Exam 1 ( Pts, 20% for Your Final Grade)

Exam 1

NAME: ______

Please circle your answer clearly. You have 30 questions and 50 minutes. Use time efficiently.

1. Consider the following table which shows the demand and supply schedules.

The market for movie tickets will be in equilibrium when the

1. price is $5 and the quantity supplied is 1200.
2. price is $6 and the quantity demanded is 850.
3. price is $6 and the quantity supplied is 850.
4. price is $7 and the quantity demanded is 900.

1. Answer based on the above table. At the price $4, there is
2. a “shortage” of 650.
3. a “surplus” of 650.
4. an excess supply of 750.
5. No answer above.

1. Consider the above table again. Suppose that there is a blockbuster movie this week and, as a result, the demandincreases by 100 at all prices. Which of the following is not true?
2. The new equilibrium quantity is 950.
3. The demand curve shifts to the right.
4. Consumers’ willingness to pay increases.
5. The new equilibrium price is $7.

1. A simultaneous increase in both the supply and the demand for coffee will always cause an increase in the equilibrium quantity of coffee.
2. True
3. False

1. A simultaneous increase in both the supply and the demand for coffee will always cause an increase in the equilibrium price of coffee.
2. True
3. False

1. Tortilla is known as an inferior good. The supply curve is upward sloping. As household income increases,at the new equilibrium, consumer surplus will ______in the market for tortilla.
2. increase
3. decrease
4. remain the same
5. No definite answer

1. Which of the following is held constant along the demand curve?
2. Price of the good
3. Quantity
4. Income
5. Both b and c

1. Which of the following is held constant along the supply curve?
2. Production technology.
3. Input prices.
4. Managerial skill.
5. All the above.

1. Which of the following would not cause a shift in the demand curve for DVDs?
2. A change in income.
3. A change in the price of DVD players.
4. A change in the price of prerecorded cassette tapes.
5. A change in the price of DVDs.

1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift to the left?
2. A decrease in income assuming that Dr. Pepper is a normal good.
3. An increase in the price of 7-UP, assuming that 7-UP is a substitute for Dr. Pepper.
4. A decrease in the price of Dr. Pepper.
5. A reduction in the price of sugar used to make Dr. Pepper.

1. French fries and milkshakes are complements.What would happen if the price of French fries increased?
2. The price of milkshakes will fall.
3. The demand curve for milkshakes is shifted to the right.
4. The demand curve for French fries is shifted to the left.
5. The quantity demanded of French fries will increase.

1. The government wants to protect consumers from rising food prices. Therefore price restrictions are imposed on lettuce growers prohibiting them from raising the price of lettuce. This will cause
2. an excess supply of lettuce.
3. an excess demand for lettuce.
4. an increase in the demand for lettuce.
5. a decrease in the supply of lettuce.

1. Suppose that the supply curve of regular coffee is exactly identical to thatof decaf coffee, while the demand for regular coffee is more elastic than thatfor decaf coffee.That is, the demand curve for regular coffee is flatter than that for decaf coffee.Suppose that thecurrent equilibrium price is the same for both, $3.25 per bag. Now the government will set the price ceiling at $2.80. Which of the following is true after the price control?
2. There will be a shortage of supply for both regular and decaf coffee.
3. There will be more decaf coffee than regular coffee in the market.
4. There will be an excess supply for decaf coffee, more than that for regular coffee.
5. Consumers will be better off for both regular and decaf coffee.

1. Satellite television and cable television are substitutes. Suppose that, due to the recent technological development, satellite providers can now provide parabola antenna at a lower price. Which of the following is most likely to happen?
2. The supply curve for cable television is shifted to the right and the subscription fee for cable television decreases.
3. The demand curve for cable television is shifted to the left and the subscription fee for cable television decreases.
4. The demand curve for satellite television is shifted to the right and the price for satellite television decreases.
5. The supply curve for satellite television is shifted to the left and the price for satellite television decreases.

1. A new fertilizer doubles the grape harvest in the California wine country, while at the same time the government decreases the minimum age to purchase alcoholic beverages. In the market for wine,
2. both the equilibrium price and quantity of wine will increase.
3. the equilibrium price will remain the same while the equilibrium quantity will increase.
4. The equilibrium price will rise but we don’t have enough information to determine the change in equilibrium quantity.
5. The equilibrium quantity will increase but we don’t have enough information to determine the change in equilibrium price.

1. The government might impose a price ceiling in a market for a good if it believed that the price in the market was
2. too high for the consumers of the good.
3. too low for the consumers of the good.
4. too high for the producers of the good.
5. too low for the producers of the good.

1. Consider the following table which shows the supply and demand schedules for used books.

Which of the following is not true?

1. In the equilibrium the consumer surplus is $6.
2. In the equilibrium there is no excess supply.
3. As the price goes down from $6 to $3, the quantity supplied decreases by 3.
4. At the price $2, the quantity supplied should be 1.

1. The demand curve shows
2. the maximum amount consumers are willing to pay for particular units of a good.
3. the minimum amount consumers are willing to pay for particular units of a good.
4. the average amount consumers are willing to pay for particular units of a good.
5. that consumers want to pay the lowest price possible.

1. A normal good is
2. a good that consumers want to consume more when they are richer.
3. a good that consumers want to consume more when the price is lower.
4. a good that is standardized in the market.
5. A good that gives consumer surplus.

1. Which of the following will lower the equilibrium price of tea?
2. A decrease in the price of coffee.
3. An increase in income and tea is a normal good.
4. An increase in the wage of workers in the production of tea.
5. An increase in a fungus that has destroyed a large portion of the tea crop.

1. During the 1970s the U.S. economy experienced the so called “stagnation” due to the old crisis when the price of crude oil skyrocketed by 300%: there existed inflation and recession. This was something new at that time because it was believed that inflation was accompanied by boom. Inflation is an overall increase in prices, and recession is a decrease in production. Consider the supply and demand curve for a good which is representative of stagnation. Which of the following is true?
2. The supply curve shifted right.
3. The supply curve shifted left.
4. The demand curve shifted right.
5. The demand curve shifted left.

1. Which of the following is not a consequence of price ceilings?
2. Inefficiently high quality goods.
3. Long line of waiting.
4. Under the table exchanges.
5. Resource misallocation.

1. Which of the following is not true?
2. A higher price of a substitute always increases the demand.
3. A lower price of a complement always increases the demand.
4. A high income always increases the demand.
5. The demand curve always shifts when preferences change.

1. Which of the following about the supply and demand model is not true?
2. Excess demand drives the price up.
3. In equilibrium the quantity demanded equals the quantity supplied.
4. The demand curve is downward sloping according to the law of demand.
5. The supply curve shifts left when the price goes up.

1. Which of the following could account for the fact that ice cream prices have recently increased and that consumption of ice cream has declined?
2. The demand for ice cream has increased.
3. The supply of ice cream has increased.
4. The supply of ice cream has decreased.
5. The demand for ice cream has decreased.

1. Suppose you manage a craft store that sells supplies for making scrapbooks and for yarn crafts such as knitting and needlepoint. What effect do you anticipate as you learn that scrapbooks are becoming more popular as a hobby and that yarn crafts are becoming less popular?
2. You will be able to sell more supplies for yarn crafts at a relatively higher price than before.
3. You will see shortages of yarn craft supplies.
4. You will be able to sell more supplies for scrapbooks at a relatively higher price than before.
5. You will see surpluses of scrapbook supplies.

1. A surplus arises when
2. the price of a good is held below the equilibrium price.
3. demand for a good decreases, causing a decrease in the equilibrium price.
4. demand for a good increases, causing an increase in the equilibrium price.
5. the price of a good is held above the equilibrium price.

1. What would be the dominant effect in the market for new homes of an increase in the wages of skilled tradesmen who work in housing construction?
2. The supply of new homes would shift to the left.
3. The demand for new homes would shift to the right.
4. The supply of new homes would shift to the right.
5. The demand for new homes would shift to the left.

1. Which of the following variables do consumers NOT take into account when deciding whether to purchase a backyard swimming pool?
2. The cost of manufacturing the pool.
3. The enjoyment they expect to derive from using the pool.
4. The cost of maintaining the pool.
5. The enjoyment they would expect from other goods they might purchase in place of the pool, such as a family entertainment center.

1. Why did the U.S. experience a gasoline shortage in 1979?
2. Because the demand for gasoline had increased too much
3. Because the supply of gasoline had decreased too much
4. Because oil producers had allowed refineries to fall into disrepair
5. Because the price of gas was legally prevented from rising to its equilibrium level

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