Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)	If Harold can increase the production of good X without decreasing the production of any other good, then Harold	1) ___C___

	A)  is producing on his production possibilities frontier.
	B)  must have a linear production possibilities frontier.
	C)  is producing inside his production possibilities frontier.
	D)  is producing outside his production possibilities frontier.
	E)  must prefer good X to any other good.

2)

A medical clinic has 10 workers. Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day. One day, the firm decides it would like to produce 10 units of medical services and 30 units of secretarial services. This output level is

2) __A____

	A)  unattainable.
	B)  is attainable if the firm reduces the number of its workers.
	C)  costless.
	D)  inefficient.
	E)  efficient.

Use the figure below to answer the following 2 questions. Figure 2.2
3)	Refer to the production possibilities frontier in Figure 2.2. If 70 units of Y are currently being produced, the opportunity cost of increasing production of Y to 80 units is	3) ___A___

	A)  3 units of X.
	B)  80 units of Y.
	C)  10 units of Y.
	D)  1 unit of X.
	E)  2 units of X.

4)

In figure 2.2, as we increase the production of X, we find we must give up larger and larger amounts of Y per unit of X. Select the best statement.

4) ___C___

	A)  Good Y will be more highly regarded by consumers than good X.
	B)  We must be inside the production possibilities frontier.
	C)  This illustrates increasing opportunity cost.
	D)  As a result, we should not specialize in the production of X.
	E)  The production possibilities frontier for X and Y will be a straight line.

Use the table below to answer the following 2 questions. Table 2.1 The following table gives points on the production possibilities frontier for goods X and Y.
5)	Refer to Table 2.1. The opportunity cost of increasing the production of Y from 16 to 36 units is	5) __C____

	A)  12 units of X.
	B)  16 units of X.
	C)  8 units of X.
	D)  20 units of Y.
	E)  4 units of X.

6)

The diagram of the production possibilities frontier corresponding to the data in Table 2.1 would be

6) ___B___

	A)  positively sloped for X and negatively sloped for Y.
	B)  negatively sloped and bowed out (concave).
	C)  negatively sloped and bowed in (convex).
	D)  negatively sloped and linear.
	E)  horizontal line.

7)

A technological improvement is represented by

7) __A____

	A)  a point outside the production possibilities frontier.
	B)  an outward shift of the production possibilities frontier.
	C)  a movement from a point inside the production possibilities frontier to a point on the production possibilities frontier.
	D)  a movement along the production possibilities frontier.
	E)  a point inside the production possibilities frontier.

Use the information below to answer the following question. Fact 2.1 In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe can produce either 8 loaves of bread or 8 kilograms of butter.
8)	Given Fact 2.1, the opportunity cost of producing 1 loaf of bread is	8) __A____

	A)  1/3 kilogram of butter for Andy and 1 kilogram of butter for Rolfe.
	B)  3 kilograms of butter for Andy and 1 kilogram of butter for Rolfe.
	C)  8 kilograms of butter for both Andy and Rolfe.
	D)  20 minutes (1/3 hour) for Andy and 1 hour for Rolfe.
	E)  not calculable from the given information.

Use the table below to answer the following 2 questions. Table 2.5 Production for one week by Sheila and Bruce
9)	Consider Table 2.5. Which of the following statements is true?	9) __D____

	A)  Sheila has an absolute advantage in the production of Y.
	B)  Sheila has a comparative advantage in the production of X.
	C)  There are no potential gains from trade.
	D)  Bruce has a comparative advantage in the production of X.
	E)  Sheila has an absolute advantage in the production of X.

Use the table below to answer the following question. Table 2.5 Production for one week by Sheila and Bruce
10)	Given the information in Table 2.5, which one of the following is true?	10) __E____

	A)  Sheila should specialize in good X.
	B)  Bruce should specialize in good X.
	C)  The opportunity cost to Bruce of an additional unit of X is 0.4 units of Y.
	D)  A and B.
	E)  B and C.

11)

If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income will lead to

11) __C____

	A)  an initial movement up and then down along the demand curve for Hamburger Helper.
	B)  a leftward shift of the demand curve for Hamburger Helper.
	C)  a rightward shift of the demand curve for Hamburger Helper.
	D)  movement down along the demand curve for Hamburger Helper.
	E)  movement up along the demand curve for Hamburger Helper.

12)

If a producer can use its resources to produce either good A or good B, then an increase in the price of A will cause

12) __B____

	A)  a decrease in the supply of A.
	B)  a decrease in the supply of B.
	C)  an increase in the supply of B.
	D)  an increase in the supply of A.
	E)  both C and D.

Use the figure below to answer the following question. Figure 3.3
13)	At price P2 in Figure 3.3, which one of the following is not true?	13) __B____

	A)  The quantity demanded is equal to the quantity supplied.
	B)  The quantity demanded is Q1.
	C)  This market is in equilibrium.
	D)  The quantity supplied is Q3.
	E)  There is no shortage.

14)

Which one of the following correctly describes how price adjustment eliminates a surplus?

14) __E____

	A)  As the price rises, the quantity demanded increases while the quantity supplied decreases.
	B)  As the price rises, the quantity demanded decreases while the quantity supplied increases.
	C)  As the price falls, the quantity demanded decreases while the quantity supplied increases.
	D)  As the price falls, the demand for substitutes of the good falls, eliminating the surplus.
	E)  As the price falls, the quantity demanded increases while the quantity supplied decreases.

15)

A shortage is the amount by which quantity

15) __A____

	A)  demanded exceeds quantity supplied.
	B)  supplied exceeds quantity demanded.
	C)  demanded exceeds the equilibrium quantity.
	D)  supplied exceeds the equilibrium quantity.
	E)  demanded increases when the price rises.

16)

A surplus can be eliminated by

16) ___E___

	A)  government raising the price.
	B)  allowing the quantity bought and sold to fall.
	C)  decreasing the quantity demanded.
	D)  increasing supply.
	E)  allowing the price to fall.

17)

When the supply of good A decreases,

17) __E____

	A)  both the price and the equilibrium quantity will increase.
	B)  a surplus will result.
	C)  both the price and the equilibrium quantity will decrease.
	D)  the price will decrease but the equilibrium quantity will increase.
	E)  the price will increase but the equilibrium quantity will decrease.

18)

If we observe an increase in the equilibrium price of good A, we know that either the demand for A has

18) __D____

	A)  decreased or the supply of A has increased (or both).
	B)  increased or the supply of A has increased (or both).
	C)  decreased or the supply of A has decreased (or both).
	D)  increased or the supply of A has decreased (or both).
	E)  none of the above.

19)

Recently, there have been many technological improvements in the production process of video-cassette recorders (VCRs). As a result, we would expect the price of VCRs to

19) __B____

	A)  rise, leading to a rise in the demand for movies shown in theatres.
	B)  fall, leading to a rise in the demand for rented video movies.
	C)  fall, leading to a rise in the demand for movies shown in theatres.
	D)  rise to reflect these technological improvements.
	E)  fall, leading to a fall in the demand for rented video movies.

20)

Which one of the following will not increase the equilibrium quantity of gasoline?

20) ___A___

	A)  The price of public transport falls.
	B)  A massive and high-grade oil supply is discovered in northern Saskatchewan.
	C)  The population doubles.
	D)  The price of public transport rises.
	E)  The introduction of robotic production plants lowers the cost of producing cars.

21)

An own-price elasticity of demand of 2 means that a 10 percent increase in the price of a good will result in a

21) ___B___

	A)  20 percent increase in quantity demanded of the good.
	B)  20 percent decrease in quantity demanded of the good.
	C)  5 percent decrease in quantity demanded of the good.
	D)  2 percent increase in quantity demanded of the good.
	E)  2 percent decrease in quantity demanded of the good.

22)

The price of oranges increases by 3 percent and quantity demanded decreases by 3 percent. This means that the demand for oranges is

22) __D____

	A)  perfectly inelastic.
	B)  perfect elastic.
	C)  elastic.
	D)  unit elastic.
	E)  inelastic.

23)

Which one of the following illustrates an inelastic demand?

23) ___B___

	A)  A 10 percent increase in price leads to a 20 percent decrease in quantity demanded.
	B)  A 10 percent increase in price leads to a 5 percent decrease in quantity demanded.
	C)  A price elasticity measure of infinity.
	D)  A price elasticity measure of 1.0.
	E)  A price elasticity measure of 2.0.

24)

A fall in the price of a good from $11.50 to $8.50 results in an increase in quantity demanded from 19,200 to 20,800 units. The price elasticity of demand in this part of the demand curve is

24) __B____

	A)  3.75.
	B)  0.27.
	C)  0.08.
	D)  30.
	E)  8.0.

25)

Suppose this coming winter France will have unusually bad weather, and that next year's wine crop will be substantially reduced. Select the best statement.

25) ___E___

	A)  If the demand for French wine is elastic, wine producers could make more profits.
	B)  French wine supply will rise as price rises.
	C)  The initial change in the market will create a surplus of French wine.
	D)  In the final equilibrium, price and quantity will be higher.
	E)  none of the above

26)

Tina and Brian work for the same recording company. Tina claims they would be better off by increasing the price of their CDs, while Brian claims they would be better off by decreasing the price. We can conclude that

26) __C____

	A)  Tina thinks the demand for CDs has price elasticity equal to 1 and Brian thinks price elasticity equals zero.
	B)  Tina and Brian should stick to singing and forget about economics.
	C)  Tina thinks the demand for CDs is price inelastic and Brian thinks it is price elastic.
	D)  Tina thinks the demand for CDs has price elasticity of zero and Brian thinks price elasticity equals 1.
	E)  Tina thinks the demand for CDs is price elastic and Brian thinks it is price inelastic.

27)

The income elasticity of demand equals the percentage change in

27) __B____

	A)  quantity demanded divided by the percentage change in price.
	B)  quantity demanded divided by the percentage change in income.
	C)  price divided by the percentage change in quantity demanded.
	D)  price divided by the percentage change in income.
	E)  income divided by the percentage change in quantity demanded.

28)

Which one of the following must be true if demand is income inelastic?

28) ___C___

	A)  A percentage rise in price will cause a smaller percentage rise in quantity demanded.
	B)  A small percentage increase in income will result in a large percentage increase in quantity demanded.
	C)  A large percentage increase in income will result in a small percentage increase in quantity demanded.
	D)  An increase in income will cause a decline in quantity demanded.
	E)  The good must be inferior.

Use the table below to answer the following question. Table 4.3
29)	Consider Table 4.3. The own-price elasticity of demand for Jolt is	29) __A____

	A)  3.0.
	B)  0.33.
	C)  1.
	D)  8.0.
	E)  not determinable, given all the variables are changing.

30)

A negative value for

30) __C____

	A)  price elasticity of supply implies an upward-sloping supply curve.
	B)  price elasticity of demand implies an inferior good.
	C)  cross elasticity of demand implies complementary goods.
	D)  income elasticity of demand implies an error in your calculation.
	E)  income elasticity of demand implies a normal good.

31)

Suppose that the demand for apples is specified as Q=200-5P, and the supply is defined as Q=5P. What is the consumer surplus in this market?

31) ___E___

	A)  500
	B)  2 000
	C)  750
	D)  250
	E)  1 000

32)

Suppose that there are 20,000 seats available for a concert . If the tickets for this concert are given away free to the first 20,000 people listed in the Toronto phone book (1 seat per listing), and if these people are not allowed to transfer their tickets to anyone else, which one of the following five statements is true?

32) ___D___

	A)  the seats have been allocated to the people with the highest willingness to pay for them
	B)  nobody gets any consumer surplus from getting a seat
	C)  the allocation of seats to the event is efficient
	D)  people listed at the very beginning of the phone book are made better off than people at the end of the phone book
	E)  everyone in Toronto would be better off if the tickets for the event were simply sold at the gate for $20 each (instead of being given away)

33)

If a store gives away 200 Ipods for free, to the first 200 people in the store Friday morning, which of the following events is not likely to happen?

33) __C____

	A)  a line-up forms outside the store door before it opens Friday morning
	B)  people who really want an Ipod, and who have nothing better to do, will line up outside the store, starting Thursday night
	C)  people who have a very high value of time will line up outside the store
	D)  some people who get the free Ipod get some consumer surplus, even though they had to wait in line
	E)  people who have a high value of time would rather simply buy the Ipod for the regular price

34)

The following table illustrates the quantity of frying pans demanded by Larry, Curly and Moe, at different prices for the frying pans. price Larry's demand Curly's demand Moe's demand 5 3 5 20 6 2 3 15 7 1 2 12 8 0 1 10 The aggregate demand curve for frying pans of Larry, Curly and Moe together

34) ___C___

	A)  is a straight line
	B)  is the vertical sum of the 3 people's individual demand curves for frying pans
	C)  has a height of 6 when the aggregate quantity demanded is 20
	D)  hits the vertical axis at a height of 10
	E)  has a height of 15 when the aggregate quantity demanded is 7

35)

The following table (identical to the one in the previous question) illustrates the quantity of frying pans demanded by Larry, Curly and Moe, at different prices for the frying pans. price Larry's demand Curly's demand Moe's demand 5 3 5 20 6 2 3 15 7 1 2 12 8 0 1 10 Which of the following statements is true?

35) ___A___

	A)  Moe's willingness to pay for his first frying pan is greater than Larry's willingness to pay for his first frying pan
	B)  Curly would get no consumer surplus if the price of frying pans were 6
	C)  Curly's willingness to pay for his 5th frying pan is about 2
	D)  Larry would get consumer surplus of 10 if the price of frying pans was 7
	E)  if the price of frying pans decreased from 7 to 6, then Moe's consumer surplus would also decrease

36)

Marginal cost

36) ___C___

	A)  is always less than price.
	B)  is the maximum price a producer must receive in order to offer an additional unit of a good for sale.
	C)  is the minimum price at which a producer is willing to produce an additional unit of a good for sale.
	D)  can be negative.
	E)  is an important factor for consumers.

37)

Producer surplus is the

37) __B____

	A)  total amount paid for the good.
	B)  difference between producers' revenues and opportunity costs of production.
	C)  difference between the maximum price consumers are willing to pay and the minimum price producers are willing to accept.
	D)  area under the supply curve.
	E)  opportunity cost of production.

Use the figure below to answer the following questions. Figure 5.6
38)	Refer to Figure 5.6. If the quantity is 200 , there	38) __C____

	A)  is too low an opportunity cost of production.
	B)  is too little supply of the good.
	C)  will be deadweight loss.
	D)  is an efficient level of the good.
	E)  will be no deadweight loss.

Use the figure below to answer the following question. Figure 5.6
39)	Refer to Figure 5.6. If the price is $15, there will be	39) __A,E____

	A)  no deadweight loss.
	B)  underproduction of the good.
	C)  too high an opportunity cost.
	D)  overproduction of the good.
	E)  an efficient level of the good.

Use the information below to answer the following question Figure 5.9
40)	Consider the demand and supply curves in Figure 5.9. Which area in the diagram indicates the loss in consumer surplus from underproduction?	40) ___C___

	A)  kaci
	B)  eacf
	C)  abd
	D)  acd
	E)  bcd