SAMPLE test one
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.
- If the price of diamonds goes up, the supply of diamonds will go up.
- True
- 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?
- yes
- no
- 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?
- Yes
- 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.
- true
- 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.
- true
- false
7. If we observe that demand increases, and the supply curve remains unchanged, the equilibrium price must have increased as a result.
- true
- 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.
- true
- false
- 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.
- true
- 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?
- true
- false
11. If Goods "A" and "B" are substitutes, a decrease in the price of A will increase the Demand curve for "B".
- true
- false
12. If the minimum wage is raised from $5.15 to $7.25, we would expect unemployment to increase.
- true
- false
13. If the equilibrium wage rate is more than $7.25, there is no point in raising the minimum wage.
- true
- 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.
- true
- false
15. Competition in a market is or is not necessary for that market to be efficient.
- is
- 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.
- true
- false
19. If the demand and supply both decrease, which of the following are true?
- The equilibrium price and quantity will both increase
- The equilibrium price and quantity will both decrease
- The equilibrium price will increase but we don’t know about the quantity
- The equilibrium quantity will increase but we don’t know about price
- None of the above
20. Elasticity can be said to measure the sensitivity of quantity demanded to a given change in the price?
- yes
- no
No books have been added to this reading list.