Transcript Practice questions.

Policy problems
• Should taxes be imposed on producers or on
consumers? A. the economic consequences on prices and quantities are identical.
• How is the demand curve for cars affected by a $100
sales tax on cars? How is the supply curve affected by a
$100 tax on suppliers of cars? A. a tax on consumers shifts the demand down and
a tax on producers shift the supply to the left.
• Subsidies: Show in a graph the effect of giving a subsidy
of 5 cents per pound to orange farmers. A. A subsidy to producers shifts
the supply to the right.
• Labor Market: Use a graph to show that it is equivalent
to impose a tax on workers and on firms. What is more
fair: a tax on workers or on firms?
Questions from Previous Exams
True/False
• The price of gas went up and the quantity sold
went down, therefore the law of supply has been
violated. A. False
Multiple Choice
• If the supply of oil shifts to the left and all other
relevant factors remain unchanged, then
a) the demand for oil will fall
b) the quantity demanded for oil will fall. This is
the correct answer
c) the demand for oil will rise
d) the quantity demanded of oil will rise
• ____3.
An increase in the price of corn will cause a shift in the
supply of corn to the right. A. False
• ____4.
If the price and quantity exchanged of a good
simultaneously rise, then the law of demand has been violated. A.
False
• ____6.
Suppose the price of a commodity is $15 per unit. At
that price, consumers wish to purchase 6,000 units weekly and
producers wish to sell 4,000 units weekly. In this situation,
• a.unsatisfied consumers will bid up the market price. This is the
correct answer.
• b.the market price will fall because producers are unsatisfied.
• c.the price will rise and the demand will fall to bring the market to
equilibrium.
• d.supply will shift to the right by 2,000 units in order to satisfy
consumers.
• 10. To make child daycare more affordable, government
advisors are debating two possible options. Plan A is to
give daycare centers a $100 subsidy per month per
child. Plan B is to give the parents $100 reduction in
taxes per month per child in daycare. Which plan
benefits parents more?
• a.Plan A because it will shift the supply to the right of
childcare and decrease the price.
• b.Plan B because the $100 goes directly to the parents.
• c.The plans are equivalent in terms of their impact on the
price minus subsidy paid by parents. A. This is the
correct answer.
• d.Plan A because the price will fall, while under Plan B
the price will rise.
18
16
Price (US$)
14
12
10
8
6
4
2
0
0
2
4
6
8
10
12
14
16
18
Cups of coffee per week
• ____14.
Comparing the elasticity of demand when the price is 12 and
when the price is 4, when is the elasticity bigger?
• a.They are equal.
• b.The elasticity is greater when the price is 12. A.This is the correct answer.
• c.The elasticity is greater when the price is 8.
• d.More information is needed to answer this question.
Quiz-True or False-Old Exams
• ____
if 1,000 acres of land can produce
3000 bushels of corn, then 2,000 acres can
produce 6000 bushels of corn and 3,000 acres
can produce 9000 bushels of corn. A. This is
False.
• ____
If the total benefits received from drug
enforcement exceed its total costs, then the
government should expand its drug enforcement
activity. A.This is false.
• ____
Fixed costs have no effect on a firm's
profit. A. This is false.
•
•
•
•
•
In each of the following 4 circumstances, what would
happen to the price and quantity consumed of corn.
Circle the correct answer. Correct answer in bold.
____
1.The price of fertilizer goes up.
Price: up down
Quantity: up down
____2.The price of wheat goes up.
Price: up down
Quantity: up down
____3.An epidemic wipes out half the population
(people). Price: up down
Quantity: up down
____4.The wages of industrial workers in the corn
industry go up.
Price: up down
Quantity: up down
True-False
• ____7. A firm's revenue can be calculated
from its demand curve using the formula
"price times quantity.” A. True.
• ____9.If the demand for lettuce falls, the
price will fall, causing the demand to go
back up. A. False
• ____2. Which of the following would
cause an increase in the price of video
tape rentals?
• a.Movie theaters reduce their prices.
• b.The royalties paid to movie actors fall.
• c.The price of video cassette recorders
(VCRs) increase.
• d.A nationwide video rental chain exits the
market. A. This is correct.
• ____
11.
Consider the market for restaurant
meals. Statistics show that wealthier families spend a
greater proportion of their income on restaurant meals
than do poorer families. If households' incomes rise
substantially during an economic recovery, then we can
expect
• a.an increased supply of restaurant meals.
• b.a lower price for restaurant meals.
• c.the demand curve for restaurant meals to shift to the
left.
• d.an increased demand for restaurant meals. This is
correct.