Mr. Beck

SUNY College at Oneonta

Economics 110  Exam 1 - Questions from Recent Exams

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Review Questions for Economics 110

1.  The equilibrium price of good X is $10 per unit. Which one of the following, if any, would result in creating a shortage for good X?

  1. The government imposes a price ceiling of $8 per unit on good X.
  2. The government imposes a price ceiling of $10 per unit on good X.
  3. The government imposes a price ceiling of $12 per unit on good X.
  4. None of the above would result in creating a shortage for good X.

    5. Q1 answer
2.  If household incomes were to increase, what effect would this have on Apple’s iPhone?
  1. Equilibrium price and quantity would both increase.
  2. Equilibrium price would increase, but equilibrium quantity would decrease.
  3. Equilibrium quantity would increase, but equilibrium price would decrease.
  4. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  5. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q2 answer
3.  An economy is operating on its production possibilities frontier for 2003. A year later it is operating at a point beyond (outside) 2003's production possibilities frontier, but on 2004's production possibilities frontier. From this information, it can be concluded that between 2003 and 2004
  1. only economic growth occurred.
  2. only a reduction in unemployment occurred.
  3. only an increase in unemployment occurred.
  4. both economic growth and a reduction in unemployment occurred.
  5. both economic growth and an increase in unemployment occurred.

    6. Q3 answer
4.
Graph question 4
Which one of the following events would be described by the above graph?
  1. Consumers’ incomes increase as an economic recovery occurs.
  2. The cost of raw materials in the production of Dell computers decreases.
  3. The price of Hewlett Packard computers increases because Hewlett Packard experiences production problems.
  4. PC World magazine rates Dell computers number 1.
  5. The price of Hewlett Packard computers decreases because of technological improvements in the production of Hewlett Packard computers.

    6. Q4 answer
5. Upstate New York experienced an unusually cool summer during 2004. As a result, we would expect the price of air conditioners in upstate New York to
  1. increase because the entire demand curve for air conditioners shifted to the right.
  2. increase because the entire demand curve for air conditioners shifted to the left.
  3. increase because the entire supply curve for air conditioners shifted to the left.
  4. decrease because the entire demand curve for air conditioners shifted to the right.
  5. decrease because the entire demand curve for air conditioners shifted to the left.
  6. decrease because the entire supply curve for air conditioners shifted to the right.

    7. Q5 answer
6.  An improvement in the technology involved in the production of calculators will cause a resultant
  1. decrease in both the equilibrium price and equilibrium quantity of calculators.
  2. decrease in equilibrium price of calculators, but an increase in quantity.
  3. decrease in equilibrium quantity of calculators, but an increase in price.
  4. decrease in equilibrium price of calculators, but the effect on quantity is indeterminate.
  5. increase in equilibrium quantity of calculators, but the effect on price is indeterminate.
  6. The effect on both the equilibrium price and quantity of calculators is indeterminate.

    7. Q6 answer
7. Assume the following two events occur simultaneously:

1. The cost of providing airline service increases because of additional expenses necessary to improve airline safety.

 2. Improved security ensures consumers that commercial airlines are safe.

 Using supply-demand analysis, what would be the resultant effect on commercial air travel?

  1. Equilibrium price and quantity would both increase.
  2. Equilibrium quantity would increase, but equilibrium price would decrease.
  3. Equilibrium price would increase, but equilibrium quantity would decrease.
  4. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  5. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q7 answer
8.    The equilibrium wage rate for unskilled manufacturing workers is $10 per hour. Which one of the following, if any, would result in creating a surplus of unemployed manufacturing workers?
  1. The government imposes a minimum wage of  $8 per hour.
  2. The government imposes a minimum wage of  $10 per hour.
  3. The government imposes a minimum wage of  $12 per hour.
  4. None of the above would result in creating a surplus of unemployed manufacturing workers.

    5. Q8 answer
9. If Canon were forced to increase the price of its digital cameras because of unexpected production cost increases, what effect would this have on Olympus’s line of digital cameras?
  1. The equilibrium price and quantity of  Olympus’s digital cameras would both increase.
  2. The equilibrium price of  Olympus’s digital cameras would increase, but the effect on equilibrium quantity is indeterminate.
  3. The equilibrium quantity of  Olympus’s digital cameras would increase, but the effect on equilibrium price is indeterminate.
  4. The equilibrium price of  Olympus’s digital cameras would decrease, but equilibrium quantity would increase.
  5. The equilibrium quantity of  Olympus’s digital cameras would decrease, but equilibrium price would increase.
  6. The effect on both equilibrium price and quantity of  Olympus’s digital cameras is indeterminate.

    7. Q9 answer
10. Hurricane Katrina temporarily disrupts the flow of gasoline from the Gulf Coast. This would cause a resultant
  1. increase in both the equilibrium price and quantity of gasoline.
  2. decrease in the equilibrium price of gasoline, but an increase in the equilibrium quantity.
  3. decrease in the equilibrium quantity of gasoline, but an increase in the equilibrium price.
  4. increase in the equilibrium price of gasoline, but the effect on equilibrium quantity is indeterminate.
  5. decrease in the equilibrium quantity of gasoline, but the effect on equilibrium price is indeterminate.
  6. The effect on both the equilibrium price and equilibrium quantity of gasoline is indeterminate.

    7. Q10 answer
11. Oswego, NY received more than 100 inches of snow in January 2004. We would expect the price of snow blowers sold in Oswego to
  1. increase because the entire demand curve for snow blowers shifted to the right.
  2. increase because the entire demand curve for snow blowers shifted to the left.
  3. increase because the entire supply curve for snow blowers shifted to the left.
  4. decrease because the entire demand curve for snow blowers shifted to the right.
  5. decrease because the entire demand curve for snow blowers shifted to the left.
  6. decrease because the entire supply curve for snow blowers shifted to the right.

    7. Q11 answer
12.
Graph question 12
An economy moves from point A on 2003’s production possibilities frontier (PPF) to point B inside (within) 2004’s production possibilities frontier (PPF). It can be concluded that from 2003 to 2004
  1. both economic growth and a reduction in unemployment occurred.
  2. both economic growth and an increase in unemployment occurred.
  3. only a reduction in unemployment occurred.
  4. only economic growth occurred.
  5. only an increase in unemployment occurred.

    6. Q12 answer
13. What would happen to the equilibrium price and quantity of Microsoft’s new Xbox 360 video game system if the following 2 events occurred?

            1.  The number of games available at its release date will only be 15 instead of the expected 30.

            2.  SONY makes a surprise announcement that it plans on releasing its new Playstation 3 video game system on the same day as the release of Microsoft’s Xbox 360. It had been expected that the Playstation 3 would not be released until several months later.

  1. Equilibrium price and quantity of the Xbox 360 would both decrease.
  2. Equilibrium quantity of the Xbox 360 would decrease and equilibrium price would increase.
  3. Equilibrium price of the Xbox 360 would decrease and equilibrium quantity would increase.
  4. Equilibrium quantity of the Xbox 360 would decrease, but the effect on equilibrium price is indeterminate.
  5. Equilibrium price of the Xbox 360 would decrease, but the effect on equilibrium quantity is indeterminate.
  6. The effect on both the equilibrium price and quantity of the Xbox 360 is indeterminate.

    7. Q13 answer
14. What would happen to the equilibrium price and quantity of Epson printers if the following 2 events occurred?

1.  PC World magazine replaces Epson with Canon printers as its top rated printers .

2.  Technological improvements result in lowering the cost of producing Epson printers.

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium quantity would decrease and equilibrium price would increase.
  3. Equilibrium price would decrease and equilibrium quantity would increase.
  4. Equilibrium quantity would decrease, but the effect on price is indeterminate.
  5. Equilibrium price would decrease, but the effect on quantity is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q14 answer
15. The equilibrium quantity for good X is 20 units per day and the equilibrium price is $100 per unit. If a surplus currently exists for good X, then
  1. the price currently is less than $100 per unit, quantity supplied is greater than 20 units per day, and  quantity demanded is less than 20 units per day.
  2. the price currently is less than $100 per unit, quantity supplied is less than 20 units per day, and quantity demanded is less than 20 units per day.
  3. the price currently is less than $100 per unit, quantity supplied is less than 20 units per day, and quantity demanded is greater than 20 units per day.
  4. the price currently is greater than $100 per unit, quantity supplied is greater than 20 units per day, and  quantity demanded is less than 20 units per day.
  5. the price currently is greater than $100 per unit, quantity supplied is less than 20 units per day, and  quantity demanded is greater than 20 units per day.
  6. the price currently is greater than $100 per unit, quantity supplied is greater than 20 units per day, and  quantity demanded is greater than 20 units per day.

    7. Q15 answer
16. Over time it is observed that the equilibrium quantity of good X has increased, although the equilibrium price has remained constant. It can be concluded that
  1. the entire supply curve has shifted to the right while the entire demand curve has shifted to the left.
  2. there have been shifts in both the entire supply and demand curves to the right.
  3. there have been shifts in both the entire supply and demand curves to the left.
  4. the entire supply curve has shifted to the left while the entire demand curve has shifted to the right.

    5. Q16 answer
17.
Graph question 17
Which one of the following events would be described by the above graph?
  1. Consumer incomes increase as an economic recovery occurs.
  2. The cost of raw materials in the production of Apple Macintosh computers increases.
  3. The price of Dell computers decreases because Dell improves their production efficiency.
  4. Technological improvements occur in the production of Apple Macintosh computers.
  5. The price of Dell computers increases because of production inefficiencies which Dell encounters.

    6. Q17 answer
18. The most basic assumption upon which the foundation of economics is based is that
  1. scarce resources are unable to satisfy unlimited wants.
  2. production decisions must be made by free market capitalist producers.
  3. a society’s economic welfare is maximized when government interference in economic decisions is minimized.
  4. business producers must care about the welfare of the consumers of their products.
  5. government policy must ensure that a fair distribution of income exists.

    6. Q18 answer
19. Adam Smith’s theory of the “invisible hand” assumes that
  1. government research is necessary to inform businesses what consumers most want.
  2. producers are concerned about maximizing the welfare of consumers.
  3. self-interested producers sell their products to self-interested consumers.
  4. people  will voluntary reduce pollution because it is in the best interests of society.
  5. consumers are concerned about maximizing the welfare of their fellow consumers.

    6. Q19 answer
20. The following data are reported for good X:
2003 2004
Equilibrium Price $6 per unit $7 per unit
Equilibrium Quantity 100 units per day 90 units per day
It can be concluded that from 2003 to 2004
  1. the entire supply curve for good X shifted to the right.
  2. the entire demand curve for good X shifted to the right.
  3. the entire supply curve for good X shifted to the left.
  4. the entire demand curve for good X shifted to the left.
  5. neither the supply nor demand curves shifted.

    6. Q20 answer
21. Which one of the following would be an example of market failure requiring government interference?
  1. The price of gasoline in the U.S. hits record highs during 2003, making it difficult for the poor to drive  to work and school.
  2. Increasing numbers of workers on busy schedules eat unhealthy lunches at fast-food restaurants.
  3. Intense competition in the automobile industry force companies to provide 0% financing, resulting in the loss of billions of dollars by Ford Motor Company.
  4. Manny Ramirez earns $20 million per year to play baseball for the Boston Red Sox.
  5. U.S. firms producing steel pollute the environment.

    6. Q21 answer
22. Given the following production possibilities frontier (PPF):

Graph question 22
 If the economy were to increase production of good Y from 2 to 3 units, the opportunity cost of this 3rd    unit of good Y would be how many units of good X?

Q22 answer
23. If the government ordered oil companies to decrease the price of gasoline, then
  1. both quantity supplied and quantity demanded will increase.
  2. both quantity supplied and quantity demanded will decrease.
  3. quantity supplied will increase and quantity demanded will decrease.
  4. quantity supplied will decrease and quantity demanded will increase.

    5. Q23 answer
24. An economy is operating at a point inside (within) its production possibilities frontier (PPF). If an increase in unemployment were then to occur, this would be shown as
  1. a shift outward in the entire production possibilities frontier.
  2. a movement to a point outside (beyond) the given production possibilities frontier.
  3. a movement to a point closer to the given production possibilities frontier.
  4. a movement to a point further inside (within) the given production possibilities frontier (closer to the origin).
  5. a movement along the given production possibilities frontier.
  6. a shift inward in the entire production possibilities frontier.

    7. Q24 answer
25. Assume the following 2 events occur simultaneously:

1. More diet conscious consumers want lettuce in their salads.

2. An economic recession in the U.S. decreases consumers’ incomes.

 Using supply-demand analysis, what would be the resulting effect of these 2 changes on lettuce?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would decrease, but the effect on quantity is indeterminate.
  3. Equilibrium quantity would decrease, but the effect on price is indeterminate.
  4. Equilibrium price would decrease, but equilibrium quantity would increase.
  5. Equilibrium quantity would decrease, but equilibrium price would increase.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q25 answer
26.  An economy is operating at a point inside (within) its production possibilities frontier (PPF). If a decrease in unemployment were then to occur, this would be shown as
  1. a shift outward in the entire production possibilities frontier.
  2. a movement to a point outside (beyond) the given production possibilities frontier.
  3. a movement to a point closer to the given production possibilities frontier.
  4. a movement to a point further inside (within) the given production possibilities frontier (closer to the origin).
  5. a movement along the given production possibilities frontier.
  6. a shift inward in the entire production possibilities frontier.

    7. Q26 answer
27.  Assume the following two events occur simultaneously:

1. The price of Panasonic plasma HDTVs are decreased because of technological improvements in Panasonic’s production process.

 2. Household incomes increase.

 Using supply-demand analysis, what would be the resulting effect on SONY’s LCD HDTVs?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would increase, but equilibrium quantity would decrease.
  3. Equilibrium quantity would increase, but equilibrium price would decrease.
  4. Equilibrium price would decrease, but the effect on equilibrium quantity is indeterminate.
  5. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q27 answer
28.  Assume the following 2 events occur simultaneously:

1. A hurricane is expected to strike North Carolina in the immediate future.

2. In anticipation of the hurricane, the government provides economic assistance (cash grants) to homeowners in North Carolina.

 Using supply-demand analysis, what would be the resulting effect of these 2 changes on plywood?

  1. Equilibrium price and quantity would both increase.
  2. Equilibrium price would increase, but the effect on quantity is indeterminate.
  3. Equilibrium quantity would increase, but the effect on price is indeterminate.
  4. Equilibrium price would decrease, but equilibrium quantity would increase.
  5. Equilibrium quantity would decrease, but equilibrium price would increase.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q28 answer
29. Adam Smith’s theory of the “invisible hand” contends that for the free market to yield the optimal production of a given product, all of the following, except one, must hold true. The single exception is
  1. consumer sovereignty applies.
  2. competition exists among businesses producing the product.
  3. businesses attempt to maximize the welfare (utility) of their customers.
  4. no externalities exist in the production or consumption of the product.

    5. Q29 answer
30.  The most basic assumption upon which the foundation of economics is based is that
  1. society’s welfare is maximized when government interference in economic decisions is minimized.
  2. society’s welfare is maximized when consumers are concerned about their fellow citizens .
  3. scarce resources are unable to satisfy unlimited wants.
  4. businesses attempt to maximize their profits.
  5. a free market capitalist system is necessary to maximize economic production.

    6. Q30 answer
31. Given the following production possibilities frontier (PPF):

Graph question 31
 If the economy were to increase production of good X from 2 to 3 units, the opportunity cost of this 3rd  unit of good X would be how many units of good Y?

Q31 answer
32. China’s rapid industrialization would cause the world price of oil to
  1. increase because the entire demand curve for oil shifts to the right.
  2. increase because the entire demand curve for oil shifts to the left.
  3. increase because the entire supply curve for oil shifts to the left.
  4. decrease because the entire demand curve for oil shifts to the right.
  5. decrease because the entire demand curve for oil shifts to the left.
  6. decrease because the entire supply curve for oil shifts to the right.

    7. Q32 answer
33. The equilibrium quantity for good X is 35 units per day and the equilibrium price is $20 per unit. If the government were to place a price ceiling of $15 per unit on good X, then
  1. quantity supplied will be greater than 35 units per day, quantity demanded will be less than 35 units per day, and a surplus would exist.
  2. quantity supplied will be less than 35 units per day, quantity demanded will be less than 35 units per day, and a surplus would exist.
  3. quantity supplied will be less than 35 units per day, quantity demanded will be greater than 35 units per day, and a shortage would exist.
  4. quantity supplied will be greater than 35 units per day, quantity demanded will be less than 35 units per day, and a shortage would exist.
  5. quantity supplied will be less than 35 units per day, quantity demanded will be greater than 35 units per day, and a surplus would exist.
  6. quantity supplied will be greater than 35 units per day, quantity demanded will be greater than 35 units per day, and a shortage would exist.

    7. Q33 answer
34. Assume the following two events occur simultaneously:

1. The cost of providing airline service increases because of the higher price of airline fuel.

2.   An economic recession reduces consumers’ incomes.

 Using supply-demand analysis, what would be the resultant effect on commercial air travel?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  3. Equilibrium price would increase, but equilibrium quantity would decrease.
  4. Equilibrium quantity would decrease, but the effect on equilibrium price is indeterminate.
  5. Equilibrium price would decrease, but the effect on equilibrium quantity is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q34 answer
35. More stringent environmental standards established by the government increases the cost of mining coal. This would cause a resultant
  1. increase in both the equilibrium price and equilibrium quantity of coal.
  2. decrease in equilibrium price of coal, but an increase in quantity.
  3. decrease in equilibrium quantity of coal, but an increase in price.
  4. increase in equilibrium price of coal, but the effect on quantity is indeterminate.
  5. decrease in equilibrium quantity of coal, but the effect on price is indeterminate.
  6. The effect on both the equilibrium price and quantity of coal is indeterminate.

    7. Q35 answer
36. An economy moves from point A on 2004’s production possibilities frontier (PPF) to point B on 2005’s new, higher production possibilities frontier (PPF). It can be concluded that from 2004 to 2005
  1. both economic growth and a reduction in unemployment occurred.
  2. both economic growth and an increase in unemployment occurred.
  3. only a reduction in unemployment occurred.
  4. only economic growth occurred.
  5. only an increase in unemployment occurred.

    6. Q36 answer
37. Hurricane Ivan forces the closing of offshore oil refineries in the Gulf of Mexico. What would be the resultant effect on gasoline in the U.S.?
  1. A decrease in both the equilibrium price and equilibrium quantity of gasoline.
  2. A decrease in equilibrium price of gasoline, but an increase in quantity.
  3. A decrease in equilibrium quantity of gasoline, but an increase in price.
  4. A decrease in equilibrium price of gasoline, but the effect on quantity is indeterminate.
  5. A decrease in equilibrium quantity of gasoline, but the effect on price is indeterminate.
  6. The effect on both the equilibrium price and quantity of gasoline is indeterminate.

    7. Q37 answer
38. Which one of the following would be an example of market failure requiring government interference?
  1. United Airlines and U.S. Airways declare bankruptcy because of significant financial problems.
  2. Only the New York Yankees can afford to pay the $20 million plus annual salary of infielder Alex Rodriguez.
  3. Automobile pollution threatens the environment.
  4. Obesity becomes a national health epidemic affecting millions of Americans.
  5. The price of gasoline in the U.S. hits record highs during 2004.

    6. Q38 answer
39. Over time it is observed that the equilibrium price of good X has increased, although the equilibrium quantity has remained constant. It can be concluded that
  1. the entire supply curve has shifted to the right while the entire demand curve has shifted to the left.
  2. there have been shifts in both the entire supply and demand curves to the right.
  3. there have been shifts in both the entire supply and demand curves to the left.
  4. the entire supply curve has shifted to the left while the entire demand curve has shifted to the right.

    5. Q39 answer
40. An economy moves from point A inside (within) 2003’s production possibilities frontier (PPF) to point B on  2004’s production possibilities frontier (PPF). It can be concluded that from 2003 to 2004
Graph question 40
  1. both economic growth and a reduction in unemployment occurred.
  2. both economic growth and an increase in unemployment occurred.
  3. only a reduction in unemployment occurred.
  4. only economic growth occurred.
  5. only an increase in unemployment occurred.

    6. Q40 answer
41. If Canon were able to decrease the price of its digital cameras because of company-wide reductions in costs of production, what effect would this have on Olympus’s line of digital cameras?
  1. The equilibrium price and quantity of  Olympus’s digital cameras would both increase.
  2. The equilibrium price of  Olympus’s digital cameras would decrease, but the effect on equilibrium quantity is indeterminate.
  3. The equilibrium quantity of  Olympus’s digital cameras would decrease, but the effect on equilibrium price is indeterminate.
  4. The equilibrium price of  Olympus’s digital cameras would decrease, but equilibrium quantity would increase.
  5. The equilibrium quantity of  Olympus’s digital cameras would decrease, but equilibrium price would increase.
  6. The equilibrium price and quantity of  Olympus’s digital cameras would both decrease.

    7. Q41 answer
42. The following data are reported for good X:
2003 2004
Equilibrium Price $8 per unit $7 per unit
Equilibrium Quantity 100 units per day 90 units per day
It can be concluded that from 2003 to 2004
  1. the entire supply curve for good X shifted to the right.
  2. the entire demand curve for good X shifted to the right.
  3. the entire supply curve for good X shifted to the left.
  4. the entire demand curve for good X shifted to the left.
  5. neither the supply nor demand curves shifted.

    6. Q42 answer
43.  Assume the equilibrium wage for unskilled workers is $6.50 per hour. The federal minimum wage is increased from $5.15 per hour to $7.25 per hour. The effect of the increase in the minimum wage will be to
  1. increase wages for unskilled workers from $5.15 per hour to $6.50 per hour.
  2. increase wages for unskilled workers from $5.15 per hour to $7.25 per hour.
  3. increase wages for unskilled workers from $6.50 per hour to $7.25 per hour.
  4. have no effect on the wages of unskilled workers.

    5. Q43 answer
44. Which one of the following, if any, would cause the entire demand curve for Nintendo’s new Wii video game console to shift to the left?
  1. Nintendo announces that it is raising the price of the Wii from $250 to $299.
  2. The introduction of SONY’s PS3, a substitute, competing video game console, is delayed indefinitely.
  3. SONY announces that it will decrease the price of its substitute, competing PS3 video game console by 20%.
  4. Nintendo announces that it is lowering the price of the Wii from $250 to $199.
  5.  Nintendo announces that it will have 20% more games available than originally anticipated for the Wii.
  6.  None of the above will cause the entire demand curve for Nintendo’s Wii to shift to the left.

    7.     Q44 answer
45.
Graph Question 45
Which one of the following events would be described by the above graph?
  1. Microsoft guarantees that all its software will work well on Apple Macintosh computers.
  2. The cost of raw materials in the production of Apple Macintosh computers increases.
  3. The price of Dell computers decreases because Dell improves their production efficiency.
  4. Technological improvements occur in the production of Apple Macintosh computers.
  5. The price of Dell computers increases because of production inefficiencies which Dell encounters.

    6. Q45 answer
46. Assume the following 2 events occur simultaneously:

1. More universities require entering students to purchase computers.

2. An economic recession in the U.S. decreases consumers’ incomes.

 Using supply-demand analysis, what would be the resulting effect of these 2 changes on Dell computers?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would decrease, but the effect on quantity is indeterminate.
  3. Equilibrium quantity would decrease, but the effect on price is indeterminate.
  4. Equilibrium price would decrease, but equilibrium quantity would increase.
  5. Equilibrium quantity would decrease, but equilibrium price would increase.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q46 answer
47. Assume the current minimum wage of $5.15 per hour is also the market-determined equilibrium wage for unskilled workers. Which one of the following statements would be correct?
  1. Raising the minimum wage to $6 per hour would create a shortage of labor, while lowering the minimum wage to $4 per hour would create a surplus of labor.
  2. Raising the minimum wage to $6 per hour would create a surplus of labor, while lowering the minimum wage to $4 per hour would create a shortage of labor.
  3. Raising the minimum wage to $6 per hour would create a shortage of labor, while lowering the minimum wage to $4 per hour would have no effect on labor.
  4. Raising the minimum wage to $6 per hour would create a surplus of labor, while lowering the minimum wage to $4 per hour would have no effect on labor.
  5. Raising the minimum wage to $6 per hour would have no effect on labor, while lowering the minimum wage to $4 per hour would create a surplus of labor.
  6. Raising the minimum wage to $6 per hour would have no effect on labor, while lowering the minimum wage to $4 per hour would create a shortage of labor.

    7. Q47 answer
48. The equilibrium quantity for good X is 100 units per day and the equilibrium price is $50 per unit. The demand for good X then increases because of a change in consumers’ tastes and preferences in favor of good X. If the government were to impose a price ceiling of $50 per unit on good X, then, at $50,
  1. quantity supplied will be greater than 100 units per day, quantity demanded will be less than 100 units per day, and a surplus would exist.
  2. quantity supplied will be less than 100 units per day, quantity demanded will be greater than 100 units per day, and a shortage would exist.
  3. quantity supplied will be greater than 100 units per day, quantity demanded will be equal to 100 units per day, and a surplus would exist.
  4. quantity supplied will be equal to 100 units per day, quantity demanded will be greater than 100 units per day, and a shortage would exist.
  5. quantity supplied will be less than 100 units per day, quantity demanded will be equal to 100 units per day, and a shortage would exist.
  6. quantity supplied will be equal to 100 units per day, quantity demanded will be equal to 100 units per day, and equilibrium would exist.

    7. Q48 answer
49. The government increases the tax it levies on cigarettes . This would cause a resultant
  1. increase in both the equilibrium price and equilibrium quantity of cigarettes.
  2. decrease in equilibrium quantity of cigarettes, but an increase in price.
  3. decrease in equilibrium price of cigarettes, but an increase in quantity.
  4. increase in equilibrium price of cigarettes, but the effect on quantity is indeterminate.
  5. decrease in equilibrium quantity of cigarettes, but the effect on price is indeterminate.
  6. The effect on both the equilibrium price and quantity of cigarettes is indeterminate.

    7. Q49 answer
50. Assume a hurricane is expected to strike Galveston, Texas in the immediate future.

 Using supply-demand analysis, what would be the resulting effect on plywood in Galveston?

  1. Equilibrium price and quantity would both increase.
  2. Equilibrium price would increase, but the effect on quantity is indeterminate.
  3. Equilibrium quantity would increase, but the effect on price is indeterminate.
  4. Equilibrium price would decrease, but equilibrium quantity would increase.
  5. Equilibrium quantity would decrease, but equilibrium price would increase.
  6. Equilibrium price and quantity would both decrease.

    7. Q50 answer
51.
Graph Question 51
The graphical change from A to B shown above would be caused by which one of the following?
  1. The federal government decreases taxes on households.
  2. Technological improvements increase labor productivity.
  3. More frequent terrorist acts reduce consumer confidence.
  4. The federal government increases spending to help rebuild areas destroyed by this spring’s floods.
  5. Higher energy costs raise the cost of producing many goods.

    6. Q51 answer
52. A decrease in the economy's overall level of spending on goods and services due to a decrease in consumer confidence would
  1. shift the entire aggregate demand curve to the right.
  2. shift the entire aggregate demand curve to the left.
  3. shift the entire aggregate supply curve to the right.
  4. shift the entire aggregate supply curve to the left.

    5. Q52 answer
53. Given the following production possibilities frontier (PPF):

Graph Question 53
 If the economy were to increase production of good Y from 2 to 3 units, the opportunity cost of this 3rd  unit of good Y would be how many units of good X?

Q53 answer
54. If the government were to increase the tax it levies on gasoline by $2 per gallon, this would cause a resultant
  1. increase in both the equilibrium price and equilibrium quantity of gasoline.
  2. decrease in equilibrium quantity of gasoline, but the effect on equilibrium price is indeterminate.
  3. increase in equilibrium price of gasoline, but the effect on equilibrium quantity is indeterminate.
  4. decrease in equilibrium price of gasoline, but equilibrium quantity would increase.
  5. decrease in equilibrium quantity of gasoline, but equilibrium price would increase.
  6. The effect on both the equilibrium price and quantity of gasoline is indeterminate.

    7. Q54 answer
55. The equilibrium quantity for heating oil is 10 million gallons per day and the equilibrium price is $2.25 per gallon. The supply of heating oil is decreased because of the effects of hurricane Katrina. If the government were to impose a price ceiling of $2.25 per gallon on heating oil, then, at $2.25 per gallon,
  1. quantity demanded will be greater than 10 million gallons per day and a surplus would exist.
  2. quantity demanded will be greater than 10 million gallons per day and a shortage would exist.
  3. quantity demanded will be equal to 10 million gallons per day and a surplus would exist.
  4. quantity demanded will be equal to 10 million gallons per day and a shortage would exist.
  5. quantity demanded will be less than 10 million gallons per day and a surplus would exist.
  6. quantity demanded will be less than 10 million gallons per day and a shortage would exist.

    7. Q55 answer
56. In Adam Smith’s theory, the “invisible hand” refers to
  1. his faith that consumers will be concerned about the welfare of others.
  2. competitive markets.
  3. his faith that businesses will be concerned about the welfare of their customers.
  4. the federal government.
  5. all levels of government, not just the federal government.

    6. Q56 answer
57. Assume the following 2 events occur simultaneously:

            1. More universities require entering students to purchase computers.

            2. Technological improvements reduce the cost of producing computers.

 Using supply-demand analysis, what would be the resulting effect of these 2 changes on computers?

  1. Equilibrium price and quantity would both increase.
  2. Equilibrium price would decrease, but the effect on quantity is indeterminate.
  3. Equilibrium quantity would increase, but the effect on price is indeterminate.
  4. Equilibrium price would decrease, but equilibrium quantity would increase.
  5. Equilibrium quantity would decrease, but equilibrium price would increase.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q57 answer
58. Assume the equilibrium price of gasoline is $3.00 per gallon. Which one of the following statements would be true?
  1. A government imposed price ceiling of $2.50 would create a surplus of gasoline and a price ceiling of $3.50 would create a shortage of gasoline.
  2. A government imposed price ceiling of $3.50 would create a surplus of gasoline and a price ceiling of $2.50 would create a shortage of gasoline.
  3. A government imposed price ceiling of $2.50 would create a surplus of gasoline, but a price ceiling of $3.50 would have no effect on gasoline.
  4. A government imposed price ceiling of $3.50 would create a surplus of gasoline, but a price ceiling of $2.50 would have no effect on gasoline.
  5. A government imposed price ceiling of $2.50 would create a shortage of gasoline, but a price ceiling of $3.50 would have no effect on gasoline.
  6. A government imposed price ceiling of $3.50 would create a shortage of gasoline, but a price ceiling of $2.50 would have no effect on gasoline.

    7. Q58 answer
59. Which one of the following would be an example of market failure requiring government interference?
  1. Delta and Northwest Airlines declare bankruptcy because of higher fuel costs.
  2. Automobile pollution threatens the environment.
  3. Workers earning the minimum wage are living in poverty.
  4. The price of gasoline hits record highs during 2005 making it difficult for the poor to drive to work and school.
  5. 60% of New Orleans’ homeowners do not have flood insurance.

    6. Q59 answer
60. Assume the following two events occur simultaneously:

            1. The price of airplane fuel increases.

             2. Increased risk of terrorist acts causes greater fear of flying.

 Using supply-demand analysis, what would be the resultant effect on commercial air travel?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium quantity would increase, but equilibrium price would decrease.
  3. Equilibrium price would increase, but equilibrium quantity would decrease.
  4. Equilibrium quantity would decrease, but the effect on equilibrium price is indeterminate.
  5. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q60 answer
61. Which one of the following would cause the greatest increase in real gross domestic product (GDP)?
  1. both the aggregate demand and supply curves shift to the right.
  2. both the aggregate demand and supply curves shift to the left.
  3. the aggregate demand curve shifts to the right and the aggregate supply curve shifts to the left.
  4. the aggregate demand curve shifts to the left and the aggregate supply curve shifts to the right.

    5. Q61 answer
62.
Graph Question 62
 The graphical change from A to B shown above would be caused by which one of the following?
  1. Technological improvements increase labor productivity.
  2. This summer’s hurricanes reduce consumer confidence.
  3. Higher energy costs raise the cost of producing many goods.
  4. The federal government increases spending to help rebuild areas destroyed by Hurricane Katrina.

    5. Q62 answer
63. Non-price rationing is required when
  1. a surplus exists and price is not permitted to increase.
  2. the price of a product is above its equilibrium price.
  3. a shortage exists and price is not permitted to increase.
  4. a shortage exists and price is not permitted to decrease.
  5. the price of a product is equal to its equilibrium price.

    6. Q63 answer
64.  More rigorous safety standards established by the government increases the cost of mining coal. This would cause a resultant
  1. increase in both the equilibrium price and equilibrium quantity of coal.
  2. increase in the equilibrium quantity of coal, but the effect on equilibrium price is indeterminate.
  3. increase in the equilibrium price of coal, but the effect on equilibrium quantity is indeterminate.
  4. decrease in the equilibrium quantity of coal, but an increase in the equilibrium price of coal.
  5. decrease in the equilibrium price of coal, but an increase in the equilibrium quantity of coal.
  6. The effect on both the equilibrium price and quantity of coal is indeterminate.

    7. Q64 answer
65. Assume the following two events occur simultaneously:

 1. The cost of mining coal increases because of tough new government anti-pollution requirements.

 2. The price of substitute, alternative energy sources, such as heating oil, increase because of the natural     disasters of hurricanes Katrina and Rita.

 Using supply-demand analysis, what would be the resulting effect on coal?

  1. Equilibrium price and quantity would both increase.
  2. Equilibrium price would increase, but equilibrium quantity would decrease.
  3. Equilibrium quantity would increase, but equilibrium price would decrease.
  4. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  5. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q65 answer
66. If a small increase in price will cause a large increase in the quantity supplied of good X, then the supply curve for good X is
  1. relatively flat with a positive slope.
  2. relatively steep with a positive slope.
  3. vertical (perfectly steep.
  4. relatively flat with a negative slope.
  5. relatively steep with a negative slope.
  6. horizontal (perfectly flat).

    7. Q66 answer
67.  Which one of the following would cause the greatest decrease in the economy’s overall price level?
  1. Both the aggregate demand and supply curves shift to the right.
  2. Both the aggregate demand and supply curves shift to the left.
  3. The aggregate demand curve shifts to the right and the aggregate supply curve shifts to the left.
  4. The aggregate demand curve shifts to the left and the aggregate supply curve shifts to the right.

    5. Q67 answer
68. The principle of increasing (opportunity) costs would be illustrated by a production possibilities frontier (PPF) which was a
  1. negatively sloped line with a slope of -1.
  2. negatively sloped line with a slope of – 2.
  3. negatively sloped line with a slope of – 0.5.
  4. positively sloped line with a slope of + 2.
  5. positively sloped line with a slope of + 0.5.
  6. curve which was bowed outward from the origin.

    7. Q68 answer
69.  A decrease in aggregate demand will cause
  1. an increase in both the economy's price level and gross domestic product (GDP).
  2. a decrease in both the economy's price level and gross domestic product (GDP).
  3. an increase in the economy's price level, but a decrease in gross domestic product (GDP).
  4. a decrease in the economy's price level, but an increase in gross domestic product (GDP).

    5. Q69 answer
70. Given the following production possibilities frontier (PPF):
Graph Question 70
Point A would represent a combination of guns and butter
     
     a. which is unattainable (impossible to produce).
     b. in which unemployment exists.
     c. in which all resources are devoted to the production of butter.
     d. in which all resources are devoted to the production of guns.
     e. in which resources are equally divided between gun and butter production.

    Q70 answer

71. If Panasonic were able to decrease the price of its plasma TVs because of improvements in worker productivity in Panasonic’s factories, what effect would this have on Toshiba’s plasma TVs?
  1. There would be a shift to the left in both the supply and demand curves for Toshiba’s plasma TVs.
  2. There would be a shift to the left in the demand curve and a shift to the right in the supply curve for Toshiba’s plasma TVs.
  3. There would be a shift to the left in the supply curve and a shift to the right in the demand curve for Toshiba’s plasma TVs.
  4. There would be only a shift to the left in the demand curve for Toshiba’s plasma TVs.
  5. There would be only a shift to the left in the supply curve for Toshiba’s plasma TVs.
  6. There would be only a shift to the right in the supply curve for Toshiba’s plasma TVs.

    7. Q71 answer
72. On a production possibilities frontier (PPF), the y-intercept represents
  1. the units of good X which can be produced if all of the society’s resources were devoted to good X.
  2. the units of good Y which can be produced if all of the society’s resources were devoted to good Y.
  3. the best possible combination of goods X and Y that can be produced.
  4. a point at which unemployment exists.
  5. a point at which society’s total production would be 0.

    6. Q72 answer
73. Hurricane Katrina temporarily disrupts the flow of gasoline from the Gulf Coast. This would cause
  1. a shift to the left in both the supply and demand curves for gasoline.
  2. a shift to the left in the demand curve and a shift to the right in the supply curve for gasoline .
  3. a shift to the left in the supply curve and a shift to the right in the demand curve for gasoline.
  4. Only a shift to the left in the demand curve for gasoline.
  5. Only a shift to the left in the supply curve for gasoline.

    6. Q73 answer
74. Which one of the following, if any, would cause the entire demand curve for Toyota’s fuel-efficient Prius hybrid car to shift to the right?
  1. A strike by Toyota workers cuts the production of Prius autos in half.
  2. Successful cost-cutting techniques enable Toyota to lower the price of the Prius.
  3.  Gas prices increase to $4 per gallon and are expected to go even higher.
  4. The price of the Accord hybrid car is decreased by rival Honda Motors.
  5. None of the above will cause the entire demand curve for the Prius to shift to the right.

    6. Q74 answer
75. Northwest Airlines’ workers accept a significant wage cut.

 Using supply-demand analysis, what would be the resulting effect on Northwest Airlines?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would decrease, but the effect on equilibrium quantity is indeterminate.
  3. Equilibrium price would decrease, but equilibrium quantity would increase.
  4. Equilibrium quantity would decrease, but the effect on equilibrium price is indeterminate.
  5. Equilibrium price would increase, but equilibrium quantity would decrease.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q75 answer
76. The equilibrium price of gasoline is $3.25 per gallon. If the government imposed a price ceiling (maximum price) on gasoline, which one of the following would be true?
  1. A price ceiling of $4.25 per gallon would create a shortage of gas.
  2. A price ceiling of $3.25 per gallon would create a shortage of gas.
  3. A price ceiling of $2.25 per gallon would create a shortage of gas.
  4. A price ceiling of $4.25 per gallon would create a surplus of gas.
  5. A price ceiling of $3.25 per gallon would create a surplus of gas.
  6. A price ceiling of $2.25 per gallon would create a surplus of gas.

    7. Q76 answer
77. The following table indicates points on a society’s production possibilities frontier (PPF):
 
Point
Units of Good Y
Units of Good X
A
1
100
B
2
80
C
3
?
Replacing the ? in the table above with which one of the following numerical values would illustrate the principle of increasing (opportunity) costs?
  1.  50
  2.  60
  3.  70
  4.  90
  5.  110
  6.  130

    7. Q77 answer
78.  Hurricane Katrina reduces the production of gasoline from the U.S. Gulf Coast. At the same time, China and India’s rapid growth increases their demand for gasoline. These events would cause a resultant
  1. increase in both the equilibrium price and quantity of gasoline.
  2. decrease in the equilibrium price of gasoline, but an increase in the equilibrium quantity.
  3. decrease in the equilibrium quantity of gasoline, but an increase in the equilibrium price.
  4. increase in the equilibrium price of gasoline, but the effect on equilibrium quantity is indeterminate.
  5. decrease in the equilibrium quantity of gasoline, but the effect on equilibrium price is indeterminate.
  6. The effect on both the equilibrium price and equilibrium quantity of gasoline is indeterminate.

    7. Q78 answer
79.  The government imposes expensive anti-pollution standards which coal mining firms must adopt. This would cause the supply curve for coal to
  1. shift down and to the left.
  2. shift down and to the right.
  3. shift up and to the left.
  4. shift up and to the right.
  5. remain unchanged.

    6. Q79 answer
80. What would happen to the equilibrium price and quantity of high definition televisions (HDTVs) if the following 2 events occurred?

            1.  More network programming content becomes available for HDTVs.

            2.  Technological improvements result in lowering the cost of producing HDTVs.

  1. Both equilibrium price and equilibrium quantity would decrease.
  2. Equilibrium quantity would decrease and equilibrium price would increase.
  3. Equilibrium price would decrease and equilibrium quantity would increase.
  4. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  5. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  6. The effect on both the equilibrium price and quantity is indeterminate.

    7. Q80 answer
81.  An increase in aggregate supply will cause
  1. an increase in both the economy's price level and gross domestic product (GDP).
  2. a decrease in both the economy's price level and gross domestic product (GDP).
  3. an increase in the economy's price level, but a decrease in gross domestic product (GDP).
  4. a decrease in the economy's price level, but an increase in gross domestic product (GDP).

    5. Q81 answer
82. Assume the following two events occur simultaneously:

             1. The cost of producing high definition plasma TVs decreases.

             2. Household incomes decrease.

 Using supply-demand analysis, what would be the resulting effect on high definition plasma TVs?

  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would increase, but equilibrium quantity would decrease.
  3. Equilibrium quantity would increase, but equilibrium price would decrease.
  4. Equilibrium price would decrease, but the effect on equilibrium quantity is indeterminate.
  5. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q82 answer
83 Which one of the following, if any, would shift the entire demand curve for Dell computers to the right?
  1. The cost of producing Dell computers is decreased due to production efficiencies.
  2. Dell raises the price of their computers by 10%
  3. Consumers’ incomes decrease as the economy slows down.
  4. Dell lowers the price of their computers by 30%.
  5. The price of Hewlett Packard (HP) computers, a competing, substitute good for Dell computers, increases by 20% because of higher costs of producing HP computers.
  6. None of the above would shift the entire demand curve for Dell computers to the right.

    7. Q83 answer
84. The following table indicates points on a society’s production possibilities frontier (PPF):
 
Point
Units of Good Y
Units of Good X
A
1
200
B
2
?
C
3
120
Replacing the ? in the table above with which one of the following numerical values would illustrate the principle of increasing (opportunity) costs?
  1. 110
  2. 120
  3. 150
  4. 160
  5. 170
  6. 210

    7. Q84 answer
85. Which one of the following, if any, would cause the entire supply curve for Nintendo’s new Wii video game console to shift to the left?
  1. Nintendo announces that it is lowering the price of the Wii from $250 to $199.
  2. The unique controller used by the Wii is reported to cause serious wrist injuries.
  3. The available number of SONY’s substitute, competing PS3 video game console is reduced because of production delays .
  4. Nintendo announces that it is raising the price of the Wii from $250 to $299.
  5. The cost of producing Nintendo’s Wii increases because the price of component parts is raised.
  6. None of the above will cause the entire supply curve for Nintendo’s Wii to shift to the left.

    7. Q85 answer
86. The following table represents 5 possible combinations of guns and butter which an economy has the potential to produce:
Point
Guns
Butter
A
0
60
B
1
55
C
2
45
D
3
30
E
4
10

Compared to the opportunity cost of the 2nd unit of guns (increasing guns from 1 to 2 guns), the opportunity cost of the 4th unit of guns (increasing guns from 3 to 4 guns) is

  1. exactly twice as large.
  2. exactly three times as large.
  3. only one-half as large.
  4. less than one-half as large.
  5. more than three times as large.
  6. None of the above answers is correct.

    7. Q86 answer
87. If the price of plasma high definition TVs made by Panasonic were to decrease because of technological improvements in Panasonic’s plasma TV production, what effect would this have on SONY’s LCD high definition TVs?
  1. Equilibrium price and quantity would both decrease.
  2. Equilibrium price would increase, but equilibrium quantity would decrease.
  3. Equilibrium quantity would increase, but equilibrium price would decrease.
  4. Equilibrium price would decrease, but the effect on equilibrium quantity is indeterminate.
  5. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q87 answer
88. In 2007, an economy is operating on its production possibilities frontier (PPF) and is producing 10 million guns and 25 billion pounds of butter. (Guns and butter are the only two goods produced.) In 2008, the economy is producing 15 million guns and 20 billion pounds of butter. It can be concluded that from 2007 to 2008
  1. only economic growth occurred.
  2. only a decrease in unemployment occurred.
  3. only an increase in unemployment occurred.
  4. both economic growth and a decrease in unemployment occurred.
  5. both economic growth and an increase in unemployment occurred.
  6. None of the above can be concluded.

    7. Q88 answer
89. Assume $4.25 per hour is the market-determined equilibrium wage for unskilled workers and the minimum wage is $5.15 per hour. What would be the effect of increasing the minimum wage from $5.15 per hour to $5.85 per hour.
  1. The surplus of labor would increase.
  2. The surplus of labor would decrease.
  3. The shortage of labor would increase.
  4. The shortage of labor would decrease.
  5. None of the above would result.

    6. Q89 answer
90. Which one of the following, if any, will shift the economy’s entire production possibilities frontier (PPF) upward and outward?
  1. An increase in unemployment.
  2. The government borrows money by issuing bonds. It spends the borrowed funds on the surge in Iraq.
  3. An increase in the nation’s capital stock of machinery and buildings.
  4. The printing of  money by the government which increases demand for goods and services.
  5. A decrease in unemployment.
  6. None of the above will shift the entire production possibilities frontier upward and outward.
     Q90 answer
91. Which one of the following, if any, would shift the entire demand curve for Toyota’s gas-saving hybrid Prius automobile to the left?
  1. The price of Honda’s hybrid Civic automobile decreases because production improvements lower the cost of producing Honda Civics.
  2. Toyota raises the price of the Prius by 10%
  3. The cost of producing the Prius increases.
  4. Toyota lowers the price of the Prius by 10%.
  5. The price of gas increases.
  6. None of the above would shift the entire demand curve for Toyota’s Prius to the left.

    7. Q91 answer
92. The following table represents the current supply and demand information for coal.
 
Point ($/ton)
Quantity Supplied (units/day)
Quantity Demanded (units/day)
$4
10
70
$5
20
60
$6
30
50
$7
40
40
$8
50
30
$9
60
20
$10
70
10
$11
80
0
The government then imposes stricter safety requirements which increase the cost of producing coal by $2 per ton. As a result, what will be the new equilibrium price of coal?
  1. $5
  2. $6
  3. $7
  4. $8
  5. $9
  6. $10

    7. Q92 answer
93.
Graph Question 93
A movement from point A to point B on the production possibilities frontier (PPF) graph above would be described by which one of the following statements?
  1. Scarce resources are transferred from butter into guns.
  2. The economy is able to increase the production of guns only because of economic growth.
  3. The economy is able to increase the production of guns only because of a decrease in unemployment.
  4. The economy is able to increase the production of guns because of a combination of economic growth and a decrease in unemployment.

    5. Q93 answer
94. The following table indicates points on a society’s production possibilities frontier (PPF):
Point
Units of Good Y
Units of Good X
A
1
?
B
2
50
C
3
30
Replacing the ? in the table above with which one of the following numerical values would illustrate the principle of increasing (opportunity) costs?
  1. 40
  2. 50
  3. 60
  4. 70
  5. 80

    6. Q94 answer
95. To cure the problem of harmful externalities, such as pollution, economists recommend that government
  1. establish and strictly enforce maximum limits on pollution which all firms must meet.
  2. take control of industries which have a history of excessive pollution.
  3. use market methods providing incentives for businesses to decrease pollution.
  4. pursue a “laissez faire,” hands off policy.

    5. Q95 answer
96. Assume $7.60 per hour is the market-determined equilibrium wage for unskilled labor. What would be the effect of increasing the minimum wage from $5.85 per hour to $7.25 per hour?
  1. The surplus of unskilled labor would increase.
  2. The surplus of unskilled labor would decrease.
  3. The shortage of unskilled labor would increase.
  4. The shortage of unskilled labor would decrease.
  5. There would be no effect on unskilled labor.

    6. Q96 answer
97. From 2000 to 2008, both the equilibrium price and the equilibrium quantity of gas has increased. A reasonable explanation for this is that
  1. from 2000 to 2008, there has been a decrease in the supply of gas.
  2. from 2000 to 2008, there has been an increase in the supply of gas.
  3. from 2000 to 2008, there has been a decrease in the demand for gas.
  4. from 2000 to 2008, there has been an increase in the demand for gas.
  5. the demand curve for gas is positively sloped.

    6. Q97 answer
98. The federal government adopts California’s stricter anti-pollution standards which increases the cost of refining oil. At the same time, U.S. households’ incomes decrease because of a recession. These events would cause a resultant
  1. increase in both the equilibrium price and quantity of oil.
  2. decrease in the equilibrium quantity of oil, but the effect on equilibrium price is indeterminate.
  3.  increase in the equilibrium price of oil, but the effect on equilibrium quantity is indeterminate
  4. decrease in the equilibrium price of oil, but an increase in the equilibrium quantity.
  5. decrease in the equilibrium quantity of oil, but an increase in the equilibrium price.
  6. The effect on both the equilibrium price and equilibrium quantity of oil is indeterminate.

    7. Q98 answer
99. What would be the resultant effect on JetBlue Airlines if the following two events occur at the same time:

 1. A competitor, Delta Airlines, raises the price on all of its flights because of increased operating costs.

 2. JetBlue is forced to pay more for jet fuel.

  1. Equilibrium price and quantity would both increase.
  2. Equilibrium price would increase, but the effect on equilibrium quantity is indeterminate.
  3. Equilibrium quantity would increase, but the effect on equilibrium price is indeterminate.
  4. Equilibrium price would decrease, but equilibrium quantity would increase.
  5. Equilibrium price would increase, but equilibrium quantity would decrease.
  6. The effect on both equilibrium price and quantity is indeterminate.

    7. Q99 answer
100. Assume $6.75 per hour is the market-determined equilibrium wage for unskilled labor. The minimum wage is $5.85 per hour. Which one of the following statements, if any, is correct?
  1. Raising the minimum wage to $6.55 per hour will create a surplus of unskilled labor.
  2. Raising the minimum wage to $7.25 per hour will create a surplus of unskilled labor.
  3. Raising the minimum wage to $6.25 per hour will create a shortage of unskilled labor.
  4. Lowering the minimum wage to $5.15 per hour will create a shortage of unskilled labor.
  5. None of the above statements is correct.

    6. Q100 answer
101. The following table represents 7 possible combinations of guns and butter which an economy has the potential to produce:
 
Point
Guns
Butter
A
0
150
B
1
145
C
2
135
D
3
120
E
4
100
F
5
70
G
6
30
Compared to the opportunity cost of the 2nd unit of guns (increasing guns from 1 to 2 guns), the opportunity cost of the 4th unit of guns (increasing guns from 3 to 4 guns) is exactly
  1. one and one-half times as large.
  2. twice as large.
  3. one-half as large.
  4. three times as large.
  5. four times as large.
  6. None of the above answers is correct.

    7. Q101 answer
102. The government imposes stricter safety requirements which increase the cost of producing coal by $1 per ton. As a result, what will be the resultant effect on the equilibrium price of coal?
  1. The equilibrium price will increase by more than $1 per ton.
  2. The equilibrium price will increase by exactly $1 per ton.
  3. The equilibrium price will increase by less than $1 per ton.
  4. The equilibrium price will not change.
  5. The equilibrium price will actually decrease.

    6. Q102 answer


Formulas

DY/DX  =  slope.     Y is the variable measured on the vertical axis.  X is the variable measured on the horizontal axis.   (D represents change.)
 

Answers

1. a  Return to Q1
Solution to Q1

2. a  Return to Q2
Solution to Q2

3. a  Return to Q3
Solution to Q3

4. b   Return to Q4
Solution to Q4

5. e   Return to Q5
Solution to Q5

6. b   Return to Q6
Solution to Q6

7. e    Return to Q7
Solution to Q7

8. c   Return to Q8
Solution to Q8

9. a   Return to Q9
Solution to Q9

10. c   Return to Q10
Solution to Q10

11. a   Return to Q11
Solution to Q11

12. b    Return to Q12
Solution to Q12

13. a   Return to Q13
Solution to Q13

14. e   Return to Q14
Solution to Q14

15. d   Return to Q15
Solution to Q15

16. b  Return to Q16
Solution to Q16

17. b  Return to Q17
Solution to Q17

18. a  Return to Q18
Solution to Q18

19. c  Return to Q19
Solution to Q19

20. c  Return to Q20
Solution to Q20

21. e  Return to Q21
Solution to Q21

22. 6  Return to Q22
Solution to Q22

23. d  Return to Q23
Solution to Q23

24. d  Return to Q24
Solution to Q24

25. f  Return to Q25
Solution to Q25

26. c  Return to Q26
Solution to Q26

27.  f  Return to Q27
Solution to Q27

28. a  Return to Q28
Solution to Q28

29. c   Return to Q29
Solution to Q29

30.  c  Return to Q30
Solution to Q30

31.  2   Return to Q31
Solution to Q31

32. a  Return to Q32
Solution to Q32

33. c  Return to Q33
Solution to Q33

34. d  Return to Q34
Solution to Q34

35. c  Return to Q35
Solution to Q35

36. d  Return to Q36
Solution to Q36

37. c  Return to Q37
Solution to Q37

38. c  Return to Q38
Solution to Q38

39. d  Return to Q39
Solution to Q39

40. a  Return to Q40
Solution to Q40

41. f  Return to Q41
Solution to Q41

42. d  Return to Q42
Solution to Q42

43. c  Return to Q43
Solution to Q43


44.  c  Return to Q44
Solution to Q44

45. c  Return to Q45
Solution to Q45

46. f  Return to Q46
Solution to Q46

47. d  Return to Q47
Solution to Q47

48. d  Return to Q48
Solution to Q48

49.  b   Return to Q49
Solution to Q49

50. a   Return to Q50
Solution to Q50

51.  e   Return to Q51
Solution to Q51

52. b   Return to Q52
Solution to Q52

53. 12  Return to Q53
Solution to Q53

54. e  Return to Q54
Solution to Q54

55. d  Return to Q55
Solution to Q55

56. b  Return to Q56
Solution to Q56

57.  c   Return to Q57
Solution to Q57

58. e   Return to Q58
Solution to Q58

59.  b   Return to Q59
Solution to Q59

60. d   Return to Q60
Solution to Q60

61.  a   Return to Q61
Solution to Q61

62. b   Return to Q62
Solution to Q62

63. c   Return to Q63
Solution to Q63

64.  d   Return to Q64
Solution to Q64

65. d   Return to Q65
Solution to Q65

66. a  Return to Q66
Solution to Q66

67. d  Return to Q67
Solution to Q67

68. f  Return to Q68
Solution to Q68

69. b  Return to Q69
Solution to Q69

70.  c   Return to Q70
Solution to Q70

71. d   Return to Q71
Solution to Q71

72. b   Return to Q72
Solution to Q72

73. e   Return to Q73
Solution to Q73

74.  c   Return to Q74
Solution to Q74

75. c   Return to Q75
Solution to Q75

76. c    Return to Q76
Solution to Q76

77. a   Return to Q77
Solution to Q77

78. d  Return to Q78
Solution to Q78

79. c  Return to Q79
Solution to Q79

80.  d   Return to Q80
Solution to Q80

81. d   Return to Q81
Solution to Q81

82. d   Return to Q82
Solution to Q82

83. e   Return to Q83
Solution to Q83

84.  e   Return to Q84
Solution to Q84

85. e   Return to Q85
Solution to Q85

86. a    Return to Q86
Solution to Q86

87. a   Return to Q87
Solution to Q87

88.  f   Return to Q88
Solution to Q88

89. a   Return to Q89
Solution to Q89

90. c   Return to Q90
Solution to Q90

91. a   Return to Q91
Solution to Q91

92.  d   Return to Q92
Solution to Q92

93. c   Return to Q93
Solution to Q93

94. c    Return to Q94
Solution to Q94

95. c   Return to Q95
Solution to Q95

96. e   Return to Q96
Solution to Q96

97. d   Return to Q97
Solution to Q97

98. b   Return to Q98
Solution to Q98

99. b   Return to Q99
Solution to Q99

100. b   Return to Q100
Solution to Q100

101. b  Return to Q101
Solution to Q101

102. c    Return to Q102
Solution to Q102

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