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

Econ 101 - Microeconomics » Fall 2022 » Midterm

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Question #1

Which of the following is not a characteristic of a market economy?

A. None of these choices

B. Goods and services are sold in a competitive way.

C. Individuals, not the government, own the factors of production.

D. Monetary incentives exist for entrepreneurs who bear risk.

E. Government services are limited to basic protections such as enforcing laws and protecting the public.

Question #2

In the resource market of the circular flow model,

A. households buy resources/labor from firms and firms sell resources/labor to households

B. households buy resources/labor from firms.

C. firms buy resources/labor from households and households sell resources/labor to firms.

D. firms sell resources/labor to households.

Question #3

Which of the following will not cause a shift of either the demand or supply curve for Toyota Priuses?

A. Consumers realize the Prius is a slow and tacky vehicle.

B. The government provides Toyota a subsidy for each car produced.

C. The price of steel used in the production of Priuses increases.

D. The cost of gas increases.

E. The price of Toyota Priuses rises.

Question #4

Use the following table on the national supply and demand of bicycles to answer questions 4 and 5. m=million Price ($) Demand 1 Demand 2 Supply 1,000 2m 8m 20m 800 5m 16m 16m 600 12m 22m 12m 400 16m 30m 8m 200 20m 36m 4m The equilibrium price and quantity of bicycles if Demand 1 is the market demand curve are:

A. $600 and 22m

B. $400 and 16m

C. $800 and 5m

D. $600 and 12m

E. $800 and 16m

Question #5

Which of the following could cause demand to shift from Demand 1 to Demand 2?

A. the price of bicycles decreases

B. the price of gas increases

C. None of these choices

D. the price of bicycles increases

E. the price of gas decreases

Question #6

Consider the market for computers. What effect would the creation of a new technology that allows suppliers to more efficiently produce computers have on the equilibrium price and quantity?

A. price increases, quantity sold increases

B. price increases, quantity sold decreases

C. price decreases, quantity sold may increase or decrease

D. price decreases, quantity sold decreases

E. price decreases, quantity sold increases

Question #7

Consider the market for designer shoelaces. If the price of shoes increases, and at the same time the price of cotton (an input to the shoelace production process) decreases, what will be the effect on the equilibrium price and quantity for designer shoelaces?

A. quantity sold decreases, price may increase or decrease

B. quantity sold increases, price may increase or decrease

C. price decreases, quantity sold increases

D. price increases, quantity sold may increase or decrease

E. price decreases, quantity sold may increase or decrease

Question #8

Assume the demand and supply for college in Los Angeles in a year are represented by the equations below. Assume P = tuition price and Q = degrees earned per year. Supply: P = 10,000 + Q Demand: P = 100,000 – 2Q In a free market at equilibrium (no government involvement), the number of degrees earned per year is:

A. 30,000 – which is less than the societally optimal amount since education is a negative externality

B. 30,000 – which is more than the societally optimal amount since education is a positive externality

C. 30,000 – which is less than the societally optimal amount since education is a positive externality

D. 60,000 – which is less than the societally optimal amount since education is a positive externality

E. 60,000 – which is more than the societally optimal amount since education is a positive externality

Question #9

For goods that create a negative externality, which of the below policies would help bring production in line with societally optimal levels?

A. A subsidy to buyers

B. All of the choices

C. A tax on producers

D. A subsidy to producers

E. None of the choices

Question #10

Which of the following is not an example of fiscal policy?

A. decreasing taxes

B. cutting subsidies for the agriculture industry

C. increasing interest rates

D. a public works project to rebuild a bridge

E. increasing taxes

Question #11

A company is currently selling 100,000 products a year at a price of $10 each. Through market research they know that if they were to lower the price to $8 they would sell 110,000 products a year. Which of the following is true about the elasticity of demand for this product at the prices given?

A. Ed = 0.4, demand is elastic

B. Ed = 0.4, demand is inelastic

C. Ed = 0.9, demand is elastic

D. Ed = 2.3, demand is elastic

E. c. Ed = 0.9, demand is inelastic

Question #12

A company is currently selling 100,000 products a year at a price of $10 each. Through market research they know that if they were to lower the price to $8 they would sell 110,000 products a year Which of the following is most likely being described in the question?

A. Luxury

B. An item that represents a large portion of consumers’ income

C. An item that consumers can quickly and easily change their consumption of

D. Necessity

E. An item with many substitutes

Question #13

Which of the following could be the income elasticity of demand for bus rides (assuming this consumer does not enjoy taking the bus)?

A. -0.5

B. None of the choices

C. 0

D. 0.5

E. 1

Question #14

If the cross elasticity of demand between products A and B is negative, this implies:

A. products A and B are complements, if the price falls for B the demand for A rises

B. products A and B are substitutes, if the price falls for B the demand for A falls

C. products A and B are complements, if the price falls for B the demand for A falls

D. products A and B are unrelated

E. products A and B are substitutes, if the price falls for B the demand for A rises

Question #15

If a company knows the demand curve for their product is inelastic, which of the following is true?

A. They would lose revenue from a small price increase

B. They would gain revenue from a small price decrease and they would lose revenue from a small price increase

C. They would gain revenue from a small price increase and they would lose revenue from a small price decrease

D. They would gain revenue from a small price decrease

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