Middle Exam Review form B
Basic Economic Problem
1. The total amount of goods and services that can be produced in
the world economy will be:
A. Determined by the amount of natural resources
B. Unlimited
C. Just enough to satisfy all consumer wants
D. Less than what consumers want
Price of Related goods
2. Cola and lemonade are substitute goods. What
will happen when the price of lemonade increases?
A. The demand for lemonade will increase
B. The price of cola will increase
C. The demand for cola will increase
D. The supply of chicken nuggets will rise
Individual supply vs. Market Supply
3. The sum of all the individual supply curves for a product is
called?
A. total supply.
B. market supply.
C. aggregate supply.
D. total output.
Scarcity
4. In which of the following situations is a good NOT scarce?
A. Consumers give up nothing to obtain more of the good.
B. Consumers can purchase as much of the good as they want at
its current market price.
C. Large quantities of the good are available in the marketplace.
D. There is a surplus of the good at some positive price.
A good is not scarce if you do not have to give
anything up to get it!
Market Demand vs. Individual Demand
5. The market demand curve:
A. is the sum (total) of all individual demand curves.
B. is the demand curve for every product in an industry.
C. shows the average quantity demanded by individual
demanders at each price.
D. is always flatter than an individual demand curve.
QD vs Curve Shift
6. When quantity demanded increases at every possible price,
the demand curve has:
A. shifted to the left.
B. shifted to the right.
C. not shifted; rather, we have moved along the demand curve
to a new point on the same curve.
D. not shifted; rather, the demand curve has become steeper.
QD vs Demand
7. An increase in the price of a good will:
A. increase demand.
B. decrease demand.
C. increase quantity demanded.
D. decrease quantity demanded.
PRICE DOES NOT SHIFT THE CURVE
This question was not marked
8. The quantity demanded of a good is the
amount that buyers are :
A. willing to purchase.
B. willing and able to purchase.
C. willing, able, and need to purchase.
D. able to purchase.
QD vs. Demand
9. Which of the following doesn’t influence the
demand:
A. Cost of production
B. Price
C. Weather
D. Income
QD vs. Demand
9. Which of the following doesn’t influence the
demand:
A. Cost of production
B. Price
C. Weather
D. Income
PRICE DOES NOT SHIFT DEMAND
Equilibrium price = S= D
10. Equilibrium price is the price at which?
A. Everything that is produced is sold
B. The number of buyers equals the number of
sellers
C. The amount of buyers demand is equal to the
amount sellers supply
D. Supply exceeds demand
Equilibrium price = S= D
10. Equilibrium price is the price at which?
A. Everything that is produced is sold
B. The number of buyers equals the number of
sellers
C. The amount of buyers demand is equal to the
amount sellers supply
D. Supply exceeds demand
Expectations of future price
11. If a seller expects higher basket prices in the
near future, the current
A. supply of baskets will increase.
B. supply of baskets will decrease.
C. supply of baskets will be unaffected.
D. demand for baskets will decrease.
Expectations of future price
11. If a seller expects higher basket prices in the
near future, the current
A. supply of baskets will increase.
B. supply of baskets will decrease.
C. supply of baskets will be unaffected.
D. demand for baskets will decrease.
This one was not easy
12. Which of the following is a determinant of the
market supply curve but not a determinant of an
individual seller’s supply?
A. production technology
B. expectations
C. input prices
D. the number of sellers
These Choices were terrible
13. What is a mixed economy?
A. One in which both capital and consumer goods are produced
B. One in which both necessities and luxuries are produced
C. One in which there is both an agricultural and manufacturing
sector
D. One in which there is both a private and a public sector
Come on ~ you should know this
14. What is meant by ‘opportunity cost’?
A. The best alternative forgone (given up)
B. The cost of the item selected
C. The cost of exploring business opportunities
D. The labor used in producing the product
Come on ~ you should know this
14. What is meant by ‘opportunity cost’?
A. The best alternative forgone (given up)
B. The cost of the item selected
C. The cost of exploring business opportunities
D. The labor used in producing the product
Basic Economic Question
15. The basic economic problem of all countries
is the existence of:
A. tax increases and budget deficits
B. limited resources and unlimited wants
C. unemployment and inflation
D. government and private industry
Basic Economic Question
15. The basic economic problem of all countries
is the existence of:
A. tax increases and budget deficits
B. limited resources and unlimited wants
C. unemployment and inflation
D. government and private industry
PED – 4 steps
• 16. When the price of used CDs is $4, Daphne buys five per
month. When the price is $3, she buys nine per month.
Daphne’s demand for used CDs is:
• A. elastic, and her demand curve would be relatively flat.
• B. elastic, and her demand curve would be relatively steep.
• C. inelastic, and her demand curve would be relatively flat.
• D. inelastic, and her demand curve would be relatively steep.
A figure out Q1 P1: Q2 P2
B determine the % change in Q
C determine the % change in P
D PED = change in Q/Change in P
He dead
17. Which of the following is an illustration of the market for
original paintings by deceased artist Vincent Van Gogh?
Which graph shows a dead supplier and normal demand?
•C
Perfectly Elastic
18. When small changes in price lead to infinite changes in
quantity demanded, demand is perfectly?
A. elastic, and the demand curve will be horizontal.
B. inelastic, and the demand curve will be horizontal.
C. elastic, and the demand curve will be vertical.
D. inelastic, and the demand curve will be vertical.
THE PRIVATE FIRM AS PRODUCER AND EMPLOYER
19. If the price of walnuts rises, many people would switch from
consuming walnuts to consuming pecans. But if the price of salt rises,
people would have difficulty purchasing something to use in its place.
These examples illustrate the importance of:
A. the availability of close substitutes in determining the price elasticity
of demand.
B. a necessity versus a luxury in determining the price elasticity of
demand.
C. the definition of a market in determining the price elasticity of
demand.
D. the time horizon in determining the price elasticity of demand.
• 20. If muffins and bagels are substitutes, a
higher price for bagels would result in a(n)?
• A. increase in the demand for bagels.
• B. decrease in the demand for bagels.
• C. increase in the demand for muffins.
• D. decrease in the demand for muffins.
• 20. If muffins and bagels are substitutes, a
higher price for bagels would result in a(n)?
• A. increase in the demand for bagels.
• B. decrease in the demand for bagels.
• C. increase in the demand for muffins.
• D. decrease in the demand for muffins.
• 21. When quantity demanded increases at every
possible price, the demand curve has:
• A. shifted to the left.
• B. shifted to the right.
• C. not shifted; rather, we have moved along the
demand curve to a new point on the
• same curve.
• D. not shifted; rather, the demand curve has
become steeper.
• 21. When quantity demanded increases at every
possible price, the demand curve has:
• A. shifted to the left.
• B. shifted to the right.
• C. not shifted; rather, we have moved along the
demand curve to a new point on the
• same curve.
• D. not shifted; rather, the demand curve has
become steeper.
• 22. If Max experiences a decrease in his
income, then we would expect Max’s demand
for:
• A. each good he purchases to remain
unchanged.
• B. normal goods to decrease.
• C. luxury goods to increase.
• D. inferior goods to decrease.
• 22. If Max experiences a decrease in his
income, then we would expect Max’s demand
for:
• A. each good he purchases to remain
unchanged.
• B. normal goods to decrease.
• C. luxury goods to increase.
• D. inferior goods to decrease.
• 23. During the 1990s many countries in Eastern
Europe transformed from planned economies
• to more market-oriented economies. Which of
the following best describes this change?
• A. More public sector control of resources
• B. Increased use of the price mechanism to
allocate resources
• C. Less private sector ownership of resources
• D. Increased use of price controls
• 23. During the 1990s many countries in Eastern
Europe transformed from planned economies
• to more market-oriented economies. Which of
the following best describes this change?
• A. More public sector control of resources
• B. Increased use of the price mechanism to
allocate resources
• C. Less private sector ownership of resources
• D. Increased use of price controls
• 24. A boat owner employs a crew to catch fish
to sell on the market. Which factors of
production are involved in this activity?
•
•
•
•
A. Labour, capital and enterprise only
B. Land, labour, capital and enterprise
C. Land and labour only
D. Labour and capital only
• 24. A boat owner employs a crew to catch fish
to sell on the market. Which factors of
production are involved in this activity?
•
•
•
•
A. Labour, capital and enterprise only
B. Land, labour, capital and enterprise
C. Land and labour only
D. Labour and capital only
• 25. In the diagram below what is the
opportunity cost of increasing the output of
cars from
• 550 per week to 640 per week ?
• 26. The market for a normal good is in
equilibrium at point X. Consumers’ incomes
fall and the cost of producing the good rises.
In which area of the diagram will the new
equilibrium be?
• 27. Why might a free market economy be
more advantageous than a mixed economy?
• A. Equality of income is encouraged.
• B. In a mixed economy, governments use
taxes which are inefficient.
• C. Production is determined solely by
consumer wishes.
• D. Social costs are taken into consideration.
• 27. Why might a free market economy be
more advantageous than a mixed economy?
• A. Equality of income is encouraged.
• B. In a mixed economy, governments use
taxes which are inefficient.
• C. Production is determined solely by
consumer wishes.
• D. Social costs are taken into consideration.
• 28. Each month Jacquelyn spends exactly $50
on ice cream regardless of the price of each
• container. Jacquelyn's price elasticity of
demand for ice cream is:
• A. 0
• B. 1
• C. greater than 1, but less than 5
• D. less than 1, but greater than 0
• 28. Each month Jacquelyn spends exactly $50
on ice cream regardless of the price of each
• container. Jacquelyn's price elasticity of
demand for ice cream is:
• A. 0
• B. 1
• C. greater than 1, but less than 5
• D. less than 1, but greater than 0
• 29. Any point inside a production possibilities
curve is?
• A. better than points on the production
possibilities curve
• B. allocatively efficient but technologically
inefficient
• C. associated with inefficient use or
unemployment of some resources
• D. associated with movements along the
production possibilities curve
• 29. Any point inside a production possibilities
curve is?
• A. better than points on the production
possibilities curve
• B. allocatively efficient but technologically
inefficient
• C. associated with inefficient use or
unemployment of some resources
• D. associated with movements along the
production possibilities curve
• 30. Which of the following might cause the
demand curve for an inferior good to shift to
the left?
A. a decrease in income
B. an increase in the price of a substitute
C. an increase in the price of a complement
D. none of the above is correct
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Here you will have all of our ppt’s, quizzes, and notes
1. a. Complement goods are goods sold
separately, but dependent on each other for
sales.
Give any TWO groups of complement goods.
b. Substitutes can satisfy the same want. Give
any TWO groups of substitutes.
c. Suggest any FOUR reasons why market
demand of coffee bean may fall.
Supply and Demand are put together to determine
equilibrium price and equilibrium quantity
Demand P
Schedule $5
P Qd
Supply
Schedule
S
P Qs
4
$5 10
$5 50
3
$4 20
$3 30
$2 50
$1 80
$4 40
2
$3 30
1
o
D
10
20
30
40
50
60
70
80
Q
$2 20
$1 10
59
The FREE MARKET system automatically pushes the
price toward equilibrium.
Demand P
Schedule $5
P Qd
Supply
Schedule
S
When there is a
surplus, producers P Qs
lower prices
$5 50
When there is a
shortage, producers $4 40
raise prices
$3 30
4
$5 10
3
$4 20
$3 30
$2 50
$1 80
2
1
o
D
10
20
30
40
50
60
70
80
Q
$2 20
$1 10
60
a. At a price of $3 dollars, what do we call it in the market?
Equilibrium ----- 5 points
b. At a price of $4 dollars, which situation will happen? And
what is the quantity?
a surplus of 20 Q ----- 5 points
c. At a price of $2, which situation will happen? And what is
the quantity?
a shortage of 30 Q ----- 5points
2. a. Complement goods are goods sold separately, but dependent on each
other for sales. Give any TWO groups of complement goods.
b. Substitutes can satisfy the same want. Give any TWO groups of substitutes.
c. Suggest any FOUR reasons why market demand of coffee bean may fall.
Answers:
a.
b.
Cars and gasoline, butter and bread ----- 2.5 points
Cars and subway, Ipad and laptop ---- 2.5 points
C
(1) a fall in disposable incomes after tax--- 2.5 points
(2) a fall in the price of tea--- 2.5 points
(3) a rise in the price of a milk shake ---- 2.5 points
(4) a fall in the population -----2.5 points
You own a small town movie theatre. You currently charge $5
per ticket for everyone who comes to your movies. Your friend
who took an economics course in college tells you that there
may be a way to increase your total revenue. Given the
demand curves shown, answer the following questions.
a. What is your current total revenue for both groups?
b. The elasticity of demand is more elastic in which market?
c. What is the elasticity of demand between the prices of $5
and $2 in the adult market? Is this elastic or inelastic?
• You own a small town movie theatre. You currently
charge $5 per ticket for everyone who comes to your
movies. Your friend who took an economics course in
college tells you that there may be a way to increase
your total revenue. Given the demand curves shown,
answer the following questions.
• e. Given the graphs and what your friend knows
about economics, he recommends you increase the
price of adult tickets to $8 each and lower the price of
a child's ticket to $3. How much could you increase
total revenue if you take his advice?
Total Revenue = P*Q.
A. Total revenue from children's tickets is $100
($5*20) and from adult tickets is $250 ($5*50).
(Total revenue from all sales would be $350.) ---2 points b.
B. The demand for children's tickets is more
elastic (It is flatter). ----- 2 point
C. The elasticity of demand between $5 and $2 is 0.21, which is
inelastic. –3 points
A. P1Q1, P2Q2: = P1=$5, Q1=50: P2=$2, Q2=60
B % change in Quantity = Q2-Q1/(Q2+Q1)/2 =
60-50/(60+50)*1/2 = 10/55 = .18%
C. % change in Price = P2-P1/(P2+P1)/2 =
$5-$2/(5+2)*1/2 = 3/3.5 = .85%
D. PED=% change Q/% change P = .18%/.85% = .21
.21 is less than 1 so we know it is inelastic
e. Total revenue in the adult market would be
$320 ($8*40). Total revenue in the children’s
market would be $120 ($3*40), so total revenue
for both groups would be $440. $440 - $350 is
an increase in total revenue of $90. -----3 points