Glendale Community College » Economics » Econ 101 - Microeconomics » Spring 2023

Econ 101 - Microeconomics » Spring 2023 » Midterm

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Question #1

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

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

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

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

D. Monetary incentives exist for entrepreneurs who bear risk.

E. Neither are characteristic of a market economy.

Question #2

In the resource market of the circular flow model,

A. All of the choices

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

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

D. None of the choices

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 cost of gas increases.

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

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

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. $800 and 16m

B. $600 and 12m

C. $400 and 16m

D. $800 and 5m

E. $600 and 22m

Question #5

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

A. the price of gas increases

B. the price of bicycles decreases

C. the price of gas decreases

D. the price of bicycles increases

E. None of these

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 decreases, quantity sold decreases

B. price decreases, quantity sold may increase or decrease

C. price increases, quantity sold decreases

D. price decreases, quantity sold increases

E. price increases, 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 increases, price may increase or decrease

B. price decreases, quantity sold may increase or decrease

C. price increases, quantity sold may increase or decrease

D. price decreases, quantity sold increases

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

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

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

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

E. 30,000 – which is less than the societally optimal amount since education is a negative 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. None of these

B. A subsidy to producers

C. A subsidy to buyers

D. A tax on producers

E. All of these

Question #10

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

A. increasing interest rates

B. a public works project to rebuild a bridge

C. decreasing taxes

D. cutting subsidies for the agriculture industry

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 = 2.3, demand is elastic

B. Ed = 0.4, demand is inelastic

C. Ed = 0.9, demand is inelastic

D. b. Ed = 0.4, demand is elastic

E. Ed = 0.9, demand is elastic

Question #12

A. Luxury

B. An item with many substitutes

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

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

E. Necessity

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. None of these

B. 1

C. -0.5

D. 0.5

E. 0

Question #14

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

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

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

C. products A and B are unrelated

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

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

Question #15

Why is the marginal cost curve is decreasing at low levels of production and increasing at higher levels of production.

A. decreasing returns to scale at low levels of production and specialization at high levels of production

B. fixed costs are decreasing at low levels of production but increasing at high levels of production

C. the average variable cost curve increases at low levels of production but decreases at high levels of production

D. fixed costs are increasing at low levels of production but decreasing at high levels of production

E. increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production

Question #16

Assume the supply of Adidas shoes is represented by the equation P = 200 + 4Q and demand of Adidas shoes is represented by the equation P = 800 – 2Q. Solve for equilibrium price.

A. 400

B. 660

C. 880

D. 600

E. 500

Question #17

Assume the supply of Adidas shoes is represented by the equation P = 200 + 4Q and demand of Adidas shoes is represented by the equation P = 800 – 2Q. Solve for equilibrium quantity.

A. 500

B. 300

C. 200

D. 400

E. 100

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