Glendale Community College » Economics » Econ 101 - Microeconomics » Winter 2022

Econ 101 - Microeconomics » Winter 2022 » Test 1

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Question #1

A price floor implemented in a labor market causes excess demand in the labor market, resulting in the need to ration by some means other than price.

A. False

B. True

Question #2

Debating about what the distribution of income should be in an economy is an example of normative economics.

A. False

B. True

Question #3

Empirical observation shows that when bad weather conditions decrease corn crop yields, the price of corn will fall.

A. True

B. False

Question #4

If Mexico decides to impose a 50 percent tax on natural gas exports to be paid by suppliers. All else being equal, this causes the:

A. supply of natural gas exports to shift to the right.

B. quantity of natural gas exports produced to increase.

C. supply of natural gas exports to shift to the left.

D. demand for natural gas exports to shift to the right.

Question #5

If price increases and there is an indeterminate change in quantity, this is consistent with a:

A. leftward shift in supply and a rightward shift in demand.

B. rightward shift in supply and a leftward shift in demand.

C. leftward shift in demand and no shift in supply.

D. leftward shift in supply and no shift in demand.

Question #6

If quantity declines and price also declines, this is consistent with a:

A. leftward shift in supply keeping demand constant.

B. rightward shift in supply and demand.

C. rightward shift in demand and a leftward shift in supply.

D. leftward shift in demand keeping supply constant.

Question #7

If you are to properly engage in economic reasoning, an individual must compare:

A. total cost and total benefit.

B. marginal cost and marginal benefit.

C. marginal cost, sunk cost, and total benefit.

D. sunk cost and marginal cost.

Question #8

If, at a good's current price, the quantity demanded is 2,000 units and the quantity supplied is 1,000 units then:

A. the market price is above equilibrium

B. the market price is at the equilibrium price

C. the market price is below equilibrium

D. price is most likely going to decline

Question #9

Nike decides to invest $60,000,000 into a shoe factory in Vietnam. What is the opportunity cost in this situation?

A. the benefit it could have received from investing the $60,000,000 into a clothing factory

B. the costs that it would had incurred if it invested the $60,000,000 into a clothing factory

C. the material costs that go into producing another shoe in that factory

D. the marginal revenue it receives from that factory

Question #10

Opportunity cost:

A. includes only monetary outlays.

B. is nonexistent for some choices.

C. is the net benefit forgone by not undertaking the next best alternative.

D. is the same as sunk cost.

Question #11

Suppose that in the rice market demand shifts due to a new rice diet that is being marketed in the U.S. as a cure for cancer. Simultaneously the supply curve shifts due to a flood that affects the rice crop in California. What is the most likely outcome in this situation?

A. the demand curve will shift back to its original level

B. the equilibrium price increases

C. the supply curve will shift again after demand meets supply

D. the equilibrium price increases, albeit by a negligible amount

Question #12

Suppose that in the rice market demand shifts greatly due to a new rice diet that is being marketed heavily in the U.S. as a cure for cancer. Simultaneously the supply curve shifts slightly due to a healthy rainy season that positively affects the rice crop in California. What is the most likely outcome in this situation?

A. equilibrium price and quantity decreases

B. equilibrium price and quantity increases

C. equilibrium price decreases and quantity increases

D. equilibrium price increases and quantity decreases

Question #13

Suppose that in the rice market demand shifts slightly due to a new rice diet that is being marketed in the U.S. as a cure for cancer. Simultaneously the supply curve shifts greatly due to a healthy rainy season that positively affects the rice crop in California. What is the most likely outcome in this situation?

A. the equilibrium price will decrease

B. the supply curve will shift again after demand meets supply

C. the equilibrium price will increase

D. the equilibrium quantity will fall

Question #14

Suppose that the equilibrium price and quantity for 1 bedroom apartments in Orange County is $2,000 and 250,000 respectively. What is the most likely outcome from the Orange County Board of Supervisors' implementation of a price ceiling at $1,500 for a 1 bedroom apartment?

A. no effect

B. a shortage of apartments

C. excess supply

D. a surplus of apartments

Question #15

Suppose that there is no third-party payer in the medical care market in Spain in 1973. Suppose that in 1975, health insurance companies begin operations in Spain. All else being equal, what does supply and demand analysis predict will happen in the medical care market in 1975?

A. Total expenditures will decline

B. Total expenditures will increase

C. The total quantity will decline

D. Demand will decrease in the medical care market initially due to insurance premium costs, but will increase over the long term

Question #16

Suppose we are analyzing the gasoline market. Initially we are at the following equilibrium point: P=$5 and Q=30,000 Now suppose incomes increase and simultaneously the price of petroleum (input for gasoline production) increases. Question: After the shifts what happened to equilibrium price and quantity in the gasoline market?

A. The equilibrium quantity increased, but we can't tell what happened to the equilibrium price because we aren't given any information about the relative size of the shifts in supply and demand in the market.

B. The equilibrium price decreased, but we can't tell what happened to the equilibrium quantity because we aren't given any information about the relative size of the shifts in supply and demand in the market.

C. The equilibrium quantity decreased, but we can't tell what happened to the equilibrium price because we aren't given any information about the relative size of the shifts in supply and demand in the market.

D. The equilibrium price increased, but we can't tell what happened to the equilibrium quantity because we aren't given any information about the relative size of the shifts in supply and demand in the market.

Question #17

Suppose we are in the blueberry market. The initial equilibrium point is P=$5 and Q=23 Now suppose incomes decline and simultaneously fertilizer (input) prices increase. Question: After the shifts what happened to equilibrium price and quantity in the blueberry market?

A. Equilibrium quantity increased because the decrease in demand and supply both led to an increase in quantity. The change in equilibrium price is ambiguous. This is due to the fact that we are not given information about the relative size of the shifts. A decrease in demand tends to decrease price, but the decrease in supply tends to increase price.

B. Equilibrium quantity declined because the decrease in demand and supply both led to a decrease in quantity. The change in equilibrium price is ambiguous. This is due to the fact that we are not given information about the relative size of the shifts. A decrease in demand tends to decrease price, but the decrease in supply tends to increase price.

C. Equilibrium quantity declined because the decrease in demand and supply both led to a decrease in quantity. The equilibrium price declined. This is due to the fact that we are not given information about the relative size of the shifts. A decrease in demand tends to decrease price, but the decrease in supply tends to decrease price.

D. The change in equilibrium quantity is ambiguous. A decrease in demand tends to decrease quantity, while a decrease in supply tends to increase quantity. The equilibrium price declined. This is due to the fact that we are not given information about the relative size of the shifts. A decrease in demand tends to decrease price, but the decrease in supply tends to decrease price.

Question #18

Suppose, that the demand for watches decreases and shifts the demand curve due to the invention of the iphone. Immediately after the shift in demand and at the "old" equilibrium price, how would you describe the situation in the market? Assume that nothing happened to the supply curve.

A. excess demand

B. excess supply

C. Disequilibrium to due to an endogenous shock in the marketplace

D. excess equilibrium

Question #19

Suppose, that the demand for watches increases and shifts the demand curve due to increased advertising by watch manufacturers. Immediately after the shift in demand and at the "old" equilibrium price, how would you describe the situation in the market? Assume that nothing happened to the supply curve.

A. Excess demand

B. excess supply

C. excess production

D. not enough information provided to answer the question

Question #20

The difference or the distinction between demand for a good and the quantity demanded of good is best articulated by saying that:

A. the quantity demanded is in an inverse relation with prices, whereas demand is in a direct relation.

B. the quantity demanded is represented graphically by a curve and demand as a point on that curve.

C. demand is represented graphically by a curve and quantity demanded as a point on that curve.

D. the quantity demanded is in a direct relation with prices, whereas demand is in an inverse relation.

Question #21

The economic decision rule states that you should engage in an activity only when the marginal benefits of that action are greater than its total costs.

A. True

B. False

Question #22

The law of demand states that the price and the quantity demanded of a good have an inverse relationship. Therefore, as the price of a good goes:

A. down, the quantity demanded stays the same.

B. up, the quantity demanded goes down.

C. down, the quantity demanded goes down.

D. up, the quantity demanded also goes up.

Question #23

The minimum wage implemented in labor markets is an example of a price floor.

A. True

B. False

Question #24

The most likely impact of an effective price floor in a market is:

A. the supply curve will shift to the right.

B. a surplus will develop.

C. a shortage will develop.

D. the demand curve will shift to the left.

Question #25

The opportunity cost of paying off a $10,000 auto loan early is:

A. The net benefit from saving interest payments on the $10,000 auto loan

B. The foregone interest expense you would have incurred on the $10,000

C. All of the available answers

D. The amount of investment income or interest income you could have earned by investing or loaning out that $10,000

Question #26

The use of the statement "other things constant" in a supply and demand model indicates that:

A. we are considering changes in just one factor.

B. we are considering all the changes which might take place in actual markets.

C. an equilibrium price has been reached.

D. an equilibrium quantity has been reached.

Question #27

When the price of gasoline declines, the demand for electric cars likely:

A. falls, lowering their equilibrium price and raising equilibrium quantity.

B. falls, raising their equilibrium price and lowering equilibrium quantity.

C. rises, raising their equilibrium price and quantity.

D. falls, lowering their equilibrium price and quantity.

Question #28

Which of the following would cause quantity demanded to change without shifting the demand curve?

A. A change in the price of the good

B. A change in the price of a substitute good

C. A change in society's income

D. A change in advertising expenditures

Question #29

A. A change in income

B. A change in the price of the good in the model

C. A change in taxes on consumers

D. None of the available answers

Question #30

A. Lamborghini

B. Student slot into Harvard Medical School

C. Chanel Shoes

D. Rare metal coins

Question #31

Which scarce service, good, or resource would most likely produce superior "technical outcomes" if it were to be distributed via non-market rationing, when the outcomes are compared to market rationing?

A. Student slot into Harvard Medical School

B. Rare metal coins

C. Chanel Shoes

D. Lamborghini

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