NEW
Font size
WorksheetsMidterm I Review
Total questions: 15
Worksheet time: 11mins
The budget line shows:
A. the amount of product A that a consumer is willing to give up to obtain one more unit of product B.
B. all possible combinations of two goods that can be purchased, given money income and the prices of the goods.
C. the minimum amount of two goods that a consumer can purchase with a given money income.
D. all possible combinations of two goods that yield the same level of utility to the consumer.
The production possibilities curve:
A. shows all of those levels of production that are consistent with a stable price level.
B. indicates that any combination of goods lying outside the curve is economically inefficient.
C. is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.
D. shows all of those combinations of two goods that are most preferred by society.
Broadly defined, competition involves:
A. private property and freedom of expression.
B. independently acting buyers and sellers and freedom to enter or leave markets.
C. increasing opportunity costs and diminishing marginal utility.
D. capital goods and division of labor.
The law of demand states that, other things equal:
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower will be product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a product at high prices than at low prices.
Consider the market for coffee. Great weather in the Caribbean has allowed for a fantastic coffee season. And studies have recently shown that coffee consumption reduces heart disease. Which of the following statements is correct?
A. Demand increases and supply decreases, equilibrium price will fall, quantity is indeterminate.
B. Supply increases and demand decreases, equilibrium price will fall, quantity is indeterminate.
C. Demand increases and supply increases, equilibrium price will be indeterminate, quantity will rise.
D. Demand increases and supply increases, equilibrium price will be increased, quantity will rise.
A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:
A. beer and marijuana are substitute goods.
B. beer and marijuana are complementary goods.
C. beer is an inferior good.
D. marijuana is an inferior good.
At a price of $20 per unit, 140 units of good W are demanded and 100 units are supplied. When the price is raised to $30 per unit, 100 units are demanded and 140 units are supplied. The price elasticity of supply in this range is:
A. 1.0
B. .833
C. .417
D. 1.20
A remote island nation is discovered, and on this island the cross elasticity of demand for coconut milk and fruit punch is +1.0. This indicates that the two goods are:
A. Normal
B. Inferior
C. Complements
D. Substitutes
Market failure is said to occur whenever:
A. private markets do not allocate resources in the most economically desirable way.
B. prices rise.
C. some consumers who want a good do not obtain it because the price is higher than they are willing to pay.
D. government intervenes in the functioning of private markets.
In a free-market economy, a product which entails a positive externality will be
A. Overproduced
B. Underproduced
C. Produced at the optimal level
D. Associated only with goods and services provided by the government
When producing a good generates external costs, the private market for that good tends to produce too:
A. Much of the product at too low a price
B. Much of the product at too high a price
C. Little of the product at too low a price
D. Little of the product at too high a price
A decrease in resource prices will:
A. increase equilibrium price and quantity.
B. decrease equilibrium price and quantity.
C. decrease equilibrium price and increase equilibrium quantity.
D. increase equilibrium price and decrease equilibrium quantity.
An effective ceiling price will:
A. induce new firms to enter the industry.
B. result in a product surplus.
C. result in a product shortage.
D. clear the market.
Producer surplus:
A. is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
B. rises as equilibrium price falls.
C. is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
D. is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.
Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:
A. 0.8.
B. 1.2.
C. 1.6.
D. 8.0
