microeconomics practice exam one (chp 1 4)
TRANSCRIPT
Microeconomics Practice Exam One (Chp 1 - 4)
1. The marginal benefit from consuming another unit of a good: A. must equal the marginal cost or the unit will not be consumed.B. must be less than the marginal cost or the unit will not be consumed.C. equals the increase in total benefits from consuming the unit.D. equals the total benefit obtained from the consumption of all prior units.
2. Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 600 minutes this month so far. What is her marginal cost per minute of making additional calls? A. 25 centsB. 10 centsC. 5 centsD. Zero
3. Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should: A. date Perry.B. not date Perry.C. determine what your sunk costs are.D. determine what your total benefits and total costs are.
4. Alan is sitting in a bar drinking beers that cost $1 each. According to the economic decision rule, Alan will quit drinking when the marginal: A. benefit to him of an additional beer is less than $1.B. cost to him of an additional beer is less than the marginal benefit.C. cost remains at $1.D. benefit to him of an additional beer is greater than $1.
5. Opportunity cost: A. includes only monetary outlays.B. is the net benefit forgone by not undertaking the next best alternative.C. is nonexistent for some choices.D. is the same as sunk cost.
6. The opportunity cost of attending college is likely to be highest for a high school graduate: A. whose next-best option is to flip hamburgers and who has access to no student loans.B. whose next-best option is to be a retail salesperson and whose family is extremely wealthy.C. whose next-best option is to drive a school bus but who has the promise of a six-figure salary after college.D. who is capable of competing successfully in professional tennis.
7. The price mechanism that guides people's actions is called the: A. invisible market force.B. invisible hand.C. invisible handshake.D. invisible foot.
8. Macroeconomics is: A. the study of individual choice and how that choice is influenced by economic forces.B. the study of the pricing policies of firms and the purchasing decisions of households.C. the study of aggregate economic relationships.D. an analysis of economic reality that proceeds from the parts to the whole.
9. The study of individual choice is a focus in: A. microeconomics.B. macroeconomics.C. normative economics.D. Ricardian economics.
10. With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban) shown in the table. The opportunity cost of producing 60 Umies instead of 30 Umies is:
A. 10 Ums.B. 20 Ums.C. 30 Ums.D. 40 Ums.
11.
Refer to the graph shown. Given the production possibility curve, the opportunity cost of reading 2 more articles when you are already reading 11 articles is on average: A. ½ CD per article.B. 2 CDs per article.C. 2/3 CD per article.D. 3 CDs per article.
12. England has a relatively cool and cloudy climate that is ill suited for grape growing. It can produce 200 units of wine for every 400 units of cloth. Portugal, in contrast, has a relatively warm and sunny climate that is good for growing grapes. It can produce 200 units of wine for every 100 units of cloth. Which country has the higher opportunity cost of producing cloth? A. Portugal: 2 units of wine for every unit of clothB. England: 2 units of wine for every unit of clothC. Portugal: ½ unit of wine for every unit of clothD. England: ½ unit of cloth for every unit of wine
13. When you produce cars, it is enormously expensive to produce one car, but then the costs per car decrease as more are produced. This would be an example of: A. increasing marginal opportunity costs.B. decreasing marginal opportunity costs.C. constant marginal opportunity costs.D. increasing returns to scale.
14. Refer to the graph below.
Given the production possibility curve, which point is unattainable? A. AB. BC. CD. D
15. Refer to the graph below.
Productive inefficiency occurs at what point? A. AB. BC. CD. D
16. If no resources had a comparative advantage in the production of any good, the production possibility curve would be: A. bowed outward.B. bowed inward.C. a horizontal line.D. a downward-sloping straight line.
17.
Given the production possibility tables for the First and Second Bakeries shown, we know that the opportunity cost of producing cookies: A. is higher at First Bakery.B. is higher at Second Bakery.C. is the same at both bakeries.D. cannot be computed without further information.
18.
The production possibility frontiers of Northland and Southland are given. Without trade, Northland produces and consumes 20 apples and 5 bananas and Southland produces and consumes 10 apples and 40 bananas. Could they increase their consumption bundle by changing production and trading? A. No; Southland does at least as well at producing both, so it would have no incentive to trade.B. Yes; they could gain 75 bananas and 60 apples.C. Yes; they could gain up to 60 apples without losing bananas.D. Yes; they could gain up to 15 bananas without losing apples.
19. John and Jane Smith are both economists who are deciding how to split household chores of cooking and cleaning. They discover that John has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning? A. No; both or neither may have a comparative advantage in cleaning.B. No; either one may have a comparative advantage in cleaning.C. Yes; John must also have a comparative advantage in cleaning.D. Yes; Jane must have a comparative advantage in cleaning.
20. Market economies are based upon: A. private property and individual good will toward others.B. government planning and individual good will toward others.C. government planning and individual self-interest.D. private property and individual planning.
21. Which of the following is a characteristic of a market economy? A. Private propertyB. Government ownership of the means of productionC. Distribution according to needD. Tradition determines the what, how, and for whom decisions
22. Markets coordinate economic activity through: A. the price mechanism.B. commanding individuals what to do.C. asking individuals what to do.D. the legal mechanism.
23. In a socialist economic system: A. markets are relied upon to decide what to produce, but government intervenes when necessary.B. individuals tell government what to produce and the government decides how best to achieve that goal.C. government planning boards decide what to produce, but rely on markets to achieve that goal.D. government planning boards decide what to produce and then give individuals directives how to achieve those goals.
24. Market and socialist economies can be contrasted in all the following ways except that: A. under a market economy labor is allocated by individual choice based on wage levels; under traditional socialism it is allocated by a government planning board.B. under a market economy government plays no role in the market; under socialism, government planning boards make most major economic decisions.C. under a market economy the distribution of income is to each according to his ability, effort, and inheritance; under ideal socialism the distribution of income is to each according to his need.D. under a market economy self-interest is the primary motive of economic activity; under socialism, individuals are supposed to act from considerations of the general good.
25. Households are on the: A. supply side of factor markets and the demand side of goods markets.B. demand side of factor markets and the supply side of goods markets.C. supply side of both factor markets and goods markets.D. demand side of both factor markets and goods markets.
26. Businesses do all of the following except: A. pay taxes to the government.B. demand labor services from households in the factor market.C. demand goods and services from households in the goods market.D. supply goods and services to the government in the goods market.
27. Businesses fail because: A. they follow the principle of consumer sovereignty too closely.B. the invisible hand determines that they are not producing something that is socially valuable.C. they earn excessive profits.D. entrepreneurship is present.
28. A partnership is a business: A. with two or more owners, with each owner liable for every other owner's actions.B. that has only one owner.C. legally treated as a person and owned by stockholders who are not liable for the actions of the corporate "person."D. in which each owner is liable only to the extent of his or her own investment.
29. Which of the following situations best demonstrates the law of demand? A. Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per year.B. Movie-goers see fewer movies per year due to an overall decrease in the quality of newly released motion pictures.C. A drought causes a decrease in the availability of pumpkins, resulting in fewer jack-o-lanterns displayed on Halloween.D. An increase in the number of people writing Economics textbooks results in a decrease in average textbook prices.
30. If the price of chicken rises and the price of beef does not rise, consumers will respond by: A. substituting beef for chicken.B. substituting chicken for beef.C. reducing purchases of beef and chicken.D. increasing purchases of beef and chicken.
31. The growing popularity of the Atkins (low-carb) Diet caused: A. an increase in the demand for bread.B. a decrease in the demand for bread.C. a movement down and to the right along the demand for bread curve.D. a movement up and to the left along the demand for bread curve.
32. Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to: A. increase the demand for diesel cars.B. decrease the demand for gasoline.C. decrease the demand for diesel cars.D. increase the demand for gasoline.
33.
Refer to the graphs shown. What arrow shows the effect of an increase in the number of consumers in the market on the demand for CDs? A. AB. BC. CD. D
34.
Refer to the graph shown. The quantity demanded when price is $16.00 per week is: A. 2 CDs per week.B. 4 CDs per week.C. 6 CDs per week.D. 8 CDs per week.
35.
Refer to the graphs shown. Assume the graph reflects demand in the egg market. Which arrow best captures the impact of increased consumer concern about cholesterol on the egg market? A. AB. BC. CD. D
36.
Refer to the table that presents Mike and Janet's demand for apples by the peck. If they are the only two in the market, which of the following represents a point on the market demand curve? A. price = $1, quantity = 18B. price = $2, quantity = 21C. price = $4, quantity = 0D. price = $4, quantity = 21
37. According to the law of supply: A. supply curves slope upward.B. supply curves slope downward.C. price and quantity supplied are negatively related.D. price and quantity supplied are inversely related.
38.
Refer to the graphs shown. The curve that best illustrates the law of supply is: A. I.B. II.C. III.D. IV.
39. When applied to labor markets, the law of supply suggests that: A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.B. a decrease in the wages earned by nurses will cause the quantity of nurses supplied to increase.C. an increase in the wages earned by nurses will cause the quantity of nurses demanded to increase.D. a decrease in the wages earned by nurses will cause the quantity of nurses demanded to increase.
40.
Assume the graphs shown reflect the egg market. The arrow that would best capture the impact of cheaper, prefabricated henhouses on the egg market is: A. WB. XC. YD. Z
41. Which of the following would be expected to cause an increase in the supply of fax machines? A. An increase in the number of business firms demanding fax machinesB. An increase in the price of fax machinesC. A decrease in the cost of manufacturing fax machinesD. The expectation that the price of fax machines will increase in future
42. When quantity supplied is greater than quantity demanded, prices tend to: A. fall.B. rise.C. stay the same.D. remain constant until the next season.
43.
Refer to the graph shown. At a price of $0.60 per dozen: A. there is a surplus of 2,000 dozen eggs per week.B. the market is in equilibrium.C. there is a shortage of 3,000 dozen eggs per week.D. there is a shortage of 2,000 dozen eggs per week.
44.
Suppose that the table shown shows the demand and supply schedules for pork bellies. Based on the table, the equilibrium price of pork bellies is: A. $0.10/lb.B. $0.25/lb.C. $0.50/lb.D. $0.75/lb.
45. When the number of Alaskan fishermen increased, salmon prices fell to record lows. This could be shown graphically by a shift in: A. the demand curve right.B. the supply curve left.C. the demand curve left.D. the supply curve right.
46. When gasoline prices fall, the demand for alternative fuel cars likely: A. falls, lowering their equilibrium price and raising equilibrium quantity.B. rises, raising their equilibrium price and quantity.C. falls, raising their equilibrium price and lowering equilibrium quantity.D. falls, lowering their equilibrium price and quantity.
47. The price of a ticket to the Maroon 5 concert is set at $35. All the tickets for the concert sell out one hour after they go on sale and there are still 1,000 fans who want to buy tickets. It follows that: A. the equilibrium price of tickets to the concert is $35.B. the equilibrium price of tickets to the concert is more than $35.C. the equilibrium price of tickets to the concert is less than $35.D. the quantity of tickets demanded is equal to the quantity supplied at the $35 price.
48.
Refer to the graphs shown. The market is computers. Which graph best represents the impact of cheaper memory chips on the computer market? A. aB. bC. cD. d
49. If market supply increases, equilibrium price will: A. fall and demand will shift to the right.B. fall, causing a movement along the demand curve.C. rise and demand will shift to the left.D. rise, causing a movement along the demand curve.
50. When workers are paid higher wages, production costs: A. rise, supply shifts leftward, and product prices fall.B. fall, supply shifts rightward, and product prices fall.C. rise, supply shifts leftward, and product prices rise.D. rise, supply shifts rightward, and product prices rise.
Microeconomics Practice Exam One (Chp 1 - 4) Key
1. The marginal benefit from consuming another unit of a good: A. must equal the marginal cost or the unit will not be consumed.B. must be less than the marginal cost or the unit will not be consumed.C. equals the increase in total benefits from consuming the unit.D. equals the total benefit obtained from the consumption of all prior units.
See the definition of marginal benefit in the text.
2. Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 600 minutes this month so far. What is her marginal cost per minute of making additional calls? A. 25 centsB. 10 centsC. 5 centsD. Zero
Marginal cost is the cost of calling another minute. Since Mary has reached 600 minutes, making another call adds 25 cents per minute to her bill.
3. Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should: A. date Perry.B. not date Perry.C. determine what your sunk costs are.D. determine what your total benefits and total costs are.
Since the marginal benefit of dating Perry exceeds the marginal cost, you will be better off going on a date.
4. Alan is sitting in a bar drinking beers that cost $1 each. According to the economic decision rule, Alan will quit drinking when the marginal: A. benefit to him of an additional beer is less than $1.B. cost to him of an additional beer is less than the marginal benefit.C. cost remains at $1.D. benefit to him of an additional beer is greater than $1.
Alan will quit drinking only when the marginal cost exceeds the marginal benefit.
5. Opportunity cost: A. includes only monetary outlays.B. is the net benefit forgone by not undertaking the next best alternative.C. is nonexistent for some choices.D. is the same as sunk cost.
Opportunity costs are the benefits forgone when an activity is undertaken, not the money paid to undertake an activity. All decisions involve opportunity costs because all decisions involve choices.
6. The opportunity cost of attending college is likely to be highest for a high school graduate: A. whose next-best option is to flip hamburgers and who has access to no student loans.B. whose next-best option is to be a retail salesperson and whose family is extremely wealthy.C. whose next-best option is to drive a school bus but who has the promise of a six-figure salary after college.D. who is capable of competing successfully in professional tennis.
Opportunity cost is the benefit forgone by undertaking an activity. Everyone except the potential tennis player has a relatively low opportunity cost since his or her next-best option does not pay well.
7. The price mechanism that guides people's actions is called the: A. invisible market force.B. invisible hand.C. invisible handshake.D. invisible foot.
The invisible hand is the price mechanism that guides people's actions as defined in the text.
8. Macroeconomics is: A. the study of individual choice and how that choice is influenced by economic forces.B. the study of the pricing policies of firms and the purchasing decisions of households.C. the study of aggregate economic relationships.D. an analysis of economic reality that proceeds from the parts to the whole.
As discussed in the text, macroeconomics focuses on aggregate relationships.
9. The study of individual choice is a focus in: A. microeconomics.B. macroeconomics.C. normative economics.D. Ricardian economics.
Microeconomics is the study of individual choice.
10. With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban) shown in the table. The opportunity cost of producing 60 Umies instead of 30 Umies is:
A. 10 Ums.B. 20 Ums.C. 30 Ums.D. 40 Ums.
Producing an extra 30 Umies means not producing 20 (40 - 20) Ums.
11.
Refer to the graph shown. Given the production possibility curve, the opportunity cost of reading 2 more articles when you are already reading 11 articles is on average: A. ½ CD per article.B. 2 CDs per article.C. 2/3 CD per article.D. 3 CDs per article.
Moving from C to B means giving up 4 CDs for 2 articles, or 2 CDs per article.
12. England has a relatively cool and cloudy climate that is ill suited for grape growing. It can produce 200 units of wine for every 400 units of cloth. Portugal, in contrast, has a relatively warm and sunny climate that is good for growing grapes. It can produce 200 units of wine for every 100 units of cloth. Which country has the higher opportunity cost of producing cloth? A. Portugal: 2 units of wine for every unit of clothB. England: 2 units of wine for every unit of clothC. Portugal: ½ unit of wine for every unit of clothD. England: ½ unit of cloth for every unit of wine
The opportunity cost for England of producing 1 unit of cloth is ½ unit of wine. The opportunity cost for Portugal of producing 1 unit of cloth is 2 units of wine. Therefore, Portugal has the higher opportunity cost.
13. When you produce cars, it is enormously expensive to produce one car, but then the costs per car decrease as more are produced. This would be an example of: A. increasing marginal opportunity costs.B. decreasing marginal opportunity costs.C. constant marginal opportunity costs.D. increasing returns to scale.
If the marginal cost of producing additional cars declines as more cars are produced, the opportunity cost rises at a decreasing rate.
14. Refer to the graph below.
Given the production possibility curve, which point is unattainable? A. AB. BC. CD. D
A production possibility curve shows the combinations of output than can be obtained from a given quantity of inputs. All points outside the curve are unattainable, and so B is unattainable.
15. Refer to the graph below.
Productive inefficiency occurs at what point? A. AB. BC. CD. D
Efficiency is not achieved at D because resources can be reallocated in such a way as to produce more of both goods.
16. If no resources had a comparative advantage in the production of any good, the production possibility curve would be: A. bowed outward.B. bowed inward.C. a horizontal line.D. a downward-sloping straight line.
Since there is no comparative advantage, you need not give up ever-increasing quantities of one good to gain more of another good. The opportunity cost of gaining more of one good is constant, and the production possibility curve is a straight line connecting the maximum points for each good.
17.
Given the production possibility tables for the First and Second Bakeries shown, we know that the opportunity cost of producing cookies: A. is higher at First Bakery.B. is higher at Second Bakery.C. is the same at both bakeries.D. cannot be computed without further information.
The opportunity cost of producing cookies at First Bakery is 6 pies for every 10 cookies, or 0.6 pie for each cookie. At Second Bakery, the opportunity cost of producing cookies is 3 pies for every 30 cookies, or 0.1 pie per cookie.
18. The production possibility frontiers of Northland and Southland are given. Without trade, Northland produces and consumes 20 apples and 5 bananas and Southland produces and consumes 10 apples and 40 bananas. Could they increase their consumption bundle by changing production and trading? A. No; Southland does at least as well at producing both, so it would have no incentive to trade.B. Yes; they could gain 75 bananas and 60 apples.C. Yes; they could gain up to 60 apples without losing bananas.D. Yes; they could gain up to 15 bananas without losing apples.
Without trade, 30 apples and 45 bananas are produced. With specialization, a position of 30 apples and 60 bananas is possible.
19. John and Jane Smith are both economists who are deciding how to split household chores of cooking and cleaning. They discover that John has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning? A. No; both or neither may have a comparative advantage in cleaning.B. No; either one may have a comparative advantage in cleaning.C. Yes; John must also have a comparative advantage in cleaning.D. Yes; Jane must have a comparative advantage in cleaning.
In a two-good situation, a comparative advantage in one good necessarily implies a comparative disadvantage in the other good.
20. Market economies are based upon: A. private property and individual good will toward others.B. government planning and individual good will toward others.C. government planning and individual self-interest.D. private property and individual planning.
See the definition of a market economy in the text.
21. Which of the following is a characteristic of a market economy? A. Private propertyB. Government ownership of the means of productionC. Distribution according to needD. Tradition determines the what, how, and for whom decisions
A market economy is an economic system based on private property and the market. It gives private property rights to individuals and relies on market forces to coordinate economic activity.
22. Markets coordinate economic activity through: A. the price mechanism.B. commanding individuals what to do.C. asking individuals what to do.D. the legal mechanism.
Markets are based upon the price mechanism—encouraging the production and discouraging the consumption of goods which are in shortage by raising their price.
23. In a socialist economic system: A. markets are relied upon to decide what to produce, but government intervenes when necessary.B. individuals tell government what to produce and the government decides how best to achieve that goal.C. government planning boards decide what to produce, but rely on markets to achieve that goal.D. government planning boards decide what to produce and then give individuals directives how to achieve those goals.
Under socialism, central planners determine both what is produced and how it is produced.
24. Market and socialist economies can be contrasted in all the following ways except that: A. under a market economy labor is allocated by individual choice based on wage levels; under traditional socialism it is allocated by a government planning board.B. under a market economy government plays no role in the market; under socialism, government planning boards make most major economic decisions.C. under a market economy the distribution of income is to each according to his ability, effort, and inheritance; under ideal socialism the distribution of income is to each according to his need.D. under a market economy self-interest is the primary motive of economic activity; under socialism, individuals are supposed to act from considerations of the general good.
Government does play a role in determining the what, how, and for whom decisions under capitalism. For example, governments must allocate property rights if a market-based system is to function.
25. Households are on the: A. supply side of factor markets and the demand side of goods markets.B. demand side of factor markets and the supply side of goods markets.C. supply side of both factor markets and goods markets.D. demand side of both factor markets and goods markets.
Households supply labor to business in the factor market and demand goods and services from business in the goods market.
26. Businesses do all of the following except: A. pay taxes to the government.B. demand labor services from households in the factor market.C. demand goods and services from households in the goods market.D. supply goods and services to the government in the goods market.
Businesses produce the goods and services that households and the government demand.
27. Businesses fail because: A. they follow the principle of consumer sovereignty too closely.B. the invisible hand determines that they are not producing something that is socially valuable.C. they earn excessive profits.D. entrepreneurship is present.
The invisible hand works to insure that the desire to earn profits is ultimately channeled into the general good of society. Businesses that fail to produce something that contributes to this good will not be profitable.
28. A partnership is a business: A. with two or more owners, with each owner liable for every other owner's actions.B. that has only one owner.C. legally treated as a person and owned by stockholders who are not liable for the actions of the corporate "person."D. in which each owner is liable only to the extent of his or her own investment.
A partnership is defined in the text as a business with two or more owners. Each owner is liable for the other owner's mistakes.
29. Which of the following situations best demonstrates the law of demand? A. Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per year.B. Movie-goers see fewer movies per year due to an overall decrease in the quality of newly released motion pictures.C. A drought causes a decrease in the availability of pumpkins, resulting in fewer jack-o-lanterns displayed on Halloween.D. An increase in the number of people writing Economics textbooks results in a decrease in average textbook prices.
The correct answer focuses on the relationship between price and quantity demanded so it is the best demonstration of the law of demand.
30. If the price of chicken rises and the price of beef does not rise, consumers will respond by: A. substituting beef for chicken.B. substituting chicken for beef.C. reducing purchases of beef and chicken.D. increasing purchases of beef and chicken.
If the price of chicken has risen but the price of beef has not, the quantity of chicken demanded will fall as demanders substitute beef for chicken.
31. The growing popularity of the Atkins (low-carb) Diet caused: A. an increase in the demand for bread.B. a decrease in the demand for bread.C. a movement down and to the right along the demand for bread curve.D. a movement up and to the left along the demand for bread curve.
Followers of the Atkins Diet consume little or no bread, so an increase in the number of people on this diet will decrease the demand for bread.
32. Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to: A. increase the demand for diesel cars.B. decrease the demand for gasoline.C. decrease the demand for diesel cars.D. increase the demand for gasoline.
The change in the price of gasoline causes a movement along the demand for gasoline curve, not a shift. Higher gasoline prices lead to an increase in the demand for diesel cars as consumers seek to take advantage of better gas mileage.
33. Refer to the graphs shown. What arrow shows the effect of an increase in the number of consumers in the market on the demand for CDs? A. AB. BC. CD. D
An increase in the number of consumers causes demand to shift to the right.
34.
Refer to the graph shown. The quantity demanded when price is $16.00 per week is: A. 2 CDs per week.B. 4 CDs per week.C. 6 CDs per week.D. 8 CDs per week.
The demand curve tells you how much is demanded at each price. To determine the quantity demanded, find $16.00 on the vertical axis and read across until you meet the demand curve. Then read the quantity from the horizontal axis.
35.
Refer to the graphs shown. Assume the graph reflects demand in the egg market. Which arrow best captures the impact of increased consumer concern about cholesterol on the egg market? A. AB. BC. CD. D
Consumer concern about cholesterol is a shift factor of demand, which shifts the demand curve to the left as consumers want fewer eggs at each price level.
36.
Refer to the table that presents Mike and Janet's demand for apples by the peck. If they are the only two in the market, which of the following represents a point on the market demand curve? A. price = $1, quantity = 18B. price = $2, quantity = 21C. price = $4, quantity = 0D. price = $4, quantity = 21
Market demand is the sum of all individual quantities demanded at every price.
37. According to the law of supply: A. supply curves slope upward.B. supply curves slope downward.C. price and quantity supplied are negatively related.D. price and quantity supplied are inversely related.
The law of supply states that, other things constant as the price of a good goes up, the quantity supplied goes up and as the price of a good goes down, the quantity supplied goes down. This is shown graphically by a curve that slopes upward.
38.
Refer to the graphs shown. The curve that best illustrates the law of supply is: A. I.B. II.C. III.D. IV.
The law of supply states that price and quantity demanded are directly related. A direct relationship is shown graphically by a curve with a positive slope.
39. When applied to labor markets, the law of supply suggests that: A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.B. a decrease in the wages earned by nurses will cause the quantity of nurses supplied to increase.C. an increase in the wages earned by nurses will cause the quantity of nurses demanded to increase.D. a decrease in the wages earned by nurses will cause the quantity of nurses demanded to increase.
The law of supply states that as the price of a good rises, the quantity of it supplied will rise. The law of supply does not address the relationship between price and quantity demanded.
40.
Assume the graphs shown reflect the egg market. The arrow that would best capture the impact of cheaper, prefabricated henhouses on the egg market is: A. WB. XC. YD. Z
A cheaper, prefabricated henhouse is a shift factor of supply. Specifically it reduces the cost of production, which would shift the supply curve to the right.
41. Which of the following would be expected to cause an increase in the supply of fax machines? A. An increase in the number of business firms demanding fax machinesB. An increase in the price of fax machinesC. A decrease in the cost of manufacturing fax machinesD. The expectation that the price of fax machines will increase in future
If there are more firms demanding fax machines, the demand will increase, not the supply. A change in price causes a change in quantity supplied, not a change in supply. Lower costs cause supply to increase. If prices are expected to rise, the current supply will fall as suppliers store machines for future sale at the higher price.
42. When quantity supplied is greater than quantity demanded, prices tend to: A. fall.B. rise.C. stay the same.D. remain constant until the next season.
When quantity supplied is greater than quantity demanded, prices tend to fall.
43.
Refer to the graph shown. At a price of $0.60 per dozen: A. there is a surplus of 2,000 dozen eggs per week.B. the market is in equilibrium.C. there is a shortage of 3,000 dozen eggs per week.D. there is a shortage of 2,000 dozen eggs per week.
At $0.60 per dozen, quantity supplied is 1,000 dozen eggs per week while quantity demanded is 3,000 dozen eggs per week. There is a shortage of 2,000 dozen eggs per week.
44.
Suppose that the table shown shows the demand and supply schedules for pork bellies. Based on the table, the equilibrium price of pork bellies is: A. $0.10/lb.B. $0.25/lb.C. $0.50/lb.D. $0.75/lb.
Equilibrium occurs where quantity demanded equals quantity supplied. This occurs at $0.50 per pound.
45. When the number of Alaskan fishermen increased, salmon prices fell to record lows. This could be shown graphically by a shift in: A. the demand curve right.B. the supply curve left.C. the demand curve left.D. the supply curve right.
An increase in catch of fish is an increase in supply independent of price. This is a shift in the supply curve to the right.
46. When gasoline prices fall, the demand for alternative fuel cars likely: A. falls, lowering their equilibrium price and raising equilibrium quantity.B. rises, raising their equilibrium price and quantity.C. falls, raising their equilibrium price and lowering equilibrium quantity.D. falls, lowering their equilibrium price and quantity.
Demand moves left lowering both price and quantity.
47. The price of a ticket to the Maroon 5 concert is set at $35. All the tickets for the concert sell out one hour after they go on sale and there are still 1,000 fans who want to buy tickets. It follows that: A. the equilibrium price of tickets to the concert is $35.B. the equilibrium price of tickets to the concert is more than $35.C. the equilibrium price of tickets to the concert is less than $35.D. the quantity of tickets demanded is equal to the quantity supplied at the $35 price.
At $35 per ticket, quantity demanded exceeds quantity supplied, so $35 cannot be equilibrium price. To eliminate the shortage, price would have to rise.
48.
Refer to the graphs shown. The market is computers. Which graph best represents the impact of cheaper memory chips on the computer market? A. aB. bC. cD. d
A cheaper memory chip would lower the cost of producing computers, shifting the supply curve for computers to the right. Graph d shows this.
49. If market supply increases, equilibrium price will: A. fall and demand will shift to the right.B. fall, causing a movement along the demand curve.C. rise and demand will shift to the left.D. rise, causing a movement along the demand curve.
When supply shifts rightward, equilibrium price falls. As price falls, the quantity demanded rises. This is shown as a movement along the demand curve.
50. When workers are paid higher wages, production costs: A. rise, supply shifts leftward, and product prices fall.B. fall, supply shifts rightward, and product prices fall.C. rise, supply shifts leftward, and product prices rise.D. rise, supply shifts rightward, and product prices rise.
Higher input prices cause supply to decrease, which causes equilibrium price to increase.