Microeconomics midterm 1 practice

Suppose that a 20% fall in the price of a good increases the quantity demanded by 10%. From this we can tell that the good:

demand for the good is inelastic

The economy is producing at a production efficient point on the PPF between sandwiches and other goods. At its production point, the marginal social cost of a sandwich is less than its marginal social benefit. Consequently, compared to the allocatively efficient quantity the economy is producing too ____ sandwiches and too ____ other goods.

A) many; few

B) many; many

C) few; few

D) few; many

E) None of the above answers are correct

D) few; many

Supply chain interruptions have raised the cost of producing the computer chips which areused in manufacturing automobiles. The price of an automobile _ and the quantity_.

A) rises; increases

B) rises; decreases

C) falls; increases

D) falls; decreases

B) rises; decreases

If the government sets a production quota for rice that exceeds the equilibrium quantity, then the price of a ton of rice ____ and the quantity ____.

A) rises; increases

B) rises; decreases

C) falls; increases

D) falls; decreases

E) None of the above answers are correct.

E) None of the above answers are correct.

C) ?

The number of people demanding food low in carbohydrates (carbs) increases while simultaneously the number of firms producing food low in carbs increases. The effect from the increase in the number of producers is larger than the effect from the number of demanders. As a result, the equilibrium price of low-carb food ____ and the equilibrium quantity ____.

A) rises; increases

B) falls; increases

C) might rise, fall, or stay the same; increases

D) rises; might increase, decrease, or stay the same

E) None of the above answers are correct.

B) falls; increases

When the price of a pizza is $19, 12 million pizzas per day are demanded. When the price of a pizza is $21, 8 million pizzas per day are demanded. The price elasticity of demand equals

A) 0.25.

B) 4.00.

C) 0.50.

D) 2.00.

E) None of the answers is correct.

B) 4.00.

Potato chips are a normal good and people's incomes rise. As a result, the equilibrium price of a pound of potato chips ____ and the equilibrium quantity ____.

A) might rise, fall, or not change; increases

B) falls; decreases

C) falls; increases

D) rises; decreases

E) rises; increases

E) rises; increases

The price elasticity of demand for streaming movies is 1.50 and the price of streaming increases by 5 percent. Consequently, the quantity demanded of streaming movies decreases by

A) 7.50 percent.

B) 6.50 percent.

C) 1.20 percent.

D) 0.30 percent.

E) None of the numeric answers is correct.

A) 7.50 percent.

When a dairy produces skim milk it also simultaneously produces cream. Suppose the price of skim milk rises. As a result, the equilibrium price of cream ____ and the equilibrium quantity of cream ____.

A) rises; increases

B) rises; decreases

C) falls; increases

D) falls; decreases

E) does not change; does not change

C) falls; increases

Explanation: Since the price increases, producers want to make more of it so price falls and quantity increases

If the price of a pizza is exactly equal to the minimum price a seller will accept for the pizza,then the

A) consumer surplus for the pizza cannot be measured.

B) seller receives the maximum producer surplus.

C) seller incurs no marginal cost from producing that pizza.

D) seller receives no producer surplus from that pizza.

A) consumer surplus for the pizza cannot be measured. or D) seller receives no producer surplus from that pizza.

Suppose the deadweight loss from a tax is $3 billion. This $3 billion equals the

A) loss to the consumers and the gain to the producers of the product.

B) loss to the producers and the gain to the consumers of the product.

C) gain to the consumers and the producers of the product, and a loss to the rest of society.

D) loss to society and a gain to neither the consumers or producers of the product.

D) loss to society and a gain to neither the consumers or producers of the product.

Bricks are used to construct houses. Suppose the price of bricks falls. As a result, the equilibrium price of a house ____ and the equilibrium quantity ____.

A) rises; decreases

B) rises; increases

C) falls; decreases

D) falls; increases

D) falls; increases

Producers pay a larger fraction of a sales tax when the price elasticity of demand is ____and when the price elasticity of supply is ____.

A) larger; larger

B) larger; smaller

C) smaller; larger

D) smaller; smaller

B) larger; smaller

Suppose both demanders and suppliers become convinced that the price of oil will be higher in a month. As a result, the equilibrium price of oil today ____ and the equilibrium quantity today ____.

A) rises; increases

B) falls; increases

C) might rise, fall, or stay the same; increases

D) rises; might increase, decrease, or stay the same

E) None of the above answers are correct.

D) rises; might increase, decrease, or stay the same

An increase in the nation's technology will

A) shift the PPF outward.

B) not shift the PPF but will cause a movement along the PPF so that more products that require extensive use of technology are produced.

C) not shift the PPF but cause a movement along the PPF, however the direction of the movement is not certain.

D) not shift the PPF but will move the nation from producing at a point on the PPF to producing at a point within the PPF as more workers become unemployed.

E) not shift the PPF but will move the nation from producing at a point within the PPF to producing at a point closer to the PPF.

A) shift the PPF outward.

Shell makes a specific brand of gasoline. The elasticity of demand for Shell gasoline is ____the elasticity of demand for gasoline in general.

A) larger than

B) the same as

C) smaller than

D) not comparable to

A) larger than

Suppose the government subsidizes the production of sugar. This subsidy ____ the price consumers pay and ____ the price (including the subsidy) the producers receive.

A) raises; raises

B) raises; lowers

C) lowers; raises

D) lowers; does not change

E) lowers; lowers

C) lowers; raises

Explanation: Supply increases so consumers pay less and producers get more money

A tax ____ the quantity produced by a larger amount if the price elasticity of demand of the product is ____.

A) increases; larger

B) increases; smaller

C) decreases; larger

D) decreases; smaller

C) decreases; larger

Explanation: Tax will decrease the quantity produced, the more specific, the more substitutes so, more elastic.