Econ 1030 - Principles of Microeconomics » Summer 2021 » Test 2
Need help with your exam preparation?
Get Answers to this exam for $6 USD.
Get Answers to all exams in [ Econ 1030 - Principles of Microeconomics ] course for $25 USD.
Existing Quiz Clients Login here
Question #1
Which of the following statements is false?
A.
When the price of an item goes down, ceteris paribus, the quantity supplied will go down, but the supply will not change.
B.
A change in the supply of an item will cause a change in its price, but a change in the price of an item will not cause a change in its supply.
C.
When the supply curve for an item shifts to the right, ceteris paribus, it will cause the price of that item to go up.
D.
There is a direct (positive) relationship between price and quantity supplied.
Question #2
Which of the following does not explain why is there an inverse (negative) relationship between price and quantity demanded?
A.
Income effect -- that is, a price change can affect the amount of some item you can afford to purchase.
B.
Substitution effect -- that is, a price change can affect the opportunity cost of purchasing some item and your willingness to switch to (or from) another item.
C.
Diminishing marginal utility -- as you consumer more, as the result of a price decrease, the additional satisfaction received from the additional units consumed will start to go down.
D.
When the price of an item increases, you buy more because it is more valuable.
Question #3
Which of the following statements is true?
A.
A price ceiling set above the equilibrium price, in a particular market, will cause a surplus.
B.
A price floor set below the equilibrium price in a particular market will cause a shortage.
C.
A price floor set above the equilibrium price, in a particular market, will have no effect on that market.
D.
A price ceiling set below the equilibrium price in a particular market will cause a shortage.
Question #4
Which of the following is true?
A.
A price floor for a resource, such as the minimum wage, set above its equilibrium price, would increase the demand for that resource.
B.
Rent control is an example of a price floor.
C.
A price ceiling on some item, set below its equilibrium price, creates rationing problems.
D.
A price ceiling on gasoline, set below its current equilibrium price, would assure that everyone would be able to buy gasoline at an affordable price.
Question #5
Which of the following is not a determinant of demand?
A.
Consumers’ expectations about their income, wealth and/or the price of the item
B.
Household’s income and wealth.
C.
Changes in the price of a substitute or complement
D.
The price of the item
Question #6
Consider the circular flow model. In the resource market, the firm does the demanding and the household does the supplying.
A.
TRUE
B.
FALSE
Question #7
An argument that some economists make against the minimum wage is that:
A.
It will decrease production costs and ultimately make the price of the product they produce too low.
B.
It will cause too many workers to be demanded.
C.
If it is too high, it will cause fewer workers to be demanded.
D.
All of the above are valid arguments against the minimum wage.
Question #8
Suppose you were shopping and saw a widget you’d like to buy – but there was no price tag. After some consideration, you determined that you’d spend as much as $25 to buy the widget. When you inquired about the price to a sales clerk, he said the price was $7. The difference between the two values is known as:
A.
Producer surplus
B.
Consumer surplus
C.
Deadweight gain
D.
Deadweight loss
Question #9
The society as a whole is better off when:
A.
Producer surplus has been maximized and consumer surplus has been minimized
B.
The sum of producer and consumer surplus has been maximized
C.
Consumer surplus has been mazimized and producer surplus has been minimized.
D.
The sum of producer and consumer surplus is zero.
Question #10
Market failure is said to occur whenever:
A.
government intervenes in the functioning of private markets.
B.
prices rise.
C.
private markets do not allocate resources in the most economically desirable way.
D.
some consumers who want a good do not obtain it because the price is higher than they are willing to pay.
Question #11
Which of the following is an example of market failure?
A.
Public goods.
B.
Negative externalities.
C.
Negative externalities, positive externalities, and public goods.
D.
Positive externalities.
Question #12
People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a:
A.
negative externality.
B.
government failure.
C.
supply-side market failure.
D.
demand-side market failure.
Question #13
From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically:
A.
maximizes the net benefit to society.
B.
generates more of a benefit than it costs to produce.
C.
costs more to produce than it provides in benefits.
D.
produces a benefit exactly equal to the cost of producing the last unit.
Question #14
The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?
A.
Positive externality.
B.
Demand-side market failure.
C.
Demand-side market failure, supply-side market failure and positive externality.
D.
Supply-side market failure.
Question #15
The two main characteristics of a public good are:
A.
nonrivalry and large negative externalities.
B.
nonrivalry and nonexcludability.
C.
nonexcludability and production at rising marginal cost.
D.
production at constant marginal cost and rising demand.
Question #16
Which of the following is an example of a public good?
A.
A sofa.
B.
A bottle of soda.
C.
A television set.
D.
A weather warning system.
Question #17
The market system does not produce public goods because:
A.
there is no need or demand for such goods.
B.
public enterprises can produce such goods at lower cost than can private enterprises.
C.
private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.
D.
their production seriously distorts the distribution of income.
Question #18
Which of the following is a key difference between the economic activities of government and those of private firms?
A.
Government focuses primarily on equity; private firms focus only on efficiency.
B.
Private firms face the constraint of scarcity; government does not.
C.
Government has the legal right to force people to do things; private firms do not.
D.
Private economic activities create externalities; government activities do not.
Question #19
The government of Southland wants to improve resource allocation in the country. Which of the following actions by the Southland government is most likely to accomplish this?
A.
Taxing polluters and subsidizing firms that are creating significant positive externalities.
B.
Coercing all firms to innovate and invest.
C.
Weakening enforcement of laws and contracts.
D.
Promising to cover every risk of loss for private firms.
Question #20
The many layers of the federal government in the United States:
A.
enhance government's ability make effective decisions quickly.
B.
lead to economic inefficiencies because of difficulty aggregating and conveying information.
C.
improve accountability of government officials, thus leading to more efficient policies.
D.
better allow the invisible hand to direct government resources to their best uses.
Question #21
Individual accountability within the government bureaucracy:
A.
is not a problem because government bureaucrats are not affected by the self-interest that affects private sector individuals.
B.
tends to be greater than in private firms, making government more efficient than private firms.
C.
tends to be lacking because of civil service protections and the complexity of government.
D.
is easy to monitor because of the small size and scope of government.
Question #22
The idea of government failure includes all of the following except:
A.
bureaucratic inefficiency.
B.
special-interest effect.
C.
extensive positive externalities from public and quasi-public goods.
D.
pressure by special-interest groups.
Question #23
Suppose American winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions. This would be an example of:
A.
moral hazard.
B.
logrolling.
C.
rent-seeking behavior.
D.
the principal-agent problem.
Question #24
The political tendency to favor spending priorities with immediate benefits but deferred costs results in:
A.
misdirection of stabilization policy.; and, unfunded liabilities.
B.
chronic budget deficits.
C.
chronic budget deficits, misdirection of stabilization policy, and unfunded liabilities.
Question #25
Chronic budget deficits can be attributed to:
A.
inappropriate monetary policy.
B.
state budget laws.
C.
voters wanting government programs but not wanting to pay taxes.
D.
unfunded liabilities.
Question #26
The U.S. federal government's largest unfunded liability is:
A.
Social Security.
B.
national defense.
C.
Medicare.
D.
unemployment insurance.
Need help with your exam preparation?
Get Answers to this exam for $6 USD.
Get Answers to all exams in [ Econ 1030 - Principles of Microeconomics ] course for $25 USD.
Existing Quiz Clients Login here