Fall 2012 Midterm Exam
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
a. The income effect is less than the substitution effect and the demand curve will be upward
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
d. The income effect is greater than the substitution effect and the demand curve will be
____ 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 household s.
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 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
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. Figure 21-10
____ 9. Refer to Figure 21 -9. If point B is the consumer's optimum and the price of chocolate chips is $3 per bag,
what is the price of a bag of marshmallows?
____ 10. Refer to Figure 21 -7. Assume that the consumer depicted in the figure faces prices and income such that she
optimizes at point B. According to the graph, what change forces the consumer to move to point A?
a. a decrease in the price of yogurt
b. an increase in the price of yogurt
c. a decrease in the price of granola bars
d. an increase in the price of granola bars
____ 11. An upward-sloping individual labour supply curve is indicative of which of the following?
a. an upward-sloping demand for leisure
b. dominant income effects
c. dominant substitution effects
d. individuals that reduce work effort (hours) as income rises ____ 12. The substitution effect of an increase in the interest rate could cause an increase in which of the following?
a. consumption when young and savings when young
b. consumption when young and savings when old
c. consumption when old and savings when young
d. savings when old and consumption when old
____ 13. Refer to Figure 4-2. What could cause the shift from D to D? 1
a. a decrease in the price of a complement
b. a decrease in the price of a substitute
c. an increase in technology
d. an increase in price
____ 14. Refer to Figure 4-2. What could cause the shift from D to D 1?
a. a decrease in the price of a substitute
b. an increase in technology
c. a decrease in the price of a complement
d. an increase in price Figure 21-2
____ 15. Refer to Figure 21 -2. Which of the graphs in the figure reflects an increase in the price of good Y only?
a. graph (a)
b. graph (b)
c. graph (c)
d. graph (d)
____ 16. The substitution effect of a wage decrease, in the work -leisure model, applies when the worker chooses which
of the following options?
a. He wishes to work more but be less productive.
b. He wishes to work more.
c. He wishes to work less.
d. He is indifferent between working more or less.
____ 17. A highly bowed inward set of indifference curves represents the two goods as which of the following types?
a. very poor substitutes
b. very poor complements
c. perfect complements
d. perfect substitutes Figure 5-10
____ 18. Refer to Figure 5-10. What is the elasticity of supply between points D and E?
____ 19. What is the difference between slope and elasticity?
a. Slope measures changes in quantity demanded more accurately than elasticity.
b. There is no difference between slope and elasticity calculations.
c. Slope measures actual changes and elasticity measures percentage changes.
d. Slope measures percentage changes and elasticity measures actual changes.
____ 20. For what reason are production possibilities frontiers usually bowed outward?
a. increasing opportunity cost
b. decreasing opportunity cost
c. increasing productivity
d. constant opportunity cost Figure 2-3
____ 21. Refer to Figure 2-3. At which point or points can the economy NOT produce?
a. point A
b. point C
c. point A, C
d. point A, C, D
____ 22. You love peanut butter. You hear on the news that 50% of the peanut crop in North America has been wiped
out, which will cause the price to double by the end of the year. What happens as a result?
a. You decide to give up peanut butter completely.
b. Your demand for peanut butter wi ll increase by the end of the year.
c. Your demand for peanut butter falls as you look for a substitute good.
d. Your demand for peanut butter increases today.
____ 23. What can good assumptions do?
a. allow economists to see the 'big picture' instead of only small segments
b. cause economists to leave out important variables that make their theories worthless
c. simplify the complex world and make it easier to understand
d. further complicate an already difficult topic
____ 24. The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price
elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per pound is levied on the sellers of
salt and a tax of $1 per pound is levied on the buyers of caviar. Who would we expect to have to pay most of
a. the sellers of salt and the sellers of caviar
b. the buyers of salt and the sellers of caviar
c. the buyers of salt and the buyers of caviar
d. the sellers of salt and the buyers of caviar Figure 6-11
____ 25. Refer to Figure 6-11. In which market will the majority of a tax be paid by the buyer?
a. market (a)
b. market (b)
c. market (c)
d. impossible to determine
____ 26. Refer to Figure 2-8. What is the opportunity cost of moving from point A to point B?
a. the difference between the 20 barrels you get and the 8 bathtubs you give up
b. 8 bathtubs
c. the difference between the 8 bathtubs you get and the 20 barrels you give up
d. 20 barrels ____ 27. What does a bowed in indifference curve reflect?
a. a consumer's unwillingness to substitute one good for another
b. a consumer's desire to specialize in the consumption of one good over another
c. a consumer's decreasing willingness to give up a good that she has in abundance
d. a consumer's increasing willingness to give up a good that she has in abundance
The table shows individual demand schedules for a market.
Price of the Good Aaron Angela Austin Alyssa
$0.00 20 16 10 8
0.50 18 12 6 6
1.00 14 10 2 5
1.50 12 8 0 4
2.00 6 6 0 2
2.50 0 4 0 0
____ 28. Refer to Table 4-1. What happens if the price increases from $1.00 to $1.50?
a. The quantity demanded in the market decreases by 2 units.
b. The quantity demanded in the market decreases by 7 units.
c. The market demand increases by 20 units.
d. Individual demands will increase.
____ 29. Refer to Figure 4-3. The graph shows the demand for cigarettes. Which most likely happened?
a. Mandatory health warnings were placed on cigarette pa