Principles of Economics - Exam 2 with Solution Key | ECON 2005, Exams of Microeconomics

Download Principles of Economics - Exam 2 with Solution Key | ECON 2005 and more Exams Microeconomics in PDF only on Docsity! Page 1 Microeconomics 2005 Exam 2 September 21, 2000 Instructions: Read each question CAREFULLY. For each question give the best response for the information given in the question. Your form letter is on the bottom of page four. 1. Which of the following will NOT cause a shift in the demand curve for orange juice? a. an increase in income b. a decrease in wealth f3) an increase in the price of apple juice () an increase in the price of orange juice 2. According to the law of demand: As prices rise, ceteris paribus, a. demand increases. By demand decreases. A quantity demanded decreases. d. quantity demanded increases. 3. The Setrite Corperation produces chairs. An economist working for the firm predicts that “if people's incomes rise next year, then the demand for our chairs will increase, ceteris paribus." The accuracy of the economist's prediction depends on whether the chairs Setrite produces a. have many complementary goods. OQ have few substitutes. c. have few complementa: goods. d. are normal goods. 4, Suppose the demand for good Z goes up whén the price of good Y gces down, We can say that goods 2 and Y are @ complements. . substitutes. c. unrelated goods. d. queuing goods. : . nee arent. : 5. When the decrease in the price of:.one. good causes the demand for another good to decrease, the goodsvare’ Pry, normal. SON inferior. substitutes. . . complements. 5 2 of Page 2 6. In -esponse to news reports that taking aspirins daily can reduce an inuividual's risk of a heart attack, there will most likely be a. queuing for aspirins. . a decrease in the supply of aspirins. an increase in the demand for aspirins. an increase in the quantity demanded of aspirins. 7. Demand curves are derived while holding constant a. income, tastes, and the price of the good. b. income and tastes. a ncome, tastes, expectations, and the price of other goods. d. castes and the price of other goods. 8. The Pasha turkish restaurant had to increase the price of its hummus due to higher input costs, but found that hummus sold actually increased slightly. The likely explanation is: - a violation of the law of supply. a violation of the law of demand. c. an outward shift in the demand curve for turkish food. da. an elastic demand. 9. A change in income, preferences, or prices of other goods or services egads to a which leads to a change in demand; movement along the demand curve change in quantity demanded; movement along the demand curve change in demand; shift of the demand curve change in quantity demanded; shift of the demand curve 20 OF 10. According to the law of supply, there is, ceteris paribus a a. negative relationship between price and the quantity of a good supplied. (8) positive relationship between price and the quantity of a good supplied. c. negative relationship between price and the change in supply. d. positive relationship between price and the change in supply. Le ll. If the price of pizza sauce increases, there will be of pizza. . an increase in the supply of a decrease in the supply of ¢. an increase in the quantity supplied of a decrease in the quantity supplied of Page 5 $ a = 53 D ae —> 2s = fu D Dg 1 0 Number of tunafish sandwiches per week e Figure 4.3 17. Refer to Figure 4.3. If consumer income falls, the demand for tuna fish sandwiches shifts from Dy to Dy], This implies that tuna fish sandwiches are a. a normal good. an inferior good. ‘Ka substitute good. e d. a complementary good. Page 6 Table 4.1 Price per pizza Quantity demanded Quantity supplied (pizzas per month) (pizzas per month) $4 900 778 $6 800 800 $8 700 825 $10 600 875 $12 500 900 18. Refer to Table 4.1. This market will be in equilibrium if the price per $8. c. $10. d. $12. 19. Refer to Table 4.1. If the price per pizza is $10, the price will e@ a. remain constant because the market is in equilibrium. .b. increase because Qd > Qs in the market. POE EE deereasé because Qs > Qd in the market. @ @ decrease because Qs > Qd in the market. Page 7 SITUATION 1: Lettuce and spinach are substitutes. Lettuce and tomatoes are complements. Lettuce is a normal good. During the winter of 1993, about 20% of the lettuce crop was destroyed by flooding in Arizona. wr ot Zz o 20. Refer to Situation 1. As a result of the flooding in Arizona during winter of 1993, you would expect that a. the price of lettuce would increase, the supply of lettuce would -s, increase and the quantity demanded of Lettuce would decrease. @ >, the supply of lettuce decreased, the price of lettuce would increased and equilibrium quanitity of lettuce decreased. > ec. the price of lettuce increased and both the quantity of lettuce Supplied and the quantity ~f lettuce demanded increased. d. the supply of lettuce decreased, the price of lettuce increased and demand for lettuce shifts left. 21. Refer to Situation 1. The floods that destroyed part of the lettuce crop would have caused oG. an increase in the demand for tomatoes. @@©./a decrease in the demand for tomatoes. 9S. an increase in the supply of tomatoes. d. a decrease in the supply of tomatoes. ~ 22, Refer to Situation 1. At the same time that part of the lettuce crop was c stroyed consumer income also decreased. Ceteris Paribus, in the market for lettuce this would have caused @,/both the equilibrium price and quantity to decrease. b. the equilibrium price to increase and the equilibrium quantity to decrease. c. the equilibrium price to decrease. The equilibrium quantityMfould have increased, decreased or remained the same. aa the equilibrium price to either increase, decrease, or remain the same and the equilibrium quantity to decrease.