ECN 104 Study Guide - Midterm Guide: Peanut Butter, Substitute Good, Demand Curve

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Fall(2012(
ECN104((
Midterm(Exam(
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Fall 2012 Midterm Exam
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. What could be one result of a cold snap in Florida?
a.
an increase in the price of oranges
b.
an increase in migrant farm workers' wages
c.
an increase in farm machinery prices
d.
an increase in the price of diesel fuel used in farming
____ 2. When a consumer experiences a price increase for an inferior good, which of the following situations is
possible?
a.
The income effect is less than the substitution effect and the demand curve will be upward
sloping.
b.
The income effect is less than the substitution effect but the substitution effect is positive
and the demand curve will be upward sloping.
c.
The income effect is greater than the substitution effect and the demand curve will be
upward sloping.
d.
The income effect is greater than the substitution effect and the demand curve will be
downward sloping.
____ 3. When will a decrease in supply cause the largest increase in price?
a.
when both supply and demand are inelastic
b.
when both supply and demand are elastic
c.
when demand is inelastic and supply is elastic
d.
when demand is elastic and supply is inelastic
____ 4. Which is true in the circular-flow diagram?
a.
households are sellers in the resource market.
b.
firms are buyers in the product market.
c.
spending on goods and services flows from firms to households.
d.
firms are sellers in the resource market and the product market.
____ 5. You have decided to purchase a new Mustang convertible. A friend tells you that Ford will stop offering a
$3000 rebate on Mustangs starting next month. As a result of this information, what will happen to your
demand curve for Mustangs?
a.
curve will be unaffected
b.
shifts left today
c.
shifts right today
d.
could shift either right or left
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Figure 6-8
____ 6. Refer to Figure 6-8. What is the share of the tax burden that buyers would pay?
a.
$1.00 per unit
b.
$1.50 per unit
c.
$2.00 per unit
d.
$3.00 per unit
____ 7. Which of the following demonstrates the law of demand?
a.
Jon buys more pretzels at $1.50 each since he got a $1 raise at work.
b.
Melissa buys fewer muffins at $0.75 each than at $1 each.
c.
Kendra buys fewer Snickers at $0.60 each since the price of Milky Ways fell to $0.50
each.
d.
Dave buys more donuts at $0.25 each than at $0.50 each.
____ 8. Goods X and Y are perfect complements. If the price of good Y falls, what will the substitution effect acting
by itself do?
a.
It will cause consumers to buy more of good Y and less of good X.
b.
It will cause consumers to buy more of good X and less of good Y.
c.
It will not affect the amount of goods X and Y that consumers buy.
d.
It will affect the amount of goods X and Y that consumers buy, but in an unpredictable
way.
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Document Summary

A friend tells you that ford will stop offering a. As a result of this information, what will happen to your demand curve for mustangs: curve will be unaffected, shifts left today, shifts right today, could shift either right or left. It will cause consumers to buy more of good y and less of good x: it will cause consumers to buy more of good x and less of good y. It will not affect the amount of goods x and y that consumers buy: it will affect the amount of goods x and y that consumers buy, but in an unpredictable. ___: . 00 per unit, . 50 per unit, . 00 per unit, . 00 per unit each. way. If point b is the consumer"s optimum and the price of chocolate chips is per bag, what is the price of a bag of marshmallows: . 50, . 70, , .

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