ECN 104 Study Guide - Midterm Guide: Illinois Central Railroad, Marginal Utility, Economic Equilibrium

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Published on 14 Apr 2013
School
Ryerson University
Department
Economics
Course
ECN 104
AP Microeconomics
Multiple Choice: Choose the item that best answers each question. Each question is
worth an equal amount. You have 90 minutes to complete this test.
1. In which of the following instances will total revenue decline?
A) price rises and supply is elastic
B) price falls and demand is elastic
C) price rises and demand is inelastic
D) price rises and demand is elastic
2. The diamond-water paradox occurs because:
A) the price of a product is related to its total utility, not its marginal utility.
B) the price of a product is related to its marginal utility, not its total utility.
C) water is, in fact, very scarce in certain regions of the world.
D) diamonds are more useful than water.
3. When a consumer is maximizing total utility:
A) the average utility from each dollar spent is the same.
B) total utility cannot be increased by reallocating expenditures among various products.
C) the total utility obtainable from each product is at a maximum.
D) the marginal utility of the last unit of each product purchased is zero.
4. The rationing function of prices refers to the:
A) tendency of supply and demand to shift in opposite directions.
B) fact that ration coupons are needed to alleviate wartime shortages of goods.
C) capacity of a competitive market to equate the quantity demanded and the quantity supplied.
D) ability of the market system to generate an equitable distribution of income.
5. If price is above the equilibrium level, competition among sellers to reduce the resulting:
A) surplus will increase quantity demanded and decrease quantity supplied.
B) shortage will decrease quantity demanded and increase quantity supplied.
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C) surplus will decrease quantity demanded and increase quantity supplied.
D) shortage will increase quantity demanded and decrease quantity supplied.
6. An increase in demand will increase equilibrium price to a greater extent:
A) if the product is a normal good.
B) if the product is an inferior good.
C) the less elastic the supply curve.
D) the more elastic the supply curve.
7. Which of the following will cause the demand curve for product A to shift to the left?
A) population growth that causes an expansion in the number of persons consuming A
B) an increase in money income if A is a normal good
C) a decrease in the price of complementary product C
D) an increase in money income if A is an inferior good
8. Suppose you have a limited money income and you are purchasing products A and B whose
prices happen to be the same. To maximize your utility you should purchase A and B in such
amounts that:
A) their marginal utilities are the same.
B) their total utilities are the same.
C) their marginal and total utilities are proportionate.
D) the income and substitution effects associated with each are equal.
9. Which of the following statements is correct?
A) If demand increases and supply decreases, equilibrium price will fall.
B) If supply increases and demand decreases, equilibrium price will fall.
C) If demand decreases and supply increases, equilibrium price will rise.
D) If supply declines and demand remains constant, equilibrium price will fall.
10. If a firm's demand for labor is elastic, a union-negotiated wage increase will:
A) necessarily be inflationary.
B) cause the firm's total payroll to increase.
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C) cause the firm's total payroll to decline.
D) cause a shortage of labor.
11. If producers must obtain higher prices than previously to produce various levels of output, the
following has occurred:
A) a decrease in demand.
B) an increase in demand.
C) a decrease in supply.
D) an increase in supply.
Use the following to answer questions 12-21:
In the following question(s) you are asked to determine, other things equal, the effects of a given change in
a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the
equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.
12. An increase in the price of a product that is a close substitute for X will:
A) decrease D, increase P, and decrease Q.
B) increase D, increase P, and decrease Q.
C) increase D, increase P, and increase Q.
D) increase D, decrease P, and increase Q.
13. An increase in income, if X is a normal good, will:
A) increase D, increase P, and increase Q.
B) increase D, increase P, and decrease Q.
C) increase S, increase P, and increase Q.
D) decrease D, increase P, and increase Q.
14. An increase in the tastes and preferences for X will:
A) increase S, decrease P, and increase Q.
B) decrease S, decrease P, and decrease Q.
C) increase D, increase P, and increase Q.
D) decrease D, decrease P, and decrease Q.
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Document Summary

Multiple choice: choose the item that best answers each question. You have 90 minutes to complete this test. A) the price of a product is related to its total utility, not its marginal utility. B) the price of a product is related to its marginal utility, not its total utility. C) water is, in fact, very scarce in certain regions of the world. A) the average utility from each dollar spent is the same. B) total utility cannot be increased by reallocating expenditures among various products. C) the total utility obtainable from each product is at a maximum. D) the marginal utility of the last unit of each product purchased is zero. The rationing function of prices refers to the: A) tendency of supply and demand to shift in opposite directions. B) fact that ration coupons are needed to alleviate wartime shortages of goods. C) capacity of a competitive market to equate the quantity demanded and the quantity supplied.

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