MICROECONOMICS

1.      The demand curve for a normal good slopes down for which of the following reasons?

I.  An increase in the price of the good induces consumers to purchase substitute products. II.  An increase in the price of the goods reduces consumers' purchasing power.

III.  An increase in the price of the good increases consumers'utility from consuming that good.

(A)    I only

(B)    II only

(C)    III only

(D)    I and II only

(E)    I and III only

2.      Assume that the government imposes a binding price ceiling on a market for an inferior good. Which of the following is most likely to occur in the market if consumers’ incomes increase?

(A)   The market demand will shift to the right.

(B)    The market supply will shift to the right.

(C)    The shortage in the market will decrease.

(D)    The surplus in the market will increase.

(E)    The market price will increase.

3.      A change in which of the following will cause a change in the supply of personal computers (PC’s) in the short run?

(A)   Technology

(B)    Demand for PC’s

(C)    Price of disks, which are a complement to PC’s

(D)   Price of PC’s

(E)    Consumers’ incomes

4.      Which of the following changes in the demand for and the supply of a goodwill necessarily result in an increase in both the equilibrium price and quantity of the good in a market?

(A)          Demand            Supply

               Increase           Increase

(B)          Demand            Supply

               Increase           No change

(C)          Demand            Supply

              No change          Increase

(D)          Demand             Supply

               Decrease           Increase

(E)           Demand            Supply

               No change        Decrease

5.

The graph above shows the market demand for good X. A movement from point A to point B would most likely be caused by

(A)    an increase in the price of good Z, a substitute

(B)    an increase in consumers'income

(C)    a decrease in consumers'income

(D)    a decrease in production costs for good X

(E)    a decrease in the supply of good X

6.      Which of the following will cause the demand for a normal good to increase? 

(A)   A decrease in consumers’ income

(B)    A decrease in the price of a complementary good

(C)    A decrease in the price of a substitute good

(D)   A decrease in the price of the good

(E)    A decrease in the number of consumers

7.      In a perfectly competitive market, a change in which of the following could cause a shift in the supply curve?

(A)   The incomes of consumers 

(B)    The number of buyers

(C)    Technology

(D)   The price of the product 

(E)    Tastes and preferences

8.      If the supply of fish increases, there will be

(A)    an increase in the demand for chicken, a substitute good 

(B)    an increase in the demand for fish

(C)    an increase in the price of fish tacos

(D)    a decrease in the price of fish

(E)    a decrease in the supply of potatoes, a complementary good 

9.      Which of the following situations best illustrates the law of demand?

(A)    As real incomes of United States citizens have decreased over the past year, the demand for housing has also decreased.

(B)   Recent decreases in the price of imported wine have led to an increase in the consumption of domestic wine.

(C)    In the past several months, as the price of compact disc players has decreased, the quantity of compact disc players sold has increased

(D)   The increase in the price of quality health foods has increased the revenues of firms producing these goods.

(E)    As the demand for computers has increased, the number of workers in the computer industry has increased.

10.    Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another?

(A)    A decrease in demand will cause the equilibrium price, equilibrium quantity, and total surplus to increase.

(B)    An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase.

(C)    A decrease in supply will cause the equilibrium price to decrease, the equilibrium quantity to increase, and consumer surplus to decrease.

(D)    An increase in supply will cause the equilibrium price to increase, the equilibrium quantity to decrease, and consumer surplus to increase.

(E)    A decrease in supply and increase in demand will cause the equilibrium quantity to decrease but the equilibrium price to be indeterminate.

11.    What will happen to the price and quantity of footballs as a result of an increase in the price of leather used to make footballs?

(A)   Price will increase, and quantity will increase.

(B)    Price will increase, and quantity will decrease.

(C)    Price will decrease, and quantity will increase.

(D)   Price will decrease, and quantity will decrease.

(E)    Price will not change, and quantity will not change.

12.    Suppose hotdogs and hamburgers are substitutes in consumption. If the supply of hotdogs decreases, which of the

following will happen in the market for hamburgers?

(A)    The supply curve for hamburgers will shift to the right. 

(B)    The supply curve for hamburgers will shift to the left.

(C)    The demand curve for hamburgers will shift to the right.

(D)    The demand curve for hamburgers will shift to the left.

(E)    Both the demand curve and supply curve for hamburgers will shift to the left.

13.    If an unusually cold summer destroyed a large portion of the bee population, the equilibrium price and quantity of honey produced by bees will most likely change in which of the following ways?

(A)       Price            Quantity

            Increase       Increase

(B)       Price            Quantity

            Increase       Decrease

(C)       Price             Quantity

            Increase      No change

(D)       Price            Quantity

            Decrease     Decrease

(E)        Price            Quantity

            No change     Decrease

14.

The graphs above show Mary’s demand for hamburgers and Mark’s demand for hamburgers. Suppose Mary and Mark are the only two consumers in the market. Which of the following is a point on the market demand curve for hamburgers?

(A)      Price          Quantity

            $2              12

(B)       Price          Quantity

            $4              7

(C)       Price          Quantity

             $6               6

(D)       Price          Quantity

             $8               4

(E)        Price         Quantity

             $10             8

15.    The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she pays gives a measure of her

(A)    consumer surplus 

(B)    producer surplus  

(C)    marginal utility    

(D)   marginal cost

(E)    ability to pay

16.    Which of the following will shift the supply curve for apples to the right?

(A)   An increase in consumers’ income

(B)    An increase in the price of apples

(C)    An increase in the wages of apple pickers

(D)   A decrease in the rental price for apple harvesting equipment

(E)    A decrease in the demand for oranges, a substitute in consumption

17.

Based on the graph above, the consumer surplus at the market equilibrium price and quantity is shown by which area?

(A)    GMK 

(B)    GMN 

(C)    GZN  

(D)    ZMN 

(E)    MNK

18.    If growing corn becomes more profitable than growing wheat, which of the following will occur?

(A)   The supply of corn will decrease.

(B)    The price of wheat will decrease.

(C)    The price of corn will decrease.

(D)    The demand for wheat will increase. 

(E)    The demand for corn will increase.

19.    Zucchini is produced in a perfectly competitive market with a downward-sloping demand curve and an upward-sloping supply curve. Dawson Farm is a typical perfectly competitive farm that produces and sells zucchini at the equilibrium price of $1 . 75 per pound. Which of the following is true?

(A)   No buyer in the market is willing to pay more than $1 . 75 per pound for zucchini.

(B)    No buyer in the market is willing to pay more than $1 . 75 per pound for zucchini from Dawson Farm.

(C)    Market demand for zucchini will increase if Dawson Farm lowers its price below $1 . 75 per pound.

(D)   Dawson Farm would lose some but not all of its customers if it increases the price above $1 . 75 per pound

(E)    Dawson Farm would likely be able to increase the demand for its zucchini by advertising.

The following questions refer to the graph below. The market is currently in equilibrium

20.    In a competition equilibrium consumer surplus is the area of

(A)   UVZ    

(B)    WYZ   

(C)    RVUT 

(D)   XVZY 

(E)    0YZS

21.    All of the following cause a rightward shift in the demand schedule for a normal good EXCEPT 

(A)    a decrease in the price of the good

(B)    a decrease in the price of a complementary good

(C)    an increase in the price of a substitute good

(D)    an increase in consumers’ income

(E)    an increase in consumers’ preference for the good

22.    A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways?

(A)     Price          Quantity

         Increase      Increase

(B)     Price           Quantity

          Increase       Decrease

(C)     Price            Quantity

          Decrease       Increase

(D)     Price            Quantity

          Decrease     Decrease

(E)     Price            Quantity

         No change     Increase

23.    In the short run, a decrease in production costs of a product will shift 

(A)   both the demand curve and the supply curve to the right

(B)    the demand curve to the left and the supply curve to the right

(C)    only the supply curve to the right

(D)    only the supply curve to the left   

(E)    only the demand curve to the left

24.    Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by

(A)   increasing the demand for pretzels and therefore the supply of pretzels 

(B)    increasing the demand for pretzels and therefore the price of pretzels    

(C)    decreasing the demand for pretzels and therefore the price of pretzels  

(D)   increasing the supply of pretzels and therefore the price of pretzels

(E)    decreasing the supply of pretzels and therefore the price of pretzels

25.    Consumer surplus exists because of the

(A)    surplus of money that wealthy consumers hold

(B)    surplus in marginal product that firms get when they hire an additional worker

(C)    willingness of some consumers to pay a price higher than the market price for some units of a good

(D)    additional utility that households obtain when the prices of substitutes fall 

(E)    increase in the availability of goods when income rises

26.    If the increase in the price of one good decreases the demand for another, then the two goods are

(A)    inferior goods 

(B)    luxury goods  

(C)    normal goods

(D)    substitute goods

(E)    complementary goods

27.    Assume that the market demand for a good is perfectly inelastic, the market supply for the good is perfectly elastic, and the market is in equilibrium. If there is a decrease in the price of a key input used in the production of the good, which of the following will occur?

(A)    There will be a decrease in the equilibrium quantity. 

(B)    There will be no change in the producer surplus.

(C)    There will be a decrease in the producer surplus.   

(D)    There will be a decrease in the consumer surplus.  

(E)    There will be an increase in the equilibrium price.

28.    Which of the following would shift the short-run supply curve for strawberries?

(A)   A decrease in the consumption of strawberries 

(B)    An increase in the price of strawberries

(C)    A strike by all farmworkers

(D)   An increase in household incomes

(E)    An announcement of a study that shows the health benefits of eating strawberries

29.    Assume that more corn is used to produce ethanol. Simultaneously, more effective control of pests and weeds occurs in farming. Which of the following will definitely occur in the corn market?

(A)   The price of corn will increase.

(B)    The quantity of corn will decrease. 

(C)    The price of corn will decrease.

(D)   The quantity of corn will increase. 

(E)    The supply of corn will decrease.

30.

The diagram above shows the demand curve for a good. If the price increases from P1 to P2, and quantity consumed decreases from Q2 to Q1 , consumer surplus decreases by the area

(A)   BDC

(B)    P1P2BC  

(C)    P1P2BD  

(D)    Q1DCQ2 

(E)    P2P3B

31.    For consumers, assume that fishsticks and tacos are substitutes. Which of the following graphs illustrates the effect on the taco market if the price of fishsticks increases?

32.    Which of the following describes how a market will respond when the scarcity of a good increases?

(A)    Consumers will increase their demand for the good   

(B)    Consumers will decrease their demand for the good.

(C)    The price of the goodwill increase.

(D)   The price of the goodwill decrease.

(E)    Producers will increase the supply of the good.

33.    The supply curve for automobiles will shift to the left in response to

(A)    an increase in the efficiency of robot technology 

(B)    an increse in wages in the automobile industry

(C)    a decrease in the number of consumers purchasing automobiles

(D)    a decrease in the interest rates for automobile loans 

(E)    a decrease in consumers'income

34.    If a hurricane reduced the crab population, the price of crabs and quantity sold would change in which of the following ways?

(A)     Price          Quantity

         Increase       Increase

(B)     Price           Quantity

           Increase    Decrease

(C)     Price            Quantity

          Decrease      Increase

(D)     Price           Quantity

           Decrease     Decrease

(E)      Price           Quantity

           No change   Decrease

35.    Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely

(A)   remain unchanged because hamburgers and onions are different goods 

(B)    increase because hamburgers and onions are substitutes

(C)    increase because hamburgers and onions are complements

(D)    decrease because hamburgers and onions are complements 

(E)    decrease because hamburgers and onions are substitutes

36.    If a normal good is produced in a competitive market, which of the following combination of events could cause the price of the good to increase and the quantity to decrease?

(A)   An increase in the average income of consumers and an increase in the number of producing firms 

(B)    An increase in the average income of consumers and an increase in the price of a variable input

(C)    An increase in the price of a substitute good an an increase in the number of producing firms

(D)   A decrease in the number of consumers and a decrease in the price of a variable input

(E)    A decrease in the average income of consumers and an increase in the number of producing firms

37.    Consumer surplus in a market for a good exists because

(A)   binding price floors encourage producers to increase the supply of the good

(B)    some consumers would be willing to pay more than the equilibrium price of the good

(C)    when the price of the good decreases, most consumers increase their demand for the good

(D)   producers do not have market power to set their own price

(E)    some producers charge different prices for the good in different markets

38.    Given an increase in the price of material K— which is an input used to produce good X— and an increase in the price of good Y— which is a substitute for good X— which of the following will definitely occur?

(A)   The equilibrium price of good X will decrease. 

(B)    The equilibrium price of good X will increase.

(C)    The equilibrium quantity of good X will be unaffected. 

(D)   The equilibrium quantity of good X will increase.

(E)    The equilibrium quantity of good X will decrease.

39.

The graph above shows the supply and demand curves for artichokes. The surgeon general announces that eating an artichoke a day dramatically reduces one’s likelihood of developing cancer. Simultaneously an infestation of the

artichoke weevil severely damages the crop. Which of the following will definitely occur as a result?

(A)   The supply of artichokes will increase. 

(B)    The price of artichokes will increase.

(C)    The demand for artichokes will decrease.

(D)   The quantity of artichokes grown will decrease.

(E)    The profits of farmers who specialize in growing artichokes will decrease.

40.    Which of the following provides a possible explanation for a simultaneous increase in the equilibrium price and the quantity of blueberries in a market?

(A)   An increase in the price of strawberries, a substitute    

(B)    An increase in the supply of strawberries, a substitute

(C)    An increase in the price of farmland used to grow blueberries

(D)   A decrease in the price of blueberry harvesting equipment 

(E)    Imposition of a price floor in the market for blueberries