Econ 2020 Test 2 Practice Exam
Econ 2020 Test 2 Practice Exam Econ 2020
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This 7 page Study Guide was uploaded by Allegra Lynch on Sunday February 7, 2016. The Study Guide belongs to Econ 2020 at Auburn University taught by William M. Finck in Spring 2016. Since its upload, it has received 59 views. For similar materials see Principles of Economics: Microeconomics in Business at Auburn University.
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Date Created: 02/07/16
VERSION 1 Name________________ ECON 2020 Exam #2 Directions: Read each question and EVERY possible answer VERY carefully. Select the best answer from the alternatives. Good luck! 1. Using the midpoint formula, find the price elasticity of demand coefficient for a producer when a price increase from $24 to $28 causes a fall in quantity demanded from 800 units to 660 units. A. 0.8 B. 1.21 C. 1.05 D. 1.0 E. 1.25 2. A decrease in the demand for a product is most likely to result in a large equilibrium price decrease if A. the supply curve of the product is relatively price inelastic B. the supply curve for the product is relatively price elastic C. the good is being exported D. the good is being imported E. “You are more beautiful than Cinderella! You smell like pine needles, and have a face like sunshine!” Use the following graph to answer question 3. P D1 D2 Q 3. Given the graph above, which of the following statements is FALSE? A. D1 is relatively more price inelastic than D2. B. For a given price change, the elasticity coefficient for D1 is bigger than that for D2. C. For a given price change, the change in Qd along D1 is smaller than the change in Qd along D2. D. A and C only E. B and C only 1 VERSION 1 Use the following graph to answer questions 4 – 8. 1 $31 D $2$ A C B C 2 80 170 250 280 4. How many units did the economy import before the tariff? A. 90 B. 10 C. 200 D. 80 E. 30 5. What is the value of the tariff? A. $10 B. $21 C. $80 D. $31 E. “It's a good tub. I slept there for my 30th birthday.” 6. If the government uses a tariff to restrict trade, the area labeled ‘A’ represents A. deadweight loss B. foreign producer revenue C. tax revenue D. gained producer surplus E. none of the above 7. If the government uses a quota to restrict trade, then the area labeled ‘B’ represents A. domestic producer revenue B. foreign producer revenue C. tax revenue D. gained producer surplus E. none of the above 8. At which point would the Dd demand curve be relatively more price elastic? A. 1 B. 2 C. elasticity is constant along a demand curve 2 VERSION 1 9. Which of the following would cause a consumer’s demand to become relatively more price elastic? A. the good becomes a smaller proportion of the consumer’s budget B. the consumer finds she has less time to make the purchase C. the consumer finds more substitutes are available D. all of the above E. B and C only 10. Cake Baby faces a price elasticity of demand of 1.15. If management decreases prices, what will happen to Cake Baby’s total revenue? A. “If I wasn't a cop anymore, I would still go out with a gun and shoot people.” B. total revenue will not change C. total revenue will increase D. total revenue will decrease Use the following graph to answer questions 11 – 12. P Sd $17 A C $13 B Dw Dd 50 100 140 Q 11. With free trade, the above economy will A. import 90 units B. export 50 units C. export 40 units D. export 90 units 12. The lost consumer surplus is represented by area(s) A. A only B. A and B C. A, B and C D. C only E. B and C 13. At the midpoint of the firm’s demand curve, A. marginal revenue is equal to 1 B. price elasticity of demand is equal to 1 C. total revenue is maximized D. A and C only E. B and C only 3 VERSION 1 14. Rhodes faces the following production possibilities: Carrots: 170 165 150 120 70 0 Cakes: 0 1 2 3 4 5 rd What is the opportunity cost of producing the 3 cake? A. 60 carrots B. 50 carrots C. 40 carrots D. 30 carrots E. 1 carrot 15. Which of the following statements about the economy above is TRUE? A. The PPF is a downward-sloping bowed line. B. The PPF is a downward-sloping straight line. C. His opportunity cost of producing cakes remains constant as he produces more cakes. D. A and C only E. B and C only Use the following diagram to answer questions 16 – 17. Frozen Peas 2 1 3 PPF 1 PPF 2 Tattoos 16. Which of the following would cause a shift from PP1 to PPF2? A. a decrease in the unemployment rate B. a technological improvement C. trade with another economy D. all of the above E. A and B only 17. Which of the following could cause a movement from point 3 to point 1? A. a decrease in the unemployment rate B. a technological improvement C. trade with another economy D. all of the above E. A and B only 4 VERSION 1 18. A perfectly elastic demand curve A. has an elasticity coefficient equal to zero B. has an elasticity coefficient equal to infinity C. is represented on a graph by a vertical line D. A and C only E. B and C only Use the following graph to answer questions 19 – 20. Wedding Gowns 4 C 3 P Brazilian Food 0 15 36 19. The above economy will import A. 21 units of Brazilian food B. 15 units of Brazilian food C. 1 wedding gown D. 3 wedding gowns E. “I want to apologize. I'm not even confident on which end that came out of.” 20. One wedding gown trades for A. 7 units of Brazilian food B. 9 units of Brazilian food C. 5 units of Brazilian food D. 12 units of Brazilian food E. 21 units of Brazilian food 21. A producer faces a price elasticity of demand of 1.46 when the price of the good is $34 and the quantity demanded is 1800 units. Find the change in quantity demanded if the producer decreases price by $2. (Round to nearest unit.) A. 82 B. 1310 C. 232 D. 38 E. 155 5 VERSION 1 Use the following information to answer questions 22 – 24. Giant Cookies Chocolate Fountains Helen 60 20 Annie 50 10 22. Annie’s opportunity cost of a chocolate fountain is A. 3 giant cookies B. 5 giant cookies C. 0.2 giant cookies D. 40 giant cookies E. 10 giant cookies 23. Which of the following statements is TRUE? A. Annie has an absolute advantage in producing giant cookies. B. Annie has an absolute advantage in producing chocolate fountains. C. Annie has a comparative advantage in producing giant cookies. D. Helen has a comparative advantage in producing giant cookies. 24. Assume that one chocolate fountain trades for 4 giant cookies. If Annie and Helen completely specialize, and the chocolate fountain producer trades 6 units, which of the following quantities will Annie consume? A. 26 giant cookies and 6 chocolate fountains B. 24 giant cookies and 14 chocolate fountains C. 24 giant cookies and 4 chocolate fountains D. 26 giant cookies and 16 chocolate fountains 25. The cross elasticity coefficient between a Wilson Phillips CD and a mystery good is -1.64. The mystery good is probably A. a CD player (a complement) B. a Wilson Phillips concert (a substitute) C. plastic (an input) D. a puppy (a weird party favor) 6 VERSION 1 7
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