Exam 1

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Question #1

Suppose we have a good known as Castellons. It has a PES of 0.5. Suddenly, there is a huge increase in tastes and preferences for it. What happens as a result?

A The price decreases and the quantity increases

B The price increases a little but the quantity increases a lot

C The price increases a lot but the quantity falls by a lot

D The price increases a lot but the quantity increases only a little

Question #2

Consider a country called “Grigorian-opolis”. In this country, there is a $1.00 tax per gallon on gas applied to the buyers. Then, this tax is raised to $2.00 per gallon of gas applied to the buyers. What happens to the demand for gas powered vehicles?

A Unclear

B Increases

C Decreases

D Stays the same

Question #3

Consider the good known as Naomis. Initially, a tax is placed on the buyers of this good. Suppose that due to intense pressure from consumer groups, the government decides to switch the tax to being on sellers. Which of the following is a result of this switch?

A Price buyers pay decreases

B Sellers pay the entire tax

C Government obtains more revenue

D None of the above

Question #4

From the lecture slides, recall the PES of housing in California’s less regulated cities which is 0.36. What can be inferred from this number?

A An increase in price causes a huge increase in supply

B PES is elastic

C An increase in price causes an increase in total revenue

D None of the above

Question #5

By one estimate, the PES for housing in California’s more regulated cities like San Francisco is 0.0. If so, what can we conclude from this number?

A The supply curve is downward sloping

B The supply is not affected by changes in price

C The supply does not shift if there are more sellers

D There will be no equilibrium price in this market

Question #6

Suppose you have the following information for the demand for toddler walkers:
P1=10 Q1=100
P2=20 Q2=170

Which of the following is true?

A The demand curve is flat and downward sloping

B An increase in tastes and preferences will cause a greater change in the quantity than the price

C A decrease in costs will cause a greater change in the quantity than in the price

D The quantity demanded is not very responsive to a change in the price

Question #7

Consider cell phones. Over time, people consider this device increasingly essential. What would this mean for its PED?

A More elastic

B More inelastic

C More cosmetic

D None of the above

Question #8

Which of the following will clearly cause a decrease in the total revenue for the entire market?

A Buyers’ income increases

B The implementation of an effective price floor on the market

C Buyers’ income increases and sellers expect the price to increase

D Tastes and preferences move away from the product

Question #9

Again, consider the market for video games in the early 1980s. As stated, due to looser licensing laws, more and more companies (firms) were producing video games. Also, due to a major fall in the quality of video games, people’s tastes and preferences moved to other forms of entertainment. Using what you have learned from this class, what happens to the quantity of the video games?

A Decreases

B Stays the same

C Unclear

D Increases

Question #10

Consider the market for video games in the early 1980s. Due to looser licensing laws, more and more companies (firms) were producing video games. Due to a major fall in the quality of video games, people’s tastes and preferences moved to other forms of entertainment. What do you think happened to the price of video games?

A Increases

B Unclear

C Stays the same

D Decreases

Question #11

Suppose you have the following information for the supply for toddler walkers:
P1=20 Q1=500
P2=10 Q2=100
Which of the following is true?

A PES for toddler walkers is inelastic

B The quantity supplied does not change much when price increases

C A decrease in costs will cause a greater change in the price than in the quantity

D An increase in tastes and preferences will cause a greater change in the quantity than the price

Question #12

Suppose a good has a PED of -0.4. What can be inferred from this number?

A Buyers will buy the product even if the price rises by a large amount

B The good has no complements

C Its demand curve is steep and downward sloping

D The good likely has many substitutes

Question #13

Consider the market for gas powered cars. In the past decade, there has been the emergence of pure electrical cars and hybrid plug in cars. What do you think would be the effect of these new options on the PED for gas powered cars?

A Decrease in its magnitude (that is, its absolute value)

B Unclear

C Unchanged

D Increase in its magnitude (that is, its absolute value)

Question #14

What is the specific definition of the PES?

A The percentage change in quantity supplied from a 1% increase in the price

B The change in quantity supplied from a given change in the price

C The Price Elasticity of Supply

D The unit change in quantity supplied from a $1 increase in the price

Question #15

Suppose the tax per unit increases. What is the effect on the tax revenue?

A Unclear

B Increase

C Stays the same

D Decrease

Question #16

What is the effect of a tax?

A The quantity increases

B Consumers of this good are made happier by the tax

C The price sellers receive decreases

D The price buyers pay decreases

Question #17

According to this course, what major economic principle is demonstrated by price controls (such as rent control)?

A Markets are usually the best way to allocate resources

B People face tradeoffs

C Decisions are often marginal

D None of the above

Question #18

In the kidney market in the US, people are not allowed to sell a kidney for money but must be willing to give it away without any financial payment. In this market, which of the following is true?

A There will be a long waiting list to get a kidney

B A price floor has been applied

C The PED has increased in magnitude

D The government’s policy will cause the supply curve of kidneys to shift

Question #19

Use the table from the previous problem. Suppose the government sets a price ceiling of $150. What is the amount bought and sold?

A 2,500

B 5,500

C 4,000

D 3,500

Question #20

We have the following table for humidifiers:
Price Quantity supplied Quantity demanded
$200 6,500 1,500
$175 6,000 2,000
$150 5,500 2,500
$125 5,000 3,000
$100 4,500 3,500
$75 4,000 4,000
$50 3,500 4,500
$25 3,000 5,000
$0 2,500 5,500
What is the equilibrium price?

A $125

B $175

C $75

D $150

Question #21

Suppose for the market for housing that both buyers and sellers expected the price to increase. Which of the following would result?

A Price rises and quantity is unclear

B Price falls and quantity is unclear

C Price rises and quantity rises

D None of the above

Question #22

Consider the market for pork in China. A major disease is spreading through the pig population that has wiped out for half of the livestock. What effect would this disease have on the equilibrium price and quantity for pork in China?

A Price falls and quantity is unclear

B Price is unclear and quantity falls

C Price rises and quantity falls

D Price falls and quantity rises

Question #23

Think about the gas market at the start of autumn when people drive less. Applying the three-step process, what would happen in this market at that time?

A Price falls and quantity falls

B Price is unclear and quantity is unclear

C Price rises and quantity is unclear

D None of the above

Question #24

Consider the market for marijuana. Suppose the price of a vaporizer (which is used to consume marijuana) becomes cheaper. What is the effect on P and Q on the market for marijuana?

A Price falls and quantity is unclear

B Price is unclear and quantity is unclear

C P is unclear and quantity falls

D Price increases and quantity increases

Question #25

Think about the market for video game consoles. Suppose there is a decrease in tastes and preferences for these consoles as people play more games on their cell phones. At the same time, the cost of making consoles increases. What is the effect of these changes on the equilibrium price and quantity for video game consoles?

A Price falls and quantity is unclear

B Price increases and quantity increases

C Price is unclear and quantity is unclear

D Price is unclear and quantity falls

Question #26

Recall the video from the lecture slides about hula hoops that shows a little boy happening upon a hula hoop and then performing in front of a bunch of kids – who then love the hula hoops and rush to buy them. Which of the following best describes the effect of this little boy on the market for hula hoops?

A Supply shift to the right

B Supply shift to the left

C Demand shift to the left

D Demand shift to the right

Question #27

Consider the market for gas in the US. Suppose there is an attack on a major oil supplying country that decreases the supply of oil and causes the price of oil to rise. Oil is used to produce gas. As a result, the attack causes the price and quantity of gas to decrease.

A TRUE

B FALSE

Question #28

Recall the market for marijuana in Colorado discussed in lecture. Recall that in January of 2014 the market had a shortage. Which of the following was true?

A The market has moved towards its new equilibrium so the shortage disappeared

B The market has moved from a shortage to surplus

C Marijuana in Colorado does not really make people feel hungry (nor stoned)

D The market has had a shortage since then

Question #29

What is the definition of the supply curve?

A The curve telling us what a country is capable of producing if it uses all its resources

B The curve telling us how many puffs of marijuana are optimal at a given price

C The curve telling us the quantity supplied at a given price

D None of the above

Question #30

Which of the following is an example of a positive statement about microeconomics?

A The unemployment rate for November 2018 is 3.7%

B The Trump tax cuts should be repealed

C A tax causes an increase in the price buyers pay for a good

D The tax burden is dependent on whom the tax is applied on

Question #31

If there is no trade, what does the Circular Flow Model look like?

A It omits a sector of the economy known as the government

B It looks more like a circle

C It consists only of households without any firms or markets

D It looks bigger

Question #32

The Circular Flow Model’s purpose is to show how a country’s individuals (persons and firms) interact.

A FALSE

B TRUE

Question #33

For the Circular Flow Model, inputs are supplied by households.

A TRUE

B FALSE

Question #34

Consider the principles of economics. Which of the following can be inferred from one of these principles of economics?

A To make a decision about whether to buy a textbook, I can just consider how helpful it will be

B To encourage more people to participate in the course discussions, I make each discussion worth fewer points

C When your teacher decided to teach this course, he must worry about alternative uses of his time

D An increase in a nation’s income means its life expectancy is going to fall

Question #35

Recall the policy of requiring restaurants and fast food places to show the calorie counts for each meal. What economic principle explained why this policy backfired?

A Tradeoffs

B Trade is beneficial

C Income affecting the standard of living

D People respond to incentives

Question #36

An example of a marginal decision is whether to spend an additional hour doing chores.

A FALSE

B TRUE

Question #37

Consider the following decision: whether to go to community college. Suppose there is an increase in the wages for full-time jobs that require a high school diploma. In terms of the net benefit equation, how is the choice of whether to go to community college affected?

A The opportunity cost of going to community college increases

B The benefit of going to community college increases

C The explicit cost of going to community college increases

D The Nazarov cost of going to community college decreases

Question #38

In terms of net benefit, what is the effect of a decrease in the tastes and preferences for landline phones on the decision to purchase a landline phone?

A Increases the benefit

B Decreases the explicit cost

C Decreases the benefit

D Increases the opportunity cost

Question #39

Which of the following is a possible benefit of taking this test?

A Caring for a loved one

B Raising your grade in the course from getting a good grade on the exam

C Studying for another course’s exam

D Watching a TV show with your friends

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