Introduction to Microeconomics - Quiz 1

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1. The economy of Country A is operating at a point inside its ppf. This may be
because
(a) the economy has very poor technoogica !no"#ho".
(b) Country A is a very sma nation and can$t produce much.
(c) Country A has speciai%ed in producing a good in "hich it has a comparative
disadvantage.
(d) Country A has some unempoyment.
&. 'ovements aong the production possibiity frontier iustrate
(a) the concept of opportunity cost.
(b) the operation of mar!et forces.
(c) improvements in technoogy.
(d) changes in the resource mi(.
). The *uantity of Co!e demanded per "ee! (+d) in Ne" ,runs"ic! is described by
the foo"ing e*uation:
+d - .// # 1//01
"here 0 (in doars) is the price of Co!e. This e*uation predicts that
(a) )// cans "i be bought this "ee!.
(b) a 2/3 rise in price "i cause 2/ fe"er cans to be bought this "ee!.
(c) )// cans "i be bought per 41// this "ee!.
(d) a 41 rise in price "i cause 1// more cans to be bought this "ee!.
.. The demand for CDs is do"n"ard soping. Suddeny the price of CDs rises from
42 to 45. This "i cause
(a) demand of shift to eft.
(b) demand to shift to right.
(c) *uantity demanded to increase.
(d) *uantity demanded to decrease.
2. A right"ard shift in the suppy of 6.S. cars might be due to
(a) an increase in the price of stee.
(b) a reduction in foreign competition.
(c) the introduction of cost#saving robots.
(d) increased popuarity of foreign cars.
7. 8oca farmers reduce the price of their tomatoes at farmers9 mar!et. The price of
corn is )/3 per ear. A passing economist theori%es that1 ceteris paribus1 buyers "i
purchase more tomatoes than before. :hich of the foo"ing is true; The
economist is
(a) impying that the price of tomatoes "i fa even further.
(b) assuming that tomatoes are of a better *uaity than before.
(c) assuming that the price of corn "i remain at )/3 per ear.
(d) impying that corn is of a poorer *uaity than before.
5. <ach "ee!1 =irm A and =irm , can each produce refrigerator and teevision in the
*uantities sho"n in the foo"ing tabe. Constant costs appy for each firm.
=irm A =irm ,
>efrigerator ? 1&
Teevision 1/ &.
According to tabe1
(a) =irm A has a comparative advantage in the production of both goods.
(b) =irm A has a comparative advantage in the production of refrigerator1 and
=irm , has a comparative advantage in the production of teevision.
(c) =irm A has a comparative advantage in the production of teevision1 and =irm
, has a comparative advantage in the production of refrigerator.
(d) =irm , has a comparative advantage in the production of both goods.
?. Chuc!$s Chips and Debi$s Dip are compements. Costs of chip production fa. At
the same time a government heath report aeges that dip consumption causes
bone cancer. =or Debi$s Dip1 the e*uiibrium price "i @@@@@ and the
e*uiibrium *uantity "i @@@@@.
(a) faA be indeterminate
(b) be indeterminateA rise
(c) be indeterminateA fa
(d) be indeterminateA be indeterminate
B. Aong a given demand curve for "heat1 "hich of the foo"ing is not hed
constant;
(a) the price of "heat
(b) the income of "heat farmers
(c) the income of "heat demanders
(d) the price of corn
1/. The a" of demand is best iustrated by
(a) the price of 0epsi rising1 eading consumers to buy more Co!e.
(b) an increase in income1 "hich resuts in reduced purchases of store#brand soft
drin!s.
(c) increased purchases of Co!e as the price of Co!e decreases.
(d) an increase in income1 "hich resuts in increased purchases of Co!e.
11. :hich of the foo"ing statement is normative;
(a) The moon is made of green cheese.
(b) The most serious economic probem confronting the nation is unempoyment.
(c) States to the "est of the 'ississippi have o"er state income ta( rates than
states to the east have.
(d) Cf the federa budget deficit is reduced1 then interest rates "i decrease.
1&. Corn is an inferior good. As Di$s income decreases "e "oud e(pect a(n)
(a) decrease in Di$s demand for corn.
(b) increase in Di$s *uantity demanded of corn.
(c) increase in Di$s demand for corn.
(d) decrease in Di$s *uantity demanded of corn.
1). The mar!et for peas is e(periencing a surpus. Eou shoud predict that
(a) price "i increase1 *uantity demanded "i fa1 and the *uantity suppied "i
rise.
(b) price "i increase1 *uantity demanded "i rise1 and the *uantity suppied "i
fa.
(c) price "i decrease1 *uantity demanded "i rise1 and the *uantity suppied "i
fa.
(d) price "i decrease1 *uantity demanded "i fa1 and the *uantity suppied "i
rise.
1.. 0rice easticity of demand is #.1/. 0rice increases by 2/F. :e "oud predict a
(a) 2/F increase in *uantity demanded.
(b) 2/F decrease in *uantity demanded.
(c) 2F increase in *uantity demanded.
(d) 2F decrease in *uantity demanded.
12. A eft"ard shift in the suppy curve of mi! causes its price to rise by 1/F. Dac!
thereafter buys &/F fe"er mi!. The price rise has caused Dac! to
(a) spend ess on mi!.
(b) spend more on mi!.
(c) reduce the *uantity bought. :e can$t te "hat has happened to ho" much he
spends.
(d) increase the *uantity bought. :e can$t te "hat has happened to ho" much he
spends.
17. A tic!et to a movie costs you 41/. Go"ever1 your roommate offers you 412 for
your tic!et. Eour opportunity cost of refusing the offer and "atching the movie is
(a) 42
(b) 41/
(c) 412
(d) 4&2
15. A government imposed ceiing on apartment rents1 if set above the e*uiibrium
rent eve1 "oud
(a) ead to a persistent surpus of apartments.
(b) ead to a persistent shortage of apartments.
(c) have no effect on the housing mar!et.
(d) shift the suppy curve for apartments to the rights.
1?. The income easticity of Hood A is #.71 and the cross#price easticity bet"een
Hood A and Hood , is .?. Hood A is a(n)
(a) norma good and a substitute for Hood ,.
(b) inferior good and a substitute for Hood ,.
(c) norma good and a compement for Hood ,.
(d) inferior good and a compement for Hood ,.
1B. >utgers Student Center coffeehouse cut the price of coffee and doughnuts by 1/F
and boosted the number of servings sod. Tota revenue of coffeehouse on coffee
and doughnuts has risen by 2F. This information sho"s that
(a) the demand curve for coffee and doughnuts is hori%onta.
(b) the price easticity of demand for coffee and doughnuts is #&./.
(c) coffee and doughnuts are a norma good.
(d) at present1 prices are in the eastic section of the demanded schedue.
&/. T"o faacies must be avoided in formuating theories and modes. Ine is the
faacy of composition1 "hich states that:
(a) <(pressing reationships in *uantitative terms is an error because mathematica
e*uations cannot accuratey describe economic behavior.
(b) A common error is made about causation: Cf event A happens before <vent ,1
it is not necessariy true that A caused ,.
(c) :hen composing modes1 it is difficut to identify reevant from irreevant
detais.
(d) Ct is erroneous to beieve that "hat is true for a part is aso true for the "hoe.
&1. >efer to the figure beo". A drop in price1 from 4? to 47 means:
(a) A drop in consumer surpus e*ua to area ,.
(b) An increase in consumer surpus for e(isting as "e as for ne" consumers.
(c) An increase in consumer surpus e*ua to areas , J C J D J <.
(d) An increase in consumer surpus e*ua to area ,.
&&. Consider the foo"ing production possibiity frontier curve. The move from point
, to point D means that:
(a) This society no" prefers to buid more consumer goods and ess capita goods.
(b) Some technoogica change has occurred1 and unempoyment may no" e(ist.
(c) =u empoyment e(ists1 but resources are no onger efficienty empoyed.
(d) 'ore consumer goods can no" be produced "ithout sacrificing the amount of
capita goods in e(istence.
&). >efer to the graph beo". Iny one of the statements beo" is entirey correct.
:hich one;
(a) This graph sho"s a shortage of soybeans1 "hich is the resut of an imposed
price foor of 41.52.
(b) This graph sho"s a surpus of soybeans1 "hich is the resut of an imposed
price foor of 41.52.
(c) This graph sho"s a surpus of soybeans1 "hich is the resut of an imposed
price ceiing of 41.52.
(d) This graph sho"s a shortage of soybeans1 "hich is the resut of an imposed
price ceiing of 41.52.
&.. >efer to the graph beo". Go" much revenue does the oi import fee generate for
the government;
(a) 47 miion per day.
(b) 4).& miion per day.
(c) 4)2.. miion per day.
(d) 41B.& miion per day.
&2. :hat is opportunity cost;
(a) Ipportunity cost is a monetary measure of cost that ta!es into account ony
e(picit costs1 or costs that can be counted.
(b) Ipportunity cost refers to costs that cannot be avoided1 regardess of "hat is
done in the future1 because they have aready been incurred.
(c) Ipportunity cost is a cost associated "ith the aocation of abundant resources
among aternative uses.
(d) Ipportunity cost is the vaue of "hat "e give up by not ma!ing the aternative
choice.
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