Exam 1 and study guide
Exam 1 and study guide ECON 2106
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This 11 page Study Guide was uploaded by Vraj Patel on Tuesday June 21, 2016. The Study Guide belongs to ECON 2106 at Georgia State University taught by in Summer 2015. Since its upload, it has received 77 views. For similar materials see PRINCIPLES OF MICROECONOMICS in Economcs at Georgia State University.
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Date Created: 06/21/16
ECON 2106 - Principles of Microeconomics Exam 1 Maymester Term – May 13, 2016 Directions for the exam: 1 You are responsible for reading and following all directions for the exam; go through the directions for each section carefully (don’t lose points because you didn’t follow directions). 2 There will be 40 multiple choice questions. Each scores 1 point and the total points you can earn from multiple choice questions is 40 points (40*1). 3 You will get 1 hour and 30 min to write this exam. Use your time accordingly. 4 Fill up the scantron neatly for full credit. 5 Turn off all electronic devices. Any exam disruption (as determined by the Professor) will result in a demerit of 10 points off the exam score. 6 Focus only on your own exam; don’t look at anyone else’s paper. Any student looking at another’s paper will have the exam taken away and receive a 0 for the exam and possible academic action. 7 Ask me if you have a question about the requirements or format. 8 You are required to listen to and follow all verbal directions given in class by me during the exam period. My signature below indicates that I have read and understood the directions for the exam and that I am responsible for following all the directions on the exam sheets. My signature also indicates that I will follow the GSU Policy on Academic Honesty and will not use any outside sources or consult with any other student in taking this exam. I understand that failure to follow this Policy will result in a 0 for this exam and possible academic action. You must complete this section for the entire exam to be accepted. Signature Date Panther ID Print Name ___________________________________ Page 1 Page 2 Multiple Choice Questions Use your Scantron to answer all the multiple choice questions below: 40*1=40 points 1. The cross-price elasticity of demand of complementary goods is: A) less than 0. B) equal to 0. C) between 0 and 1. D) greater than 0. 2. A decrease in demand and a decrease in supply will lead to ________ in equilibrium quantity and ________ in equilibrium price. A) an indeterminate change; an increase B) an indeterminate change; a decrease C) an increase; an indeterminate change D) a decrease; an indeterminate change 3. The price elasticity of demand is computed as the percentage change in the: A) quantity demanded divided by the percentage change in income. B) quantity demanded divided by the percentage change in the price. C) price divided by the percentage change in the quantity demanded. D) quantity demanded divided by the percentage change in the quantity supplied. 4. Which of the following would shift the demand curve for new textbooks to the right? A) a fall in the price of new textbooks B) an increase in college enrollment C) a decrease in the price of paper D) a fall in the price of used textbooks 5. A negative relationship between the quantity demanded and price is called the law of: A) increasing returns. B) demand. C) market clearing. D) supply. Page 3 6. For a good to be considered a normal good, the_____ must be ________. A) cross-price elasticity of demand; equal to 0 B) income elasticity of demand; between 1 and 0 C) income elasticity of demand; greater than 0 D) cross-price elasticity of demand; less than 0 7. Which of the following will not cause an increase in the supply of good X? A) an improvement in the technology used to produce good X B) an increase in the price of good Y, a substitute C) a decrease in the price of inputs used to produce good X D) an increase in the price of inputs used to produce good X Use the following to answer question 8: Figure: Demand for DVDs 8. (Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the price of DVD players (a complement) would result in a change illustrated by: A) the move from f to g in panel A. B) the move from h to i in panel B. C) the move from l to m in panel D. D) the move from j to k in panel C. Page 4 9. All points on the production possibility frontier are: A) economic growth. B) infeasible production points. C) efficient production points. D) inefficient production points. 10. Which of the following methods of encouraging recycling is likely to be most effective? A) All three methods are equally effective. B) imposing a tax per unit of garbage generated C) appealing to the consumers to “be a good citizen” D) publicizing the advantages of recycling 11. Total revenue is A) the price of a good times the quantity of the good that is sold. B) the price of a good divided by the amount of the good sold. C) total sales less total cost. D) the price effect times the quantity effect. 12. If goods A and B are substitutes, a decrease in the price of good B will: A) decrease the demand for good A. B) increase the demand for good B and decrease the demand for good A. C) increase the demand for good B. D) increase the demand for good A. 13. Which of the following is not a determinant of supply? A) expectations regarding future prices B) the cost of production C) the technology of production D) consumer tastes 14. A good is normal if which of the following is true? A) Income and the demand are unrelated. B) When income increases, the demand decreases. C) When income increases, the demand increases. D) When income increases, the demand remains unchanged. Page 5 15. If the opportunity cost of manufacturing machinery is higher in the United States than in Britain and the opportunity cost of manufacturing sweaters is lower in the United States than in Britain, then the United States will: A) import sweaters from Britain and export machinery to Britain. B) export sweaters to Britain and import machinery from Britain. C) export both sweaters and machinery to Britain. D) import both sweaters and machinery from Britain. 16. Microeconomics deals with: A) economic growth. B) gross domestic product. C) the working of the entire economy or large sectors of it. D) individual decision makers in the economy. 17. If the price of a good increases by 15% and the quantity demanded changes by 20%, then the price elasticity of demand is equal to: A) approximately 0.33 B) approximately 1.33. C) 1. D) 0.75. 18. The price elasticity of demand for gasoline in the short run has been estimated to be 0.4. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total revenue from gasoline in the short run, all other things unchanged? A) Demand will not change; total revenue will rise. B) Total revenue will remain unchanged. C) Quantity demanded will stay the same; total revenue will fall. D) Quantity demanded will decrease; total revenue will rise. 19. The price elasticity of demand measures the responsiveness of the change in the: A) slope of the demand curve to a change in the quantity demanded. B) price to a change in the quantity demanded. C) slope of the demand curve to a change in the price. D) quantity demanded to a change in the price. Page 6 20. A linear demand curve: A) has a calculated price elasticity of demand that is positive. B) has a constant price elasticity of demand. C) can have both elastic and inelastic price elasticities of demand. D) has a price elasticity of demand equal to one. Use the following to answer question 21: Figure: Guns and Butter 21. (Figure: Guns and Butter) Look at the figure Guns and Butter. The combination of guns and butter at point H: A) cannot be attained, given the level of technology and the factors of production available. B) has no meaning, since it does not relate to the preferences of consumers. C) is attainable but would increase unemployment. D) can be attained but would cost too much. 22. An inward shift in the U.S. economy's production possibility frontier could represent which of the following? A) U.S. workers moving to Canada B) U.S. workers moving from New Jersey to Massachusetts C) U.S. economic growth as workers move to different states D) U.S. economic growth Page 7 23. Scarcity exists when: A) resources are unlimited. B) making choices among two or more alternatives is not necessary. C) individuals can have more of any good. D) individuals can have more of one good but only at the expense of another. 24. The opportunity cost of something is: A) less during periods of falling prices. B) greater during periods of rising prices. C) what is given up to acquire it. D) equal to the money cost. 25. Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will ________ and the quantity of gasoline bought and sold will ________. A) rise or fall; rise B) rise or fall; fall C) rise; fall D) rise; rise 26. Which of the following is an example of marginal analysis? A) How do tax cuts change the growth rate of median income? B) When a large corporation lays off workers, how do profits change if sales remain constant? C) Should a commuter take the bus to work rather than driving. D) What additional output does a family business produce when it hires one more worker? 27. On a linear demand curve, the price elasticity of demand at higher prices will be: A) price-inelastic. B) price unit-elastic. C) price-elastic. D) negative. 28. Determining the price elasticity of demand involves all of the following factors except: A) the proportion of the budget spent on the item. B) the time period involved. C) the number of available substitutes. D) the slope of the supply curve. Page 8 29. A choice made ________ is a choice whether to do a little more or a little less of something. A) at the margin B) at the front end C) ceteris paribus D) in the beginning 30. The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium relative price of digital cameras ________ and the equilibrium quantity ________. A) increases; increases B) decreases; increases C) may increase, decrease, or stay the same; increases D) increases; may increase, decrease, or stay the same 31. The price elasticity of supply is computed as the percentage change in the: A) price divided by the percentage change in the quantity supplied. B) quantity supplied divided by the percentage change in the price. C) quantity supplied divided by the percentage change in the quantity demanded. D) quantity supplied divided by the percentage change in consumer income. 32. A perfectly price-inelastic demand curve is: A) vertical. B) horizontal. C) downward sloping. D) upward sloping. 33. Excess supply occurs when: A) the quantity demanded exceeds the quantity supplied and when the price is below the equilibrium price. B) the price is below the equilibrium price. C) the price is above the equilibrium price. D) the quantity demanded exceeds the quantity supplied. 34. The ________ apples will decrease when apple prices rise. A) quantity demanded of B) supply of C) equilibrium of D) demand for Page 9 Use the following to answer question 35: 35. (Table: Coffee and Salmon Production Possibilities) Look at the table Coffee and Salmon Production Possibilities. The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of salmon for Alaska is: A) 1 coffee. B) 1/2 coffee. C) 1/4 coffee. D) 2 coffees. 36. A good is inferior if which of the following is true? A) When income increases, the demand increases. B) When income increases, the demand remains unchanged. C) Income and the demand are unrelated. D) When income increases, the demand decreases. 37. Suppose the equilibrium price of good X is $25 and the equilibrium quantity is 124 units. If the price of good X is $2: A) there will be an excess supply of good X. B) the market will clear. C) the quantity demanded of good X will be less than 124 units. D) there will be excess demand for good X. 38. Which of the following is an example of normative economics? A) The minimum wage has not kept pace with inflation. B) A higher minimum wage is expected to increase the price of a fast-food cheeseburger. C) The minimum wage can create higher unemployment for teens and unskilled workers. D) The minimum wage is an important tool in fighting poverty and should be increased. Page 10 39. If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are: A) complementary goods. B) substitute goods. C) inferior goods. D) normal goods. 40. A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price. A) an increase; an increase B) a decrease; a decrease C) a decrease; an increase D) an increase; a decrease 41. When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is: A) price-elastic. B) price-inelastic. C) unstable. D) price unit-elastic. 42. An example of a positive statement is: A) the rate of unemployment is 4%. B) a high rate of economic growth is good for the country. C) baseball players should not be paid higher salaries than the president of the United States. D) everyone in the country should be covered by national health insurance. Page 11
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