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.
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____ 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.
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____ 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
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____ 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.
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____ 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.
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____ 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.
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____ 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
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____ 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.
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____ 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.
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____ 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.
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____ 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.
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____ 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.
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____ 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.
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____ 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.
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____ 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.
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____ 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.
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____ 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. |
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