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Name: ________________________ Class: ___________________ Date: __________ ID: B

Microeconomics Mid-term

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

Figure 6-3

____ 1. Refer to Figure 6-3. In panel (b), with the price floor in effect, there will be
a. a shortage of wheat.
b. equilibrium in the market.
c. a surplus of wheat.
d. an excess demand for wheat.
____ 2. The positive relationship between price and quantity supplied is called
a. profit.
b. a change in supply.
c. a shift of the supply curve.
d. the law of supply.
____ 3. When quantity demanded decreases at every possible price, we know that the demand curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved down the demand curve to a new point on the same
curve.
d. not shifted; rather, the demand curve has become flatter.
____ 4. When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the
quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
a. 0.22.
b. 0.67.
c. 1.33.
d. 1.50.
____ 5. Which of these statements about economic models is correct?
a. For economists, economic models provide insights about the world.
b. Economic models are built with assumptions.
c. Economic models are often composed of equations and diagrams.
d. All of the above are correct.

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Name: ________________________ ID: B

____ 6. The signals that guide the allocation of resources in a market economy are
a. surpluses and shortages.
b. quantities.
c. property rights.
d. prices.
____ 7. Economics is the study of
a. production methods.
b. how society manages its scarce resources.
c. how households decide who performs which tasks.
d. the interaction of business and government.

Figure 4-10

____ 8. Refer to Figure 4-10. Graph C shows which of the following?


a. an increase in demand and an increase in quantity supplied
b. an increase in demand and an increase in supply
c. an increase in quantity demanded and an increase in quantity supplied
d. an increase in supply and an increase in quantity demanded
____ 9. Refer to Figure 4-10. Which of the four graphs illustrates a decrease in quantity demanded?
a. A.
b. B.
c. C.
d. D.

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Name: ________________________ ID: B

____ 10. Refer to Figure 4-10. Which of the four graphs illustrates an increase in quantity supplied?
a. A.
b. B.
c. C.
d. D.
____ 11. Suppose a producer is able to separate customers into two groups, one having an inelastic demand and the
other having an elastic demand. If the producer's objective is to increase total revenue, she should
a. increase the price charged to customers with the elastic demand and decrease the price
charged to customers with the inelastic demand.
b. decrease the price charged to customers with the elastic demand and increase the price
charged to customers with the inelastic demand.
c. charge the same price to both groups of customers.
d. increase the price for both groups of customers.

Figure 5-2

____ 12. Refer to Figure 5-2. If the price decreased from $18 to $6,
a. total revenue would increase by $1,200 and demand is elastic between points A and C.
b. total revenue would increase by $800 and demand is elastic between points A and C.
c. total revenue would decrease by $1,200 and demand is inelastic between points A and C.
d. total revenue would decrease by $800 and demand is inelastic between points A and C.
____ 13. Refer to Figure 5-2. The elasticity of demand between point B and point C, using the midpoint method, is
a. 0.5.
b. 0.75.
c. 1.0.
d. 1.3.

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Name: ________________________ ID: B

Figure 4-7

____ 14. Refer to Figure 4-7. At a price of $35,


a. there would be a shortage of 400 units.
b. there would be a surplus of 200 units.
c. there would be a surplus of 400 units.
d. there would be an excess supply of 200 units.
____ 15. Refer to Figure 4-7. Equilibrium price and quantity are, respectively,
a. $35 and 200.
b. $35 and 600.
c. $25 and 400.
d. $15 and 200.
____ 16. In markets, prices move toward equilibrium because of
a. the actions of buyers and sellers.
b. government regulations placed on market participants.
c. increased competition among sellers.
d. buyers' ability to affect market outcomes.
____ 17. A decrease in supply will cause the largest increase in price when
a. both supply and demand are inelastic.
b. both supply and demand are elastic.
c. demand is elastic and supply is inelastic.
d. demand is inelastic and supply is elastic.

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Name: ________________________ ID: B

____ 18. During the last few decades in the United States, health officials have argued that eating too much beef might
be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced.
Which of the following best explains the decrease in production?
a. Beef producers, concerned about the health of their customers, decided to produce
relatively less beef.
b. Government officials, concerned about consumer health, ordered beef producers to
produce relatively less beef.
c. Individual consumers, concerned about their own health, decreased their demand for
beef, which lowered the relative price of beef, making it less attractive to produce.
d. Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet in
the marketplace.

Figure 5-5

____ 19. Refer to Figure 5-5. An increase in price from $20 to $30 would
a. increase total revenue by $2,000.
b. decrease total revenue by $2,000.
c. increase total revenue by $1,000.
d. decrease total revenue by $1,000.
____ 20. A surplus exists in a market if
a. there is an excess demand for the good.
b. the situation is such that the law of supply and demand would predict an increase in the
price of the good from its current level.
c. the current price is above its equilibrium price.
d. None of the above is correct.
____ 21. Which of the following events will definitely cause equilibrium quantity to fall?
a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase

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Name: ________________________ ID: B

____ 22. Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government
increases the minimum wage by $1.00 an hour it is likely that the
a. demand for bicycle assembly workers will increase.
b. supply of bicycles will shift to the right.
c. supply of bicycles will shift to the left.
d. firm must increase output to maintain profit levels.
____ 23. A decrease in the number of sellers in the market causes
a. the supply curve to shift to the left.
b. the supply curve to shift to the right.
c. a movement up and to the right along a stationary supply curve.
d. a movement downward and to the left along a stationary supply curve.
____ 24. Which of the following sets of events would most likely cause an increase in the price of a new house?
a. higher wages for carpenters, higher wood prices, increases in consumer incomes, higher
apartment rents, increases in population and expectations of higher house prices in the
future
b. lower wages for carpenters, lower wood prices, increases in consumer incomes, higher
apartment rents, increases in population and expectations of higher house prices in the
future
c. lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher
apartment rents, decreases in population and expectations of higher house prices in the
future
d. higher wages for carpenters, lower wood prices, decreases in consumer incomes, lower
apartment rents, decreases in population and expectations of lower house prices in the
future
____ 25. In a free market system, what coordinates the actions of millions of people with their varying abilities and
desires?
a. producers
b. prices
c. consumers
d. the government
____ 26. For a college student who wishes to calculate the true costs of going to college, the costs of room and board
a. should be counted in full, regardless of the costs of eating and sleeping elsewhere.
b. should be counted only to the extent that they are more expensive at college than
elsewhere.
c. usually exceed the opportunity cost of going to college.
d. plus the cost of tuition, equals the opportunity cost of going to college.
____ 27. A price ceiling is binding when it is set
a. above the equilibrium price, causing a shortage.
b. above the equilibrium price, causing a surplus.
c. below the equilibrium price, causing a shortage.
d. below the equilibrium price, causing a surplus.
____ 28. Efficiency means that
a. society is conserving resources in order to save them for the future.
b. society's goods and services are distributed equally among society's members.
c. society's goods and services are distributed fairly, though not necessarily equally, among
society's members.
d. society is getting the maximum benefits from its scarce resources.

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Name: ________________________ ID: B

____ 29. A typical society strives to get the most it can from its scarce resources. At the same time, the society
attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other
words, the society faces a tradeoff between
a. guns and butter.
b. efficiency and equity.
c. inflation and unemployment.
d. work and leisure.
____ 30. An example of a price floor is
a. the regulation of gasoline prices in the U.S. in the 1970s.
b. rent control.
c. the minimum wage.
d. any restriction on price that leads to a shortage.
____ 31. The term price takers refers to buyers and sellers in
a. perfectly competitive markets.
b. monopolies.
c. markets that are regulated by government.
d. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.
____ 32. Lead is an important input in the production of crystal. If the price of lead decreases, other things equal, we
would expect the supply of
a. crystal to be unaffected.
b. crystal to decrease.
c. crystal to increase.
d. lead to increase.
____ 33. Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she
needs. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If
you know that the demand for lemonade is elastic, what is your advice to her?
a. Leave the price at 25 cents and be patient.
b. Raise the price to increase total revenue.
c. Lower the price to increase total revenue.
d. There isn't enough information given to answer this question.
____ 34. When a society cannot produce all the goods and services people wish to have, it is said that the economy is
experiencing
a. scarcity.
b. shortages.
c. inefficiencies.
d. inequities.
____ 35. Which of the following statements is not valid when supply is perfectly elastic?
a. The elasticity of supply approaches infinity.
b. The supply curve is horizontal.
c. Very small changes in price lead to large changes in quantity supplied.
d. The time period under consideration is more likely a short period rather than a long
period.
____ 36. If the quantity supplied responds only slightly to changes in price, then
a. supply is said to be elastic.
b. supply is said to be inelastic.
c. an increase in price will not shift the supply curve very much.
d. even a large decrease in demand will change the equilibrium price only slightly.

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Name: ________________________ ID: B

____ 37. The market for ice cream is


a. a monopolistic market.
b. a competitive market.
c. a highly organized market.
d. a market in which there is no connection whatsoever between buyers and sellers.
____ 38. If there is a shortage of farm laborers, we would expect
a. the wages of farm laborers to increase.
b. the wages of farm laborers to decrease.
c. the prices of farm commodities to decrease.
d. a decrease in the demand for substitutes for farm labor.
____ 39. For which of the following types of goods would the income elasticity of demand be positive and relatively
large?
a. all inferior goods
b. all normal goods
c. goods for which there are many good complements
d. luxuries
____ 40. Which of the following events would cause the price of oranges to fall?
a. There is a shortage of oranges.
b. An article is published in which it is claimed that tangerines cause a serious disease, and
oranges and tangerines are substitutes.
c. The price of land throughout Florida decreases, and Florida produces a significant
proportion of the nations oranges.
d. All of the above are correct.

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ID: B

Microeconomics Mid-term
Answer Section

MULTIPLE CHOICE

1. ANS: C DIF: 2 REF: 6-1 TOP: Price floors, Surpluses


MSC: Applicative
2. ANS: D DIF: 1 REF: 4-3 TOP: Law of supply
MSC: Definitional
3. ANS: A DIF: 2 REF: 4-2 TOP: Demand
MSC: Interpretive
4. ANS: B DIF: 1 REF: 5-1 TOP: Price elasticity of demand
MSC: Applicative
5. ANS: D DIF: 1 REF: 2-1 TOP: Economic models
MSC: Definitional
6. ANS: D DIF: 1 REF: 4-5 TOP: Resource allocation, Prices
MSC: Interpretive
7. ANS: B DIF: 1 REF: 1-0 TOP: Economies, Scarcity
MSC: Definitional
8. ANS: D DIF: 2 REF: 4-4 TOP: Supply, Quantity demanded
MSC: Applicative
9. ANS: D DIF: 2 REF: 4-4 TOP: Quantity demanded
MSC: Applicative
10. ANS: A DIF: 2 REF: 4-4 TOP: Quantity supplied
MSC: Applicative
11. ANS: B DIF: 3 REF: 5-1
TOP: Elastic demand, Inelastic demand, Total revenue MSC: Analytical
12. ANS: A DIF: 2 REF: 5-1
TOP: Price elasticity of demand, Total revenue MSC: Applicative
13. ANS: B DIF: 2 REF: 5-1 TOP: Price elasticity of demand
MSC: Applicative
14. ANS: C DIF: 2 REF: 4-4 TOP: Surpluses
MSC: Interpretive
15. ANS: C DIF: 1 REF: 4-4 TOP: Equilibrium
MSC: Interpretive
16. ANS: A DIF: 2 REF: 4-4 TOP: Equilibrium price
MSC: Interpretive
17. ANS: A DIF: 3 REF: 5-3
TOP: Price elasticity of demand, Price elasticity of supply MSC: Analytical
18. ANS: C DIF: 2 REF: 4-4 TOP: Equilibrium, Demand, Supply
MSC: Applicative
19. ANS: C DIF: 2 REF: 5-1 TOP: Total revenue
MSC: Applicative
20. ANS: C DIF: 2 REF: 4-4 TOP: Surpluses
MSC: Interpretive

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ID: B

21. ANS: B DIF: 2 REF: 4-4 TOP: Equilibrium, Demand, Supply


MSC: Applicative
22. ANS: C DIF: 2 REF: 4-3 TOP: Supply, Inputs
MSC: Applicative
23. ANS: A DIF: 2 REF: 4-3 TOP: Supply
MSC: Interpretive
24. ANS: A DIF: 3 REF: 4-4 TOP: Equilibrium, Demand, Supply
MSC: Analytical
25. ANS: B DIF: 1 REF: 4-5 TOP: Resource allocation, Prices
MSC: Interpretive
26. ANS: B DIF: 2 REF: 1-1 TOP: Opportunity cost
MSC: Applicative
27. ANS: C DIF: 2 REF: 6-1 TOP: Price ceilings, Shortages
MSC: Interpretive
28. ANS: D DIF: 1 REF: 1-1 TOP: Efficiency
MSC: Definitional
29. ANS: B DIF: 1 REF: 1-1 TOP: Efficiency, Equity
MSC: Interpretive
30. ANS: C DIF: 1 REF: 6-1 TOP: Price ceilings, Price floors
MSC: Definitional
31. ANS: A DIF: 2 REF: 4-1 TOP: Perfect competition
MSC: Interpretive
32. ANS: C DIF: 2 REF: 4-3 TOP: Supply, Inputs
MSC: Applicative
33. ANS: C DIF: 2 REF: 5-1 TOP: Elastic demand, Total revenue
MSC: Applicative
34. ANS: A DIF: 2 REF: 1-0 TOP: Scarcity
MSC: Interpretive
35. ANS: D DIF: 3 REF: 5-2 TOP: Perfectly elastic supply
MSC: Applicative
36. ANS: B DIF: 2 REF: 5-2 TOP: Price elasticity of supply
MSC: Interpretive
37. ANS: B DIF: 1 REF: 4-1 TOP: Markets
MSC: Interpretive
38. ANS: A DIF: 2 REF: 4-4 TOP: Shortages
MSC: Applicative
39. ANS: D DIF: 2 REF: 5-1 TOP: Income elasticity of demand
MSC: Interpretive
40. ANS: C DIF: 2 REF: 4-4 TOP: Equilibrium price
MSC: Applicative