Sample Questions E 218 2013
Place your answer on the answer sheet. There are 50 questions, each worth 2 points.
1) A Rolling Stones song goes: "You can't always get what you want." This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?
A) Consumers must make the best purchasing decisions they can, given their limited incomes.
B) Workers do not have as much leisure as they would like, given their wages and working conditions.
C) Workers in planned economies, such as North Korea, do not have much choice over jobs.
D) Firms in market economies have limited financial resources.
2) Use the following two statements to answer this question:
I. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions.
II.Economic theories use value judgments to determine which people ought to pay more taxes.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.
3) Which of the following statements is false? An economic analysis of carbon taxes can:
A) calculate the increase in costs faced by coal-using industries.
B) predict the effect on unemployment in West Virginia coal mining communities.
C) compare the likely reductions in medical expenditures on diseases caused by smog.
D) present a trade-off of the costs and benefits of different levels of carbon taxes.
E) conclude that such taxes should be imposed to benefit future generations.
4) Which of the following markets has the most restrictive geographic boundary?
A) The market for retail gasoline
B) The market for housing
C) The market for gold
D) The market for beef
5) An investor can acquire shares of stock in Acme Corporation either by purchasing shares on the stock market or by purchasing a bond that is convertible into shares of Acme stock. After careful study, the investor discovers that she can profit by purchasing the bond, converting it to shares of stock, and selling the stock. This practice is called:
A) selling short.
B) arbitrage.
C) profiteering.
D) dumping.
E) none of the above
6) In a perfectly competitive market:
A) there are a few buyers.
B) there is a single seller.
C) there is a cartel.
D) no single buyer or seller can significantly affect the market price.
7) Although the U. S. airline industry has only a relatively small number of sellers, the market is nevertheless highly competitive. The reason is that:
A) the number of buyers is very large.
B) due to fierce competition, no firm has significant control over prices.
C) due to fierce competition, no firm has significant control over the quantity supplied.
D) most airline routes are served by relatively many sellers.
8) Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the real price of 1987 gasoline in 2012 dollars, we should:
A) multiply by the 1987 CPI and divide by the 2012 CPI.
B) multiply by the 2012 CPI and divide by the 1987 CPI.
C) not do anything because this is the real price in 2012 dollars.
D) none of the above
9) A supply curve reveals:
A) the quantity of output consumers are willing to purchase at each possible market price.
B) the difference between quantity demanded and quantity supplied at each price.
C) the maximum level of output an industry can produce, regardless of price.
D) the quantity of output that producers are willing to produce and sell at each possible market price.
10) Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:
A) the price of steel to fall.
B) the demand curve for steel to shift to the right.
C) the demand curve for plastic to shift to the left.
D) nothing to happen to steel because it is only a substitute for plastic.
E) the demand curve for steel to shift to the left.
11) Which of the following would shift the demand curve for new textbooks to the right?
A) A fall in the price of paper used in publishing texts
B) A fall in the price of equivalent used textbooks
C) An increase in the number of students attending college
D) A fall in the price of new textbooks.
12) Suppose Congress passes a law that states the price of gasoline may not exceed $6 per gallon (but may be lower). If the current price of gasoline is less than $6, what impact does this law have on the current price and quantity of gasoline in the US market?
A) There is a shortage of gasoline
B) There is a surplus of gasoline
C) Quantity supplied currently equals quantity demanded, but a surplus is possible at prices above $6
D) The law currently has no impact, and the market clears at the equilibrium price
13) Which of the following would cause an unambiguous decrease in the real price of DVD players?
A) A shift to the right in the supply curve for DVD players and a shift to the right in the demand curve for DVD players.
B) A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
C) A shift to the left in the supply curve for DVD players and a shift to the right in the demand curve for DVD players.
D) A shift to the left in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
14) Which of the following represents the price elasticity of demand?
A)
B) () + ()
C) () × ()
D) () - ()
Answer: C
Figure 2.1
15) Refer to Figure 2.1. At point D, demand is:
A) completely inelastic.
B) inelastic, but not completely inelastic.
C) unit elastic.
D) elastic, but not infinitely elastic.
E) infinitely elastic.
16) A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:
A) a budget line.
B) an isoquant.
C) an indifference curve.
D) a demand curve.
E) none of the above
17) Zoe is an executive at Dell Computer Company who is in charge of designing the next version of laptop computers. She will consider such features as screen size, weight, processor speed, and CD and DVD drives. Given the fact that it is costly to include more features in new products, why might Zoe be interested in data on how much consumers paid for a range of laptops with different attributes?
A) in order to estimate willingness to pay for each feature.
B) in order to set an optimal price for the laptops.
C) in order to determine the best features to include.
D) in order to estimate willingness to trade off one feature for another.
E) all of the above
18) Mikey is very picky and insists that his mom make his breakfast with equal parts of cereal and apple juice — any other combination and it ends up on the floor. Cereal costs 4 cents per tablespoon and apple juice costs 6 cents per tablespoon. If Mikey's mom budgets $8 per month for Mikey's breakfast, how much cereal and juice does she buy?
A) 40 tablespoons each of cereal and juice
B) 80 tablespoons each of cereal and juice
C) 40 tablespoons of cereal and 75 tablespoons of juice
D) 100 tablespoons of cereal and 67 tablespoons of juice
19) The income-consumption curve for Dana between Qa and Qb is given as: Qa = Qb. His budget constraint is given as:
120 = Qa + 4Qb
How much Qa will Dana consume to maximize utility?
A) 0
B) 24
C) 30
D) 60
E) More information is needed to answer this question.
Figure 4.1
A consumer's original utility maximizing market basket of goods is shown in Figure 4.1 as point A. Following a price change, the consumer's utility maximizing market basket changes is at point B.
20) Refer to Figure 4.1. The substitution effect of the price change in food on the quantity of food purchased is:
A) the change from F3 to F1.
B) the change from F3 to F2.
C) the change from F2 to F1.
D) the change from F1 to F2.
E) none of the above
21) Assume that average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen,
A) marginal product is rising.
B) marginal product is falling.
C) average product is rising.
D) average product is falling.
Figure 6.1
22) Refer to Figure 6.1. At point D, the marginal product of labor is
A) rising.
B) at its minimum.
C) at its maximum.
D) diminishing.
23) An important factor that contributes to labor productivity growth is:
A) growth in the capital stock.
B) technological change.
C) the standard of living.
D) A and B only
E) A, B, and C are correct.
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