Professional Documents
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Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
1. Holding everything else constant, an increase in the price of MP3 players will result in
2. How does the increasing use of digital cameras affect the market for traditional camera film?
a. The demand curve for traditional camera film shifts to the right.
b. The supply curve for traditional camera film shifts to the left.
c. The supply curve for traditional camera film shifts to the right.
d. The demand curve for traditional camera film shifts to the left.
3. If a firm expects that the price of its product will be lower in the future than it is today
a. the firm has an incentive to increase supply now and decrease supply in the future.
b. the firm has an incentive to decrease supply now and increase supply in the future.
c. the firm has an incentive to increase quantity supplied now and decrease quantity supplied in the
future.
d. the firm will not change supply until it knows for certain what will happen to its price.
4. The demand for lobster is lower in the spring than in the summer. If the price of lobster is higher in spring
than in summer then:
5. In which case we can get a PPF that looks like a straight line?
7. Refer to Figure 3. With a price ceiling present in this market, when the supply curve for gasoline shifts
from S1 to S2
a. the price will increase to P3.
b. a surplus will occur at the new market price of P2.
c. the market price will stay at P1 due to the price ceiling.
d. a shortage will occur at the price ceiling of P2.
8.. Refer to Figure 3. Without the price ceiling in this market, when the supply curve for gasoline shifts from
S1 to S2 the price will:
a. An increase in demand causes a change in equilibrium price; the change in price does not
cause a further change in demand or supply.
b. A decrease in supply causes equilibrium price to rise; the increase in price then results in a
decrease in demand.
c. If both demand and supply increase there must be an increase in equilibrium price; equilibrium
quantity may either increase or decrease.
d. If demand decreases and supply increases one cannot determine if equilibrium price will
increase or decrease without knowing which change is greater.
11. 1,000 individuals desire Good X, but only 100 units are available. ______________ will determine
who attains Good X, and who does not.
a. An opportunity cost
b. A rationing device
c. Utility
d. Natural Selection
12. In 2010, the average price for Refrigerators that tell people to stop eating, close the door, and go
away was $4000. In 2011 the average price rose to $5000, but sales still doubled. It
follows that:
13. You eat Wasabi Green Peas by the case. The CNN news anchor announces that the Japanese
believe Americans are fat and lazy. They respond by putting a tariff on all food exports to the US
starting in 2011. This will cause the price you pay to double next year. As a result,
a. your demand for Wasabi Peas will increase starting next year.
b. your demand for Wasabi Peas increases today.
c. your demand for Wasabi Peas falls as you look for a substitute good.
d. you decide to give up Wasabi Peas completely.
FIGURE 3
14. The graph in Figure 3 illustrates an initial competitive equilibrium in the market for apples at the
intersection of D1 and S1 (point A). If the price of oranges, a substitute for apples, decreases
and the wages of apple workers increase how will the equilibrium point change?
15. The graph in Figure 3 illustrates an initial competitive equilibrium in the market for apples at the
intersection of D1 and S1 (point A). If there is a shortage of apples how will the equilibrium point
change?
a. More firms are in the market, therefore more goods are produced.
a. Because more quantity is being demanded, suppliers raise the price.
b. Producers face higher opportunity costs when producing higher levels of quantity, so
they must receive a higher price.
c. Producers seek to maximize total revenue.
17. Shirts are made with cotton. Should the price of cotton rise, then:
18. Which of the following would shift a nation's production possibilities frontier inward?
FIGURE 4
Farmer Bob grows tomatoes and strawberries on his land. A portion of his land is more suitable
for growing tomatoes and the other portion is better suited for strawberry cultivation. Which of the
graphs represent his production possibilities frontier?
a. Graph A
b. Graph B
c. Graph C
d. Graph A or Graph C
Table 1
George Jack
Lawns Mowed 10 6
Gardens Cultivated 5 4
22. Specializing in the production of a good or service in which one has a comparative advantage
enables a country to do all of the following except:
23. For most people who retire, the largest single cost of retirement is:
a. Medical bills.
b. The income given up by not working.
c. Costs of vacations or hobbies.
d. Insurance costs.
24. If the best lawyer in town is also the best at typing on MS Word, then according to economic
reasoning, this person should :
25. Figure 5 above represents the market for iced tea. At a price of $3
a. the marginal cost of iced tea is greater than the marginal benefit; therefore, output is
inefficiently low.
b. producers should lower the price to $1 in order to sell the quantity demanded of 10,000.
c. the marginal benefit of iced tea is greater than the marginal cost; therefore, output is
inefficiently low.
d. the marginal benefit of iced tea is greater than the marginal cost; therefore, output is
inefficiently high.
26. Sue receives a large pay increase when taking a new job. We would expect which of the following to
occur: