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1 | |
One year, on the island of Porcinia, hog prices reached a record price of 400 pazoozas/kg, and a Porcinian farmer decided to increase his hog production from 6,000 to 30,000. However, to his dismay, hog prices the next year plunged to a low of only 120 pazoozas/kg. Economists would explain this drop in hog prices by saying that the |
| | A) | quantity of hogs supplied increased so the price of hogs fell. |
| | B) | supply of hogs increased so the price fell and the quantity demanded of hogs increased. |
| | C) | The demand for hogs increased so the quantity supplied of hogs increased. |
| | D) | The quantity of hogs demanded increased because the quantity of hogs supplied increased. |
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2 | |
If the demand for Dutch Delftware plates in Canada is given by P = 140 - 4Q and the supply of the plates is given by P = 3Q, the market equilibrium price and quantity respectively will be |
| | A) | 60, 20 |
| | B) | 105, 35 |
| | C) | 136, 1 |
| | D) | none of the above is correct. |
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3 | |
In question 2-2 if an import duty of 7 is put on the Dutch plates and is paid by the importer, how much will the plates now cost the consumer, and what is the quantity of plates now imported? |
| | A) | 64, 19 |
| | B) | 56, 21 |
| | C) | 0, 0 |
| | D) | 147, 0 |
| | E) | none of the above is correct. |
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4 | |
In question 2-3, How much net welfare is lost to society because of the import duty? |
| | A) | $7 |
| | B) | $3.50 |
| | C) | 0 |
| | D) | This question can not be answered from the information given. |
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5 | |
If a price support system for tobacco has created an excess supply of tobacco, and now a new report about the dangerous health risks of tobacco is published and a drought has hurt tobacco farmers, we can be sure that |
| | A) | the amount of excess supply has increased. |
| | B) | the amount of excess supply has been reduced. |
| | C) | the changed circumstances do not affect the excess supply resulting from the price support system. |
| | D) | we can not answer the question until we get more specific data. |
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6 | |
A minimum wage law and a rent control price have a similar effect on a competitive market in that they both |
| | A) | create excess supply. |
| | B) | create excess demand. |
| | C) | lead to below-equilibrium prices (wages). |
| | D) | result in less than equilibrium quantities in their respective markets. |
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7 | |
When government intervenes in a competitive market with no externalities in order to make adjustments in equilibrium price and quantity, it would be fair to assume that |
| | A) | everyone is made worse off, since there is a loss in net welfare. |
| | B) | some are made better off and some are made worse off, but the gainers'' gains outweigh the losers'' losses. |
| | C) | some are made better off and some are made worse off, but the losers''s losses outweigh the gainers'' gains. |
| | D) | everyone is made better off if the government''s decision is a democratic one. |
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8 | |
If hot dogs are inferior goods, community incomes are rising, hamburger prices are falling, and hot dog casings (the synthetic skin around the hot dog) must now undergo a careful sterilization process not required before, we can conclude that |
| | A) | the quantity of hot dogs consumed will go down and the price change is indeterminate. |
| | B) | the quantity of hotdogs consumed will go down and the price of hotdogs will rise. |
| | C) | the price of hotdogs will rise and the quantity consumed will rise also. |
| | D) | both the price of hot dogs and the quantity of hot dogs consumed will decrease. |
| | E) | the price of hot dogs will go up and the quantity consumed is indeterminate. |
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9 | |
In correct economic terminology, assuming all else stays constant but the stated change, which statement is always true? |
| | A) | A shift to the right of the demand curve increases the supply of a good. |
| | B) | A shift to the left of the supply curve decreases demand for a good. |
| | C) | A shift to the right of the supply curve increases the quantity supplied of the good. |
| | D) | A shift to the left of the demand curve decreases the quantity supplied of a good. |
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10 | |
If the demand curve is P = 20 - Q and the supply curve is P = 5 + 2Q, then a $1 per unit tax imposed on the buyer at the point of sale would do which of the following? |
| | A) | Change the demand curve facing sellers to P = 19 - Q. |
| | B) | Change the supply curve facing buyers to P = 6 + 2Q. |
| | C) | Change the demand curve facing sellers to P = 21 - Q. |
| | D) | Change the supply curve facing buyers to P = 7 + Q. |
| | E) | Change the supply curve facing buyers to P = 5 + 3Q. |
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11 | |
In a first-come-first-serve allocation system with prices held artificially low, supply and demand pressures are not negated, because |
| | A) | people still pay the dollar value of the unconstrained market equilibrium price. |
| | B) | people still buy the same quantity of goods as an unconstrained price system would provide. |
| | C) | people still pay full price according to their demand schedule, by spending in money and in waiting time. |
| | D) | all of the above are true. |
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2002 McGraw-Hill Higher Education