SAMPLE test one

Contained here are some questions from previous exams. These are provided to help you study since so very few of you have worked a single problem or asked a single question. Some material may not be applicable because the textbook has changed .

 

 

 

SHORT ANSWER QUESTION              Using the Production Possibilities Curve and a two-good world in which society produces only guns  and green beans, illustrate and explain : 1)  the concept of Opportunity Cost  and why Opportunity Cost is  important in economics?     2)   the concept of productive Efficiency.  Use one graph  and hypothetical numbers to illustrate both parts.

 

 


Answer all questions.   Each is worth 10 points.  Everyone gets to miss one free.   Remember that for a statement to be true, all parts of it must be true.   Put your name or initials  on each page.  Show work for partial credit.  Circle the correct answer.

 

 

  1. If  the price of diamonds goes up, the supply of diamonds will go up.

 

  1. True
  2. False

 

2. If elasticity of demand for computers is less than one, and the elasticity of demand for printers is known to be less than one,  and the objective of Best Buy  is to increase revenues over the President’s Day weekend, would Best Buy be well advised to put computers on sale that weekend rather than printers?

 

  1. yes
  2. no
  3. Impossible to tell since we don't know if printers and computers are both insensitive to price.

 

3.  Assume that the price of salami goes down and that salami is a substitute for canned tuna.  Then we would expect that the demand for canned tuna would increase, everything else the same, when salami prices went down?

 

  1. Yes  
  2. No

 

4. If the Demand for automobiles increases, everything else the same, we would expect to see an increase in the equilibrium price and a decrease in the quantity supplied at equilibrium of these automobiles.

 

a. true

b. false

 

5.  If the quantity of a good or service supplied goes down and the quantity demanded also goes down, there has probably been an increase in demand (the demand curve), holding supply constant.

 

  1. true
  2. false

 

 

 

 

 

 

6.   A change in technology will shift the supply curve either to the right if the  supply curve is inelastic or to the left if the supply curve is elastic, everything else the same.

 

  1. true
  2. false

 

7.   If we observe that  demand increases, and the supply curve remains unchanged, the equilibrium price must have increased as a result.

 

  1. true
  2. false

 

8.  If  Jon Deaux and hundreds of his co-workers lost their jobs,   and at the same time there is a huge influx of people (immigration) into Deaux’s town, we would expect to see the Demand for milk and bread go up or down ---depending on the relative magnitude of the changes to price of these goods, but the supply of milk and bread will only increase.

 

  1. true
  2. false

 

  1. If the price of avocadoes has gone up, everything else the same that means the number of suppliers has decreased and the Supply curve will have moved to the left.

 

  1. true
  2. false

 

 

10.  If Goods "A” and "B" are complements; an increase in the price of A will result in an increase in the demand for B?

 

  1. true
  2. false

 

11. If Goods "A" and "B" are substitutes, a decrease in the price of A will increase the Demand curve for "B".

 

  1. true
  2. false

 

 

 

 

 

12. If the minimum wage is raised from $5.15 to $7.25, we would expect unemployment to increase.

 

  1. true
  2. false

 

13. If the equilibrium wage rate is more than $7.25, there is no point in raising the minimum wage.

 

  1. true
  2. false

 

14. If we have a price ceiling or a price floor, or any other type of government price setting involved in a market, we are not guaranteed that the market with be efficient.

 

  1. true
  2. false

 

15.  Competition in a market is or is not necessary for that market to be efficient.

 

  1. is
  2. is not

 

16. Efficiency and equilibrium are  the same thing.

 

a.  true

b.  false

 

17.  If the Demand for automobiles decreases, everything else the same, we would expect to see a decrease in the equilibrium price and an increase in the quantity demanded of these automobiles.

 

a. true

b. false

 

18.  Assume that the price of mayonnaise  goes up and that  mayonnaise  is a substitute for Miracle Whip.  Then we would expect that the demand for Miracle Whip  would increase, everything else the same.

 

  1. true
  2. false

 

 

 

 

 

19.  If the demand and supply both decrease, which of the following are true?

 

  1. The equilibrium price and quantity will both increase
  2. The equilibrium price and quantity will both decrease
  3. The equilibrium price will increase but we don’t know about the quantity
  4. The equilibrium quantity will increase but we don’t know about price
  5. None of the above

 

 

20.  Elasticity can be said to measure the sensitivity of quantity demanded to  a given change in the price?

 

  1. yes 
  2. no

No books have been added to this reading list.