1. A good definition of economics involves some reference to a. scarcity and choice. b. Harry Potter and Hermione Granger. c. money and wealth. d. Sherlock Holmes and Dr. Watson. e. (a) and (c). 2. The income elasticity of demand for good 2 is 1.0. This indicates that good 2 is a. a normal good. b. an inferior good. c. elastic in demand. d. unit elastic in demand. e. (a) and {d}. 3. There is a decrease in the supplyr of scissors. In other words, the supplyr curve for scissors shifts to the left. As a result, what will happen to the equilibrium price and quantityr of scissors? a. The equilibrium price will rise; the equilibrium quantity will rise. The equilibrium price will fall; the equilibrium quantity will fall. The equilibrium price will rise; the equilibrium quantity will fall. The equilibrium price will fall; the equilibrium quantity will rise. All ofthe above\" {DP-PF 4. When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price. a. demand is elastic. demand is unit elastic. demand is inelastic. the good in question is a normal good. la} and {d}. EDP-PF 21. For a seller, total revenue is equal to a. price. b. quantity. c. price plus quantity. d. price divided by quantity. e. price multiplied by quantity. 22. There is an increase in the demand for birdcages. In other words, the demand curve for birdcages shifts to the right. What will happen to the equilibrium price and quantity of birdcages as a result? a. The equilibrium price will rise; the equilibrium quantity will rise. The equilibrium price will fall; the equilibrium quantity will fall. The equilibrium price will rise; the equilibrium quantity will fall. The equilibrium price will fall; the equilibrium quantity will rise. All ofthe above\" {DP-99' 23. Consumer surplus is represented graphically by a. the vertical distance between price and average total cost. the area between the demand curve and the price line. the area between the supply curve and the demand curve. the area of the deadweight-loss triangle. an abstract painting by Piet Mondrian. EDP-953' 24. When incomes go up, the demand curve for some good shifts to the left. This indicates that this good is a. elastic in demand. b. inelastic in demand. c. a normal good. d. an inferior good. e. (b) and {d}. 25. Currently, in the market for labor, the quantity demanded is greater than the quantity supplied. Assuming that no price-control laws apply to labor, which of the following statements is/are true? a. The market for labor is experiencing a shortage. b. The market for labor is experiencing a surplus. c. There will be pressure for the price of labor to increase. d. (a) and (cl. e. Not enough information has been given to answer the question. 26. The demand curve for computers shifts to the right. At the same time, the supply curve for computers shifts to the left. When these two inuences are taken together, what will be the net effect on the equilibrium price and quantity? a. Price will decrease; quantity will decrease. b. Price will increase, but the effect on quantity cannot be determined without more specic information. c. Quantity will increase, but the effect on price cannot be determined without more specic information. d. Quantity will decrease, but the effect on price cannot be determined without more specic information. e. Price will decrease, but the effect on quantity cannot be determined without more specic information. 27. A minimum-wage law pushes the wage rate above its equilibrium level for a group of workers. Assuming that the law is enforced, what will happen to the total amount of money paid to the affected group of workers? a. The total amount of earnings will increase. b. The total amount of earnings will decrease. c. The total amount of earnings will remain the same. d. Not enough information has been given to answer the question. e. (a) and {b}. 28. In the Republic of Bunuel, the economy is on its production-possibilities frontier (p.p.f.) in 2018. Then, by one year later (in 2019), the economy produces more of every good than it had produced in 2018. How could this occur? a. By reducing waste, so that the available resources are used more efficiently. b. By moving downward and to the right along the existing p.p.f. c. By moving upward and to the left along the existing p.p.f. d. By adopting new technologies and increasing the size ofthe labor force. e. (a) and (d). 29. Which of the following is a true statement regarding market equilibrium? 3. When the market price is at its equilibrium level, quantity demanded is equal to quantity supplied. b. Graphically, market equilibrium occurs where the supply curve and the demand curve cross each other. c. When the market price is at its equilibrium level, there is neither a surplus nor a shortage. d. All of the above. e. None of the above. 30. There is a decrease in the price of good A. Good A and good B are complements. What (if anything) will happen in the market for good B? a. The supply curve for good B will shift to the right. b. The supply curve for good B will shift to the left. c. The demand curve for good B will shift to the right. d. The demand curve for good B will shift to the left. e. None of the above: The increase in the price of good A will have no effect on good B. Free Response (5 questions) 1. The own-price elasticity of demand for backpacks is 2. The quantity demanded goes up by 10%. Assume that a change in price is the only reason for this change in quantity demanded. What must have happened to the price, in order for quantity demanded to have changed in this way? (hint: rst write down the general elasticiwjormula and use it to identg'v how price must have changed). 2. The demand curve for good A is given by Q] = 75 2P. The supply curve for good A is given by Q; = 3P. Graph the supply and demand curves for good A. What are the equilibrium price and equilibrium quantity? 3. Refer to your answer from question 2. Suppose the government imposes a price ceiling of $12, add this price ceiling to your graph. How does the quantity suppliedfdemanded compare with the equilibrium quantity? (hint: put 12 in for P in the Qa' and Q5 equations) 4. Using separate supply-and-demand diagrams, show the effect of the following events on the market for computers. The price of a tablet rises. Faster computer chips are invented. The price of computer processors decreases, and the price of tablets fall. 5. Using separate supply-and-demand diagrams, show the effect of the following taxes on the market for cars. Make sure you illustrate the dierences in the prices paid by consumers and producers. A tax on sellers (assume that supply is more elastic than demand) A tax on buyers (assume that demand is more elastic than supply) 5. In an effort to raise its revenues, a restaurant increases the price of its mozzarella sticks. What does this imply about the beliefs of the restaurant's management, regarding the elasticity of demand for mozzarella sticks? a. Demand is believed to be elastic. b. Demand is believed to be inelastic. c. Demand is believed to be unit elastic. d. Demand is believed to be normal. e. Not enough information has been given to answer the question. 6. In the production-possibilities frontier diagram below, point R is Good Good x a. attainable, but associated with inefficient use of the available resources. b. attainable, and associated with efficient use of the available resources. c. unattainable with the resources that are currently available. d. all of the above. e. none of the above. 7. Refer to the same diagram that was used in question 6. Point Sis a. attainable, but associated with inefficient use of the available resources. b. attainable, and associated with efficient use of the available resources. c. unattainable with the resources that are currently available. d. All of the above. e. None of the above. 8. We observe an increase in the equilibrium price of paring knives, and a decrease in the equilibrium quantity of paring knives. Which of the following could have caused these changes? a. A rightward shift in the demand curve for paring knives. b. A leftward shift in the demand curve for paring knives. c. A rightward shift in the supply curve for paring knives. d. A leftward shift in the supply curve for paring knives. e. All ofthe above!!! Remarkably enough, an increase in the equilibrium price and a decrease in the equilibrium quantity are consistent with (a), (b), (c), and (d)!!! 9. The elasticity of demand for yellow highlighters is 3. The quantity demanded goes down by 15%. Assume that a change in price was the only reason for this change in quantity demanded. What must have happened to the price, in order for quantity demanded to have changed in this way? a. Price was unchanged. b. Price went up by 5%. c. Price went up by 15%. d. Price went up by 18%. e. Price went up by 45%. 10. There is a decrease in the price of a printer cartridge, from $33 to 527. As a result, the quantity demanded increases from 950 to 1050. What is the own-price elasticity of demand? a. ol2rtl'1 b. zero c. 0.5 cl. 1.0 e. 2.0 11. Assume that SUVs are a normal good. Also assume that SUVs and motorcycles are substitutes. Which of the following would be expected to shift the demand curve for SUVs to the right? a. An increase in the incomes of potential buyers of SUVs. b. A decrease in the price of SUVs. c. An increase in the price of motorcycles. d. All ofthe above. e. la) and it) only. 12. Microeconomics is primarily concerned with a. the behavior of households and business firms. and the way in which they interact in markets. b. objects that are less than one micron in diameter. c. the overall rate of inflation. d. the overall rate of unemployment. e. (a) and (d). 13. For Clarence Gideon really enjoys going to the movie theatre. Here is the value {or willingness to pay) that Clarence places on each movie ticket he buys in a month: Quantity Willingness to Pay: 0 _- 1 $12 2 10 3 8 4 6 5 4 6 2 The current market price of a movie ticket is $8. How many movie tickets will Clarence buy this month? a. {DP-9F U'I-PIWMIl 14. A price-ceiling law is enforced at a price that is lower than the equilibrium price. As a result. a. the law will not have any effect. b. there will be a surplus. c. there will be a shortage. cl. the number of units actuallyr bought and sold will decrease. e. (cl and (d). 15. Which of the following would shift the supply curve for iPhones? a. An increase in the incomes of potential buyers of iPhones. b. An increase in the price of Samsung Galaxy phones, which are substitutes for iPhones. c. An increase in the price of computer chips, which are an input in the production of iPhones. d. An increase in the popularity of iPhones. e. None of the above. 16. The supplyr of burritos is given by Q. = 2P. The demand for burritos is given by Qd = 30 - P. What are the equilibrium price and quantityr of burritos? a. P=$5,o= 15. b. P = $10, C1: 20. c. P = $15, 0.: 15. d. P = $20, Q: 10. e. P = $30, Q = 800,000,000. 17. Paper is an important input in the production of comic books. There is a decrease in the price of paper. What will happen to the equilibrium price and quantity of comic books? a. Price will rise, but the effect on quantity cannot be determined without additional information. b. Price will fall; quantity will fall. c. Price will fall; quantity will rise. d. Price will rise; quantitv will rise. e. Price will rise; quantityr will fall. 18. The equilibrium price for a good is $100. A price-floor law is put into effect. The price floor is enforced at $50 per good. What effectls) will the price oor have? a. The price floor will lead to a shortage. b. The price floor will lead to a surplus. c. The price oor will have no effect. d. All of the above. e. None of the above. 19. The opportunity cost of producing silk neckties is lower in lllyria than anywhere else. This implies that a. lllyria has comparative advantage in the production of silk neckties. b. It would be beneficial for lllyria to specialize in the production of silk neckties, and export them to other countries. c. Producers in lllyria would be better off if the governments of other countries would impose tariffs on imports of silk neckties from Illyria. c. All of the above. e. (a) and {b} only. 20. what does a price floor that is enforced above the equilibrium price have in common with a price ceiling that is enforced below the equilibrium price? a. Both will lead to a shortage. b. Both will lead to a surplus. c. Both will reduce the quantity that is actually bought and sold. d. Neither will have any effect on the market. e. All of the above are true