California State University, Fullerton
Department of Economics
Dr. Morteza Rahmatian
Form A
Name __________________________________
CWID _________/_________/__________
Part I:
Economics 315 (8)
Spring 2024
First Quiz
Multiple Choice Questions. Please choose the best possible answer. (1.5 Point Each)
1) Economic profit serves to
A) cover the costs firm incur through production
B) signal to resource holders of where those resources are most highly valued
C) help compensate consumers for the opportunity cost they take on
D) none of the above
2) Which of the following can explain an increase in the demand for housing (a normal good)?
A) a drop in housing prices
B) an increase in the population
C) a decrease in income
D) an improvement in technology
3) The law of _______ says that as the price of a good rises, the quantity supplied of a good rises, holding other factors constant.
A) one price
C) supply
B) opportunity cost
D) demand
4) Find the annual interest rate of a perpetual bond that pays $2,880 a year and has a present value of $90,000.
A) 9.8%
B) 4.8%
C) 3.2%
D) 0.27%
5) Given MC = 200 + 15Q and MB = 300 – 10Q , what is the optimal level of Q?
A) 4
B) 3
C) 12.5
D) 28.5
6) An excise tax causes the
A) demand curve to shift to the right
B) demand curve to shift to the left
C) supply curve to shift to the right
D) supply curve to shift to the left
7) A surplus indicates that there is
A) an effective price floor in place
B) an ineffective price ceiling in place
C) excess demand in the market
D) a shortage of producers in the market
8) Producer surplus
A) is the area above the price line and below the supply curve.
B) is the area below the price line and above the supply curve.
C) is the gains to producers.
D) None of the above.
9) Given the demand curve QDx = 15 - 10Px + 4Py – M :
A) Good X is an inferior good
B) Good X is a normal good
C) Good X is a substitute good
D) Good X is a complementary good
10) Which of the following would not shift the demand for good X?
A) An increase in advertisement for good X
B) An overall decrease in income levels
C) the price of good X
D) the price of substitute good Y
Part II: Please answer your short answer questions in the space provided below. (15 Points)
11) Using the graph below of the market for tea, answer the following:
A) What is the effect of an increase in the price of coffee? Show this in the graph.
B) What is the effect of a shortage of the fibers used to make tea bags? Show this in the graph.
C) What is the cumulative effect on equilibrium price and quantity?
Answer Key:
EC 315 QUIZ 1 A
1) B
2) B
3) C
4) C
5) A
6) D
7) A
8) B
9) A
10) C
Part II:
A) Demand will increase
B) Supply will decrease
C) Equilibrium price will increase and the effect on quantity is indeterminable
Their graphs may look a little different depending on how far
they shifted the curves, but the important points are an increase
in demand, a decrease in supply, and correctly determining the
effect on equilibrium.