.
d.	strongly normal or inferior a good is.

 

 

____  46.   A key determinant of the price elasticity of supply is

a.	the ability of sellers to change the price of the good they produce.
b.	the ability of sellers to change the amount of the good they produce.
c.	how responsive buyers are to changes in sellers’ prices.
d.	the slope of the demand curve.

 

 

____  47.   Which of the following was not a reason OPEC failed to keep the price of oil high?

a.	Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity.
b.	Consumers responded to higher prices with greater conservation.
c.	Consumers replaced old inefficient cars with newer efficient ones.
d.	The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

 

 

____  48.   Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

a.	supply decreases, demand is unaffected, and price increases.
b.	demand decreases, supply is unaffected, and price decreases.
c.	demand and supply both decrease, leaving price essentially unchanged.
d.	supply decreases, demand increases, and price increases substantially as a result.

 

 

____  49.   A price ceiling

a.	is a legal maximum on the price at which a good can be sold.
b.	is often imposed in markets in which “cutthroat competition” would prevail without a price ceiling.
c.	is often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling.
d.	All of the above are correct.

 

 

____  50.   A legal minimum price at which a good can be sold is

a.	exemplified by rent-control laws.
b.	usually intended to enhance efficiency in a market.
c.	called a price ceiling.
d.	called a price floor.

 

 

____  51.   A price ceiling will be binding only if it is set

a.	equal to equilibrium price.
b.	above equilibrium price.
c.	below equilibrium price.
d.	none of the above; a price ceiling is never binding.

 

 

Figure 6-2

 

____  52.   Refer to Figure 6-2. If the government imposes a price ceiling of $8 in this market, the result would be a

a.	surplus of 10.
b.	surplus of 20.
c.	shortage of 10.
d.	shortage of 20.

 

 

____  53.   Under rent control, tenants can expect

a.	lower rent and higher quality housing.
b.	lower rent and lower quality housing.
c.	higher rent and a shortage of rental housing.
d.	higher rent and a surplus of rental housing.

 

 

____  54.   When a tax is imposed on the buyers of a good, the demand curve shifts

a.	downward by the amount of the tax.
b.	upward by the amount of the tax.
c.	downward by less than the amount of the tax.
d.	upward by more than the amount of the tax.

 

 

____  55.   A tax on bicycles that buyers of bicycles are required to pay shifts

a.	the demand curve downward, causing both the price received by sellers and the equilibrium quantity to fall.
b.	the demand curve upward, causing both the price received by sellers and the equilibrium quantity to rise.
c.	the supply curve downward, causing the price received by sellers to fall and the equilibrium quantity to rise.
d.	the supply curve upward, causing the price received by sellers to rise and the equilibrium quantity to fall.

 

Figure 6-10

____  56.   Refer to Figure 6-10. Buyers effectively pay how much of the tax per unit?

a.	$1.00.
b.	$1.50.
c.	$2.50.
d.	$3.00.

 

 

____  57.   Refer to Figure 6-10. Sellers effectively pay how much of the tax per unit?

a.	$1.00.
b.	$1.50.
c.	$2.50.
d.	$3.00.

 

 

____  58.   Which of the following statements is correct concerning the burden of a tax imposed on candles?

a.	Buyers bear the entire burden of the tax.
b.	Sellers bear the entire burden of the tax.
c.	Buyers and sellers share the burden of the tax.
d.	We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.

 

 

Figure 6-12

 

____  59.   Refer to Figure 6-12. In which market will the majority of the tax burden fall on the buyer?

a.	market (a)
b.	market (b)
c.	market (c)
d.	All of the above are correct.

 

 

____  60.   Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, we know that the

a.	demand is more inelastic than supply.
b.	supply is more inelastic than demand.
c.	government has required that buyers remit the tax payments.
d.	government has required that sellers remit the tax payments.