Exam 2

Question 1

If the law of demand applies to this good, then Q1 could be

500
100
200
0

Answer 1

0

Question 2

If the price in the market were $28, there would be a

surplus of 40 units
surplus of 10 units
shortage of 10 units
shortage of 30 units
none of the above

Answer 2

surplus of 10 units

Question 3

Suppose that the quantity of labor demanded increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

W = $9.50; Q = 570,000
W = $8.50; Q = 550,000
W = $12.50; Q = 630,000
W = $11.50; Q = 610,000
W = $10.50; Q = 590,000

Answer 3

W = $11.50; Q = 610,000

Question 4

The table above shows the demand schedules for caviar of two individuals ( Ari and Sonia ) and the rest of the market. If the price of caviar falls from $45 to $35, the market quantity demanded would

decrease by 70 oz
increase by 70 oz
decrease by 50 oz
decrease by 36 oz

Answer 4

increase by 70 oz

Question 5

A decrease in the price of a complement ( trash bags ) would be represented by a movement from

A to B
B to A
D1 to D2
D2 to D1

Answer 5

D1 to D2

Question 6

A decrease in the price of Clorox wipes would be represented by a movement from

A to B
B to A
S1 to S2
S2 to S1

Answer 6

B to A

Question 7

Acquiring new machinery that could produce Clorox wipes more quickly ( i.e. an advance in technology ) would be represented by a movement from

A to B
B to A
S1 to S2
S2 to S1

Answer 7

S1 to S2

Question 8

If a increase in income leads to an increase in the demand for sushi, then sushi is

a necessity
a normal good
a neutral good
an inferior good

Answer 8

a normal good

Question 9

Hunter Hayes Concert Tickets. At a price of $15

there is a shortage of 4 tickets
there is a surplus of 4 tickets
there is a shortage of 6 tickets
there is a scarcity of 4 tickets

Answer 9

there is a surplus of 4 tickets

Question 10

Assume that the graphs in this figure represent the demand and supply curves for limo rides and that limo rides and helicopter rides are substitues. What panel describes what happens in this market when the price of helicopter rides fall?

Panel a
Panel b
Panel c
Panel d

Answer 10

Panel d

Question 11

Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except

a decrease in the price of lithium, an input used in the electric car batteries
an increase in the price of gasoline ( a substitute for electric cars )
technological advancement in the production of electric car batteries
an increase in the number of manufacturers of electric cars

Answer 11

an increase in the price of gasoline ( a substitute for electric cars )

Question 12

Using midpoint method, what is the absolute value of the price elasticity of demand between $9 and $12?

0.11
1.00
0.43
2.33

Answer 12

2.33

Question 13

Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna’s demand for gas represented by demand curve

A and her demand for gas is perfectly elastic
A and her demand for gas is perfectly inelastic
D and her demand for gas is perfectly elastic
D and her demand for gas is perfectly inelastic
None of the above

Answer 13

A and her demand for gas is perfectly inelastic

Question 14

Using the midpoint method, in which range is demand most elastic?

$0 to $3
$3 to $6
$6 to $9
$9 to $12
$12 to $15

Answer 14

$12 to $15

Question 15

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changes the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

74%
60%
66.67%
40%
30%

Answer 15

60%

Question 16

Last year, Joan bought 50 pounds of hamburger when her household’s income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan’s income elasticity of demand for hamburger is

positive, so Joan considers hamburger to be an inferior good
positive, so Joan considers hamburger to be a normal good and a necessity
negative, so Joan considers hamburger to be an inferior good
negative, so Joan considers hamburger to be a normal good but not a necessity

Answer 16

negative, so Joan considers hamburger to be an inferior good

Question 17

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y decreases from 70 to 65. We can conclude that the cross-price elasticity of demand is _____ and goods X and Y are ______.

positive; substitutes
positive; complements
negative; substitutes
negative: complements

Answer 17

negative; complements

Question 18

Which of the following statements is not correct?

supply curve A is perfectly inelastic
supply curve B is perfectly elastic
supply curve C is unit elastic
supply curve D is more elastic than supply curve C

Answer 18

supply curve C is unit elastic

Question 19

If price increases from $10 to $20, total revenue will

increase by $120, so demand must be inelastic in this price range
increase by $320, so demand must be inelastic in this price range
decrease by $120, so demand must be inelastic in this price range
decrease by $320, so demand must by elastic in this price range

Answer 19

increase by $120, so demand must by inelastic in this price range

Question 20

A perfectly inelastic demand implies that buyers

purchase the same amount as before when the price rises or falls
decrease their purchases when the prices rises
increase their purchases only slightly when the price falls
respond substantially to an increase in price

Answer 20

purchase the same amount as before when the price rises or falls

Question 22

If a minimum wage of $12.50 is mandated, there will be a

shortage of 40,000 jobs
shortage of 80,000 jobs
surplus of 40,000 jobs
surplus of 80,000 jobs
neither a shortage nor a surplus will result, because this minimum wage will not be binding

Answer 22

shortage of 80,000 jobs

Question 23

A government-imposed price of $12 in this market is an example of a

binding price ceiling that creates a shortage
non-binding price ceiling that creates a shortage
binding price floor that creates a surplus
non-binding price floor that creates a surplus

Answer 23

binding price ceiling that creates a shortage

Question 24

The price ceiling shown in panel a

is not binding
creates a surplus
creates a shortage
both A and B are correct

Answer 24

is not binding

Question 25

Rent-control laws dictate

the exact rent that landlords must charge tenants
a maximum rent that landlords may charge tenants
a minimum rent that landlords may charge tenants
both a minimum rent and a maximum rent that landlords may charge tenants

Answer 25

a maximum rent that landlords may charge tenants