ECON 101 M DTERM 2
Name___________________________________
Number_____________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In the above figure, the movement from point C to point A is the result of
A) an increase in the price of coffee.
B) a decrease in the price of coffee.
C) a decrease in the price of gasoline.
D) an increase in the price of gasoline.
1)
Answer: D
2) The income effect from a fall in the price of a gallon of gasoline is shown in the above figure by the
movement from
A) point B to point C.
B) point A to point C.
C) point A to point B and then to point C.
D) point A to point B.
2)
Answer: A
3) The marketing people for Turk Telekom believe that if they lower the price of long-distance phone
calls by 5 percent, their quantity sold will increase by 15 percent. If they are correct in their belief,
then
A) the total revenue from long-distance services will decrease if they lower the price.
B) the total revenue from long-distance services will increase if they lower the price.
C) the demand for their long-distance service is income elastic.
D) the demand for their long-distance service is price inelastic.
Answer: B
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3)
4) The above figure shows the apartment rental market in Had mköy. At what rent will there be
neither a shortage nor a surplus of apartments?
A) $1250
B) $500
C) $1000
D) $750
4)
Answer: D
5) The above figure shows the apartment rental market in Had mköy. If severe flooding (too much
rain) resulted in the destruction of many of the city's apartment buildings, then the
A) equilibrium market price of apartments rented would fall below $750.
B) equilibrium quantity of apartments rented would increase beyond 3,000.
C) supply curve of apartments would shift leftward and rent would rise above $750.
D) demand curve for apartments would shift rightward and rent would rise above $750.
Answer: C
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5)
6) The figure above shows Ilene's budget line. The price of a can of cat food is $2. Ilene's income per
week is _______ and the relative price of a can of cat food is_______.
A) $56, 5/2 cans of cat food.
B) $40, 2/5 cans of dog food.
C) $40, 2/5 cans of cat food.
D) $40, 5/2 cans of dog food.
6)
Answer: B
7) The figure above shows Ilene's budget line. The price of a can of cat food is $2. The price of a can of
dog food
A) is $5.00.
B) is $1.60.
C) is $4.00.
D) cannot be determined without more information.
7)
Answer: A
8) If the price of cars falls, the equilibrium price of gasoline will ________ and the equilibrium
quantity of gasoline sold will ________.
A) fall; decrease
B) rise; increase
C) fall; increase
D) rise; decrease
Answer: B
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8)
9) In the above figure, Mark's monthly budget line for movies and plays changed, as shown by the
arrow. The change was caused by
A) a fall in the price of a play.
B) a decrease in Mark's income.
C) an increase in Mark's income.
D) a rise in the price of a play.
9)
Answer: A
10) When your income increases, you buy less pizza. To you, pizza is
A) a substitution good.
B) an inferior good.
C) a normal good.
D) a complementary good.
10)
Answer: B
11) Joe receives consumer surplus on the new computer he buys if
A) the price of the computer is less than the marginal benefit he receives from buying the
computer.
B) the price of the computer is decreased by 25 percent.
C) the price of the computer is equal to his marginal benefit from the computer.
D) he pays for the computer with money he earned from the stock market.
11)
Answer: A
12) When the price of a normal good decreases, people buy ________ of the good due to ________.
A) more; the substitution effect only
B) more; the substitution and income effects
C) less; the income effect only
D) less; the substitution effect only
12)
Answer: B
13) In order to draw an individual's budget line, we must know
A) prices and preferences.
B) prices, income, and preferences.
C) prices and income.
D) income and preferences.
Answer: C
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13)
14) The above figure gives your budget line between CDs and magazines. Which combination of CDs
and magazines are not affordable?
A) combination a
B) combination b
C) combination c
D) both combinations b and d
14)
Answer: A
15) The figure above gives your budget line for magazine and CDs per month. Given that your income
equals $60 per month, what is the price of a magazine and the price of a CD?
A) The price of a magazine is $4 per magazine and the price of a CD is $12 per CD.
B) The price of a magazine is $5 per magazine and the price of a CD is $10 per CD.
C) The price of a magazine is $12 per magazine and the price of a CD is $6 per CD.
D) It is impossible to tell from the information given.
15)
Answer: B
16) If the market price of a new CD is $10, but Clara values the CD at $20 (Clara receives $20 benefit
from the CD), Clara
A) receives $10 of producer surplus.
B) receives $10 of consumer surplus.
C) will not buy the CD.
D) None of the above answers is correct.
Answer: B
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16)
17) The above figure shows Jane's budget line and two of her indifference curves. How many steak
dinners will Jane purchase each month?
A) 4 steak dinners
B) 8 steak dinners
C) 10 steak dinners
D) 6 steak dinners
17)
Answer: C
18) The above figure shows Jane's budget line and two of her indifference curves. When Jane is
consuming at her best affordable point, what is her marginal rate of substitution?
A) 2.0 lobster dinners per steak dinner
B) 0.33 lobster dinners per steak dinner
C) 0.5 lobster dinners per steak dinner
D) 1.0 lobster dinners per steak dinner
18)
Answer: C
Quantity of
pizza
5
6
7
8
Marginal
benefit (lira)
25
20
15
10
Marginal cost
(lira)
11
13
15
17
19) The table above represents the marginal cost and marginal benefit associated with pizza. What
amount of pizza should be produced if resources are to be used efficiently?
A) 5 pizzas
B) 8 pizzas
C) 6 pizzas
D) 7 pizzas
19)
Answer: D
20) Suppose Sandy's Candies wants to increase total revenues. If Sandy increases the price of her candy
in order to increase total revenue, she must be assuming that the demand for candy is
A) elastic.
B) inelastic.
C) income elastic.
D) unit elastic.
Answer: B
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20)
21) Which of the following can prevent markets from reaching efficiency?
I. price ceiling
II. increasing marginal cost
III. price floor
A) I and II
B) II and III
C) I and III
21)
D) I only
Answer: C
22) If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is
12,000 per year, there is a ________ in the market and the price will ________.
A) shortage; rise
B) surplus; rise
C) surplus; fall
D) shortage; fall
22)
Answer: A
23) Gasoline is a normal good. If the price of gasoline falls, a consumer buys more gasoline because of
A) both an income effect and a substitution effect.
B) only a substitution effect.
C) an increase in the marginal rate of substitution.
D) only an income effect.
23)
Answer: A
24) We observe that the equilibrium price of digital cameras has fallen and the equilibrium quantity of
digital cameras has increased. Which of the following events could be responsible for this?
A) Technological advances in digital camera production.
B) Consumers' preferences changed in favor of digital cameras.
C) The price of 35mm cameras rose.
D) Workers who make digital cameras received a pay raise.
24)
Answer: A
25) Sam's income for gasoline and coffee currently is $60 per week. If Sam's budget for gasoline and
coffee increased from $60 to $70, Sam would experience _________ as a consumer.
A) only an income effect.
B) an increase in the marginal rate of substitution of both gasoline for coffee and coffee for
gasoline.
C) only a substitution effect.
D) both income effect and substitution effect.
Answer: A
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25)
26) In the figure above, suppose the original budget line is BD. A rise in the price of a compact disc will
A) rotate the budget line to CD.
B) not move the budget line.
C) rotate the budget line to AD.
D) result in a parallel leftward shift of the budget line.
26)
Answer: C
27) In the figure above, which budget line has the lowest relative price of carrots?
A) CD
B) AD
C) BD
D) The relative price is equal for all three budget lines.
27)
Answer: B
28) Suppose that the market for potatoes is initially in equilibrium. If demand for potatoes increase in
the market, what happens to the consumer surplus, producer surplus and total surplus?
A) consumer surplus decreases, producer surplus increases, total surplus does not change
B) change in consumer surplus is ambiguous, producer surplus increases, total surplus increases
C) consumer surplus increases, producer surplus increases, total surplus does not change
D) consumer surplus decreases, change in producer surplus is ambiguous, total surplus
decreases
Answer: B
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28)
29) In the production possibilities frontier depicted in the figure above, what is the opportunity cost of
increasing the production of bananas from two million pounds to three million pounds?
A) 1 million bananas
B) 2 million hats
C) 1 million hats
D) 3 million hats
29)
Answer: C
30) In the production possibilities frontier depicted in the figure above, as we want to produce more
and more bananas, the opportunity cost of bananas in terms of hats ________.
A) need more information to answer this
B) increase
C) is constant
D) decrease
Answer: B
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30)