YORK UNIVERSITY

FACULTY OF LIBERAL ARTS AND PROFESSIONAL STUDIES

Introduction to Microeconomics
AP/ECON 1000.03C
Test #1 (a)



Course Director: Ida Ferrara October 9
th
, 2009


Name ______________________________________

Student Number _____________________________



Instructions: Calculators, digital dictionaries, cell phones, pagers, or other
electronic devices are not allowed. All such devices as well as all books, papers,
knapsacks, and briefcases must be left at the front of the lecture hall. The only
items you may have at your seat are pens, pencils, student ID, purse, and coat.
There are 22 multiple choice questions. Record your answer on the Scantron form
provided. The maximum number of marks is 22. Time allotted is 45 minutes. Stop:
Please fill in your name and student number.



MARK
Total (22)




MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) A new car has a sticker price of $35,000. Fred decided that he would pay no more than $32,000 for
this car. He bought the car for $31,000. Fred obtained a consumer surplus of
1)
A) $3,000. B) $1,000. C) $32,000. D) $4,000. E) $35,000.
Use the figure below to answer the following question.
Figure 4.1.2
2) Figure 4.1.2 illustrates a linear demand curve. If the price falls from $13 to $11, 2)
A) total revenue increases.
B) total revenue initially decreases then increases.
C) total revenue initially increases then decreases.
D) total revenue decreases.
E) total revenue remains unchanged.
3) The price of good X falls and the demand for good Y decreases. We can conclude that 3)
A) X and Y are substitutes.
B) X and Y are independent of each other.
C) X is an inferior good.
D) X is a normal good.
E) X and Y are complements.
4) Consider the market for cell phones. Suppose the price of a cell phone falls. Explain the effect of
this event on the quantity of cell phones demanded and on the demand for cell phones.
4)
A) The quantity of cell phones demanded is unchanged and the demand for cell phones
decreases.
B) The quantity of cell phones demanded is unchanged and the demand for cell phones
increases.
C) The quantity of cell phones demanded increases and the demand for cell phones is
unchanged.
D) The quantity of cell phones demanded decreases and the demand for cell phones is
unchanged.
E) The quantity of cell phones demanded increases and the demand for cell phones also
increases.
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5) In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or 7 jackets. Sue's
opportunity cost of producing a cap is ________ jackets and Tessa's opportunity cost of producing
a cap is ________ jackets.
________ has a comparative advantage in producing caps.
If Sue and Tessa each specialize in producing the good in which they have a comparative
advantage and trade 1 jacket for 7 caps, ________.
5)
A) 0.2; 0.10; Sue; both Sue and Tessa gain
B) 0.2; 0.10; Sue; Tessa gains but Sue loses
C) 0.2; 0.10; Tessa; both Sue and Tessa gain
D) 5.0; 10.0; Tessa; Sue loses but Tessa gains
E) 5.0; 10.0; Sue; both Sue and Tessa gain
6) If the quantity of chicken demanded increases by 1.25 percent when the price of beef increases by
2.5 percent, the cross elasticity of demand between chicken and beef is
6)
A) 2.0. B) 0.5. C) 3.125. D) - 0.5. E) - 3.125.
Use the figure below to answer the following question.
Figure 2.3.1
7) Refer to the production possibilities frontier in Figure 2.3.1. The production possibilities frontier
will shift rightward most rapidly if current production is at
7)
A) A. B) B. C) C. D) D. E) E.
Use the table below to answer the following question.
Table 5.3.1
Quantity
(units)
Marginal Cost
(dollars)
1 2
2 3
3 4
4 5
8) Refer to Table 5.3.1. If the price is $6 a unit, the producer surplus on the third unit is 8)
A) $2. B) $6. C) $4. D) $3. E) $5.
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9) Which one of the following events shifts the demand curve for grape jelly to the right? 9)
A) a decrease in the price of strawberry preserves, a substitute for grape jelly
B) a decrease in the price of grape jelly
C) an increase in income if grape jelly is a normal good
D) an increase in the price of peanut butter, a complement of grape jelly
E) a decrease in the population
10) Which one of the following would not shift the supply curve of good X to the right? 10)
A) a rise in the price of X
B) a fall in the price of Y, a substitute in production of X
C) an improvement in technology used in the production of X
D) a fall in the price of the factors of production used in producing X
E) an increase in the price of Y, a complement in production of X
11) The demand curve is P =700 - 10Q
D
. The supply curve is P =400 +5Q
S
. At market equilibrium,
the equilibrium quantity is ________ and the equilibrium price is ________.
11)
A) 0.05; 5 B) 20; 500 C) 500; 20 D) 300; 15 E) 5; 0.05
12) If we observe a rise in the equilibrium price of good A, we know that either the demand for Ahas 12)
A) decreased or the supply of Ahas increased or both.
B) decreased or the supply of Ahas decreased or both.
C) increased or the supply of Ahas increased or both.
D) increased or the supply of Ahas decreased or both.
E) none of the above.
Use the figure below to answer the following question.
Figure 5.4.2
13) Refer to Figure 5.4.2. If the level of output is 100 units, the deadweight loss is area 13)
A) DCE. B) BCF. C) HCG. D) ACG. E) ACH.
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Use the table below to answer the following question.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
Point Production of X Production of Y
A 0 40
B 4 36
C 8 28
D 12 16
E 16 0
14) The economy illustrated by the data in Table 2.1.1 exhibits 14)
A) constant opportunity cost in the production of X.
B) increasing opportunity cost.
C) constant opportunity cost in the production of Y.
D) decreasing opportunity cost.
E) initially increasing, then decreasing opportunity cost.
Use the figure below to answer the following question.
Figure 2.1.1
15) Refer to the production possibilities frontier in Figure 2.1.1. Which one of the following is true
about point A?
15)
A) Resources are either unused or misallocated or both.
B) It is preferred to point B.
C) It is unattainable.
D) While no more of good Y can be produced, more of good X can be produced.
E) It is attainable only if the amount of capital goods is increased.
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16) As a result of Hurricane Katrina, the supply curve of apples shifted leftward, the equilibrium price
of apples rose, and total revenue fell. This suggests that the demand for apples is
16)
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) perfectly elastic.
17) The bowed- out (concave) shape of a production possibilities frontier 17)
A) is due to capital accumulation.
B) reflects the existence of decreasing opportunity cost.
C) is due to technological change.
D) reflects the existence of increasing opportunity cost.
E) is due to the equal usefulness of resources in all activities.
18) Which one of the following must be true if demand is income elastic? 18)
A) An increase in income will decrease the quantity demanded.
B) A percentage change in price will lead to a larger percentage change in quantity demanded.
C) A small percentage increase in income will result in a large percentage increase in quantity
demanded.
D) A large percentage increase in income will result in a small percentage increase in quantity
demanded.
E) The good is an inferior good.
Use the figure below to answer the following question.
Table 2.4.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.
Vulcan Romulus
Good X Good Y Good X Good Y
0 16 0 12
2 12 2 9
4 8 4 6
6 4 6 3
8 0 8 0
19) Refer to Table 2.4.1. Which one of the following is true? 19)
A) Vulcan has both an absolute advantage and a comparative advantage in the production of X.
B) Vulcan should specialize in the production of X.
C) Romulus has a comparative advantage in the production of X.
D) Romulus has both an absolute advantage and a comparative advantage in the production of
Y.
E) Romulus has a comparative advantage in the production of Y.
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20) Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought
and sold. Which one of the following is a likely explanation?
20)
A) The law of supply is violated.
B) The supply of A increased.
C) The demand for A increased.
D) The supply of A decreased.
E) The demand for A decreased.
Use the figure below to answer the following question.
Figure 5.2.1
21) Consider the demand curve in Figure 5.2.1. If the price of the good is $4, what is the consumer
surplus?
21)
A) $32.50
B) $12.50
C) $25.00
D) $20.00
E) none of the above
22) A given percentage rise in the price of a good is likely to result in a larger percentage decrease in
the quantity of the good demanded
22)
A) the larger the proportion of income spent on it.
B) the shorter the passage of time.
C) the harder it is to obtain good substitutes.
D) all of the above.
E) none of the above.
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