exam 1 practice questions

Question 1

1) Which of the following is a macroeconomic topic?
A) The impact of a new NordicTrack exercise bike on the price of Peloton’s exercise bike.
B) The impact of deferring the federal payroll tax on US GDP.
C) Microsoft is pricing its new Xbox at $399. How will Sony respond with its Playstation 5?
D) If Walmart buys TikTok, how will that impact Target’s online strategy?

Answer 1

B

Question 2

2) All economic questions arise because we
A) want more than we need.
B) want more than we can get.
C) have limited wants that need to be satisfied.
D) have an abundance of resources.

Answer 2

B

Question 3

3) Macroeconomics differs from microeconomics in that
A) microeconomics looks at the economy as a whole.
B) macroeconomics studies the behavior of government while microeconomics looks at private corporations.
C) macroeconomics focuses on the national economy and the global economy.
D) macroeconomics studies the decisions of individuals.

Answer 3

C

Question 4

4) What is the main measuring stick that economists use to value costs and benefits?
A) demand
B) supply
C) money
D) opportunity costs

Answer 4

C

Question 5

5) Scarcity is a situation in which
A) people can satisfy all their wants.
B) people cannot satisfy all their wants.
C) some people can get all they want and some cannot.
D) most people can get only bare necessities

Answer 5

B

Question 6

6) A student athlete is deciding whether to work out for an extra hour. Her marginal benefit from another
hour of exercise
A) is the benefit she gets from all the hours she’s worked out all week.
B) is less than the marginal cost of the additional hour.
C) is the benefit she receives from exercising the additional hour.
D) depends on the cost of the workout.

Answer 6

C

Question 7

7) Mark loves fishing on Saturday mornings. How would Mark quantify this love?
A) his love is based on how much he would be willing to pay for the ability to fish on a Saturday morning
B) his love is based on the number of fish he catches
C) his love is based on the cost of the obtaining his fishing pole
D) his love is based on the amount of time he thinks about fishing

Answer 7

A

Question 8

8) Jill is considering attending college. If she goes, her tuition would be $10,000 and her books would cost
Jill $1,000. Jill already has an apartment that costs her $6,000 that she would live in whether she attends
college or not. Finally, if Jill attends college, she will have to cut back her hours at work. This would result
in a decrease of $12,000 in her yearly wages. What is the opportunity cost of Jill attending college?
A) $23,000
B) $29,000
C) $11,000
D) $17,000

Answer 8

A

Question 9

9) Matt is willing to pay $2000 for a new phone. The new phone costs the manufacturer $500 to produce.
Matt ends up paying $800 for the phone. What is the total surplus generated from this transaction?
A) $300
B) $1,200
C) $800
D) $1,500

Answer 9

D

Question 10

10) When I sacrifice playing video games today in order to exercise, my future self is better off due to my
increased health. My decision to exercise today therefore follows which dependency?
A) dependency of choices
B) dependency of people
C) dependency of markets
D) dependency of time

Answer 10

D

Question 11

11) An inferior good is a good for which demand
A) increases when population increases.
B) decreases when income increases.
C) increases when income increases.
D) decreases when population increases.

Answer 11

B

Question 12

12) Some sales managers are talking shop. Which of the following quotations refers to a movement along
the demand curve?
A) “We decided to cut our prices, and the increase in our sales has been remarkable.”
B) “It has been an unusually mild winter; our sales of wool scarves are down from last year.”
C) “Since our competitors raised their prices our sales have doubled.”
D) none of the above

Answer 12

A

Question 13

13) The law of demand states that the quantity of a good demanded varies
A) directly with income.
B) directly with population.
C) inversely with the price of substitute goods.
D) inversely with its price.

Answer 13

D

Question 14

14) Consumers expect that the price of a gallon of gasoline will rise next week. As a result
A) today’s supply of gasoline increases.
B) next week’s supply of gasoline decreases.
C) today’s demand for gasoline increases.
D) the price of a gallon of gasoline falls today.

Answer 14

C

Question 15

15) If shoes rise in price, the demand curve for shoes_____and the quantity of shoes demanded_____.
A) shifts leftward; does not change
B) does not shift; decreases
C) shifts leftward; decreases
D) does not shift; does not change

Answer 15

B

Question 16

16) The “law of demand” states that, other things remaining the same, the quantity demanded of any good is
A) positively related to its price.
B) directly related to the supply of the good.
C) directly related to its price.
D) inversely related to its price

Answer 16

D

Question 17

17) A supply curve shows the relation between the quantity of a good supplied and
A) income. Usually a supply curve has positive slope.
B) income. Usually a supply curve has negative slope.
C) the price of the good. Usually a supply curve has negative slope.
D) the price of the good. Usually a supply curve has positive slope.

Answer 17

D

Question 18

18) A severe drought has damaged this year’s lettuce crop. The initial effect on the lettuce market is a
A) decrease in both the demand and supply of lettuce.
B) rightward movement along the demand curve for lettuce.
C) decrease in the demand for lettuce.
D) decrease in the supply of lettuce

Answer 18

D

Question 19

19) Which of the following shifts the supply curve for good X leftward?
A) an increase in the cost of the machinery used to produce X
B) a situation in which quantity demanded exceeds quantity supplied
C) a technological advance in the production of X
D) a decrease in the wages of workers employed to produce X

Answer 19

A

Question 20

20) Sellers expect the price of Good A to rise in the near future. This causes
A) a decrease in the supply of Good A
B) an increase in the supply of Good A
C) a decrease in the demand for Good A
D) an increase in the demand for Good A

Answer 20

A

Question 21

21) A change in which of the following would NOT shift the supply curve for sneakers?
A) an increase in the price of rubber, used to make sneakers
B) an increase in the price of sneakers
C) an increase in technology for making sneakers
D) None of the above, that is, each change shifts the supply curve

Answer 21

B

Question 22

22) As the price of a pound of peanuts falls, the
A) quantity of peanuts supplied decreases.
B) supply of peanuts increases.
C) quantity of peanuts supplied increases.
D) supply of peanuts decreases.

Answer 22

A

Question 23

23) Which of the following statements is TRUE?
A) An increase in the price of gasoline will increase the supply of gasoline.
B) An increase in the price of gasoline will decrease the demand for gasoline.
C) An increase in the price of gasoline will increase the quantity demanded of gasoline.
D) An increase in the price of gasoline will increase the quantity supplied of gasoline.

Answer 23

D

Question 24

25) Which of the following statements is CORRECT?
A) When supply increases, Qe increases and Pe falls.
B) When demand increases, both Pe and Qe decrease.
C) When demand decreases, both Pe and Qe increase.
D) When supply decreases, both Pe and Qe decrease.

Answer 24

A

Question 25

26) The equilibrium quantity will decrease and the price movement depends on which curve shifts more than
the other when the
A) demand for a good increases and the supply of it decreases.
B) demand and the supply of a good both decrease.
C) demand for a good decreases and the supply of it increases.
D) demand and the supply of a good both increase.

Answer 25

B

Question 26

27) When the demand curve shifts rightward and the supply curve shifts leftward, then the equilibrium price
________ and the equilibrium quantity ________.
A) rises; movement depends on which curve shifts more than the other
B) depends on which curve shifts more than the other; increases
C) falls; depends on which curve shifts more than the other
D) depends on which curve shifts more than the other; decreases

Answer 26

A

Question 27

29) The above figures show the market for hamburger meat. Which figure(s) shows the effect of an increase
in the number of people who eat hamburger meat?
A) Figure A
B) Figure B
C) Figure C
D) Figures A and C

Answer 27

A

Question 28

31) When there is a surplus in the market,
A) QD > QS and the price falls back to Pe
B) QD > QS and the price rises back to Pe
C) QD < QS and the price falls back to Pe
D) QD < QS and the price rises back to Pe

Answer 28

C

Question 29

32) Coffee and sugar are complements for consumers. If the supply curve of coffee shifts leftward because
of poor weather, then there will be
A) a leftward shift of the demand curve for coffee.
B) a leftward shift of the supply curve for sugar.
C) a decrease in the price of sugar.
D) an increase in the price of sugar

Answer 29

C

Question 30

33) When the price is below the equilibrium price, the quantity demanded
A) exceeds the equilibrium quantity and the quantity supplied also exceeds the equilibrium quantity.
B) exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.
C) is less than the equilibrium quantity and the quantity supplied also is less than the equilibrium quantity.
D) is less than the equilibrium quantity but the quantity supplied exceeds the equilibrium quantity.

Answer 30

B

Question 31

7
34) Suppose the equilibrium price of a gallon of gasoline drops from $3.00 to $2.85 and the equilibrium
quantity increases from 365 millions of gallons per week to 372 millions of gallons per week. These changes
can be the result of
A) a decrease in demand.
B) a decrease in supply.
C) an increase in supply.
D) an increase in demand.

Answer 31

A

Question 32

35) Suppose Apple needed to pay a higher price to obtain the screens they use in their iPhone. All else
equal, how would this impact the market for iPhones?
A) Pe increases and Qe increases
B) Pe increases and Qe decreases
C) Pe decreases and Qe increases
D) Pe decreases and Qe decreases

Answer 32

B

Question 33

36) Suppose that a new study shows that drinking more than 2 cups of coffee per day can lead to high blood
pressure. How will this impact the market for coffee?
A) Pe increases and Qe increases
B) Pe increases and Qe decreases
C) Pe decreases and Qe increases
D) Pe decreases and Qe decreases

Answer 33

D