Microeconomics_FinalExam

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Jan 9, 2024

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1 MICROECONOMICS FINAL EXAM Due: 5/21/2023 INSTRUCTIONS: - Please read the instructions carefully. - Please do not use any separate paper to answer the questions. - All your answers to multiple-choice questions must be put on the attached Excel file . - In the Excel file for each questions there are blank cells for you to put down your answers. You will have to put ONLY ONE answer out of the choices given for each question. For example , for answer ( a ), put a in the blank cell in the Excel file. - Please write your name on your Excel file! - Just submit the Excel file with your answers on the Blackboard. - Your exam is not to be graded if the exam submission is not done with the excel file attached here. MULTIPLE-CHOICE QUESTIONS For Questions 1-17 refer to below statement and demand and supply functions. Suppose that demand and supply curves for avocado in Brooklyn are as the followings: Q d = 144 − 24P Q s = -36 + 12P

2 where Q d and Q s are quantities demanded and supplied in tons respectively, and P is the price of avocado in dollars per kg. 1) If price elasticity of demand for avocado at price P* is equal to -2/3, how much is P*? a) $2.00 b) $2.20 c) $2.40 d) $2.60 e) $2.80 2) What is quantity demanded at price P* at which price elasticity of demand for avocado equals -2/3? a) 82.2 tons b) 83.2 tons c) 84.4 tons d) 85.2 tons e) 86.4 tons 3) If price elasticity of supply for avocado at price P* is equal to 2.5, how much is P*? a) $2 b) $3 c) $4 d) $5 e) $6 4) What is quantity supplied at price P* at which price elasticity of supply for avocado equals 2.5? a) 6 tons b) 12 tons

3 c) 18 tons d) 24 tons e) 30 tons 5) What is market clearing equilibrium price and quantity in Brooklyn avocado market? a) $3; 20 tons b) $4; 22 tons c) $5; 24 tons d) $6; 30 tons e) $7; 30 tons 6) What is the price elasticity of demand if the avocado sells for $2 per kg? a) -0.2 b) -0.5 c) -0.8 d) -1.2 e) -2 7) If the selling price of avocado is $3.00 per kg, the demand is a) inelastic b) elastic c) unit elastic d) perfectly elastic e) perfectly inelastic 8) What is the price elasticity of demand if the avocado sells for $5.75 per kg? a) -0.23

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4 b) -2.3 c) -12.3 d) -22.3 e) - 23 9) If the selling price of avocado is $5.75 per kg, the demand is a) inelastic b) elastic c) unit elastic d) perfectly elastic e) perfectly inelastic 10) If the selling price of avocado is $5.9999 per kg, the demand is a) inelastic b) elastic c) unit elastic d) perfectly elastic e) perfectly inelastic 11) What is the price elasticity of supply if the avocado sells for $3.25 per kg? a) 0.3 b) 13 c) 1.3 d) 2.3 e) 3 12) If the selling price of avocado is $6.00 per kg, the supply is a) inelastic

5 b) elastic c) unit elastic d) perfectly elastic e) perfectly inelastic 13) What is the price elasticity of supply if the avocado sells for $9 per kg? a) 0.5 b) 15 c) 1.5 d) 2.5 e) 3 14) If the selling price of avocado is $5.75 per kg, the supply is a) inelastic b) elastic c) unit elastic d) perfectly elastic e) perfectly inelastic 15) If the selling price of avocado is $100 per kg, the supply is a) inelastic b) elastic c) unit elastic d) perfectly elastic e) perfectly inelastic 16) What is the total amount of shortage/surplus if the price of avocado is $4.00 per kg in Brooklyn avocado market?

6 a) 36 tons of surplus b) 39 tons of surplus c) 42 tons of surplus d) 36 tons of shortage e) 18 tons of shortage 17) What is the total amount of shortage/surplus if the price of avocado is $6.00 per kg in Brooklyn avocado market? a) 36 tons of surplus b) 39 tons of surplus c) 42 tons of surplus d) 36 tons of shortage e) 18 tons of shortage 18) While the avocado market is in equilibrium if avocado sellers decide to raise their prices by 2% above the market equilibrium price, what will happen to the percent change in quantity demanded? a) It will decrease by 5%. b) It will decrease by 10% c) It will decrease 15%. d) It will decrease by 20% e) It will decrease by 25% 19) Which of the following would not shift the supply curve for avocado to the right? a. An increase in the number avocado farms b. Good weather for growing avocado c. A reduction in wages for avocado pickers d. An increase in the expected price of avocado in the future e. A technology for growing avocado with less water 20) Which of the following would not shift the supply curve for avocado to the left? a) Bad weather for growing avocado

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7 b) An increase in wages for avocado pickers c) A shift in tastes from avocado to tomatoes d) An increase in the cost of the inspection and certification paid by avocado producers e) An increase in the expected price of coffee in the future 21) Suppose that the supply of avocado increases due to an improvement in the technology for growing avocado with less watering costs. Which of the following describes the mechanism of price and quantity adjustment assuming that there is no change in the demand curve? a) There is a downward pressure on prices and an increase in the equilibrium quantity. b) There is an upward pressure on prices and an increase in the equilibrium quantity. c) There is no change in equilibrium price and quantity. d) There is a downward pressure on prices and a decrease in the equilibrium quantity. e) None of the above. 22) In answering the following question, it may be helpful to draw a supply and demand diagram. What is the effect on equilibrium price and quantity of an decrease in both supply and demand? a) There is an increase in equilibrium price and an increase in equilibrium quantity. b) There is no change in equilibrium price but a decrease in equilibrium quantity. c) There is a decrease in equilibrium price and an increase in equilibrium quantity. d) There is no change in equilibrium price or quantity. e) There is an ambiguous effect on equilibrium price and a decrease in equilibrium quantity. 23) Suppose we know that the price elasticity of demand for organic apples is -1.2. If a grocer increases the price of organic apples by 15%, what would we expect to happen to the quantity of organic apples purchased?

8 a) Decrease by 1.2% b) Decrease by 12% c) Decrease by 1.8% d) Decrease by 18% e) Decrease by 2.4 % 24) Suppose we know that the price elasticity of demand for sandals is -1.5. A shoe stores normally sells 100 pairs of sandals each month. If it decides to raise the price of its sandals by 30%, how many sandals would it then sell per month? a) 115 b) 85 c) 70 d) 60 e) 55 25) If a increase in the price of apples from $1 to $2 per pair leads to an decrease in the quantity of apples demanded from 150 million to 100 million kg, then applying the midpoint formula, the price elasticity of demand equals: a) -4/10 b) -6/10 c) -2/3 d) -3/2 e) -4/3 26) Suppose we observe that the revenue a music store receives from CD sales increases when the price of CDs is decreased. What can we conclude? a) The price elasticity of demand for CDs is zero. b) The demand for CDs is perfectly inelastic.

9 c) The price elasticity of demand for CDs is -1. d) The price elasticity of demand for CDs is greater than -1 . e) The price elasticity of demand for CDs is less than -1. 27) Suppose the price elasticity of supply for shampoo is 20. If the price of shampoo increases by 0.7 %, what would we expect to happen to the quantity of shampoo supplied? a) Increase by 27% b) Increase by 14% c) Increase by 13% d) Decrease by 13% e) Decrease by 27% 28) If pasta is a Giffen good, then… a) pasta is also a normal good. b) pasta is also a luxury good. c) an decrease in the price of pasta will increase the quantity demanded. d) an increase in the price of pasta will increase the quantity demanded. e) pasta must make up a small portion of consumers’ total expenditures. 29) An inferior good in which the income effect dominates the substitution effect is called... a) a normal good. b) a luxury good. c) a Giffen good. d) a mass-produced good. e) a favored good.

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10 30) The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of a) its complements but not its substitutes. b) its substitutes but not its complements. c) its substitutes and its complements. d) neither its substitutes nor its complements. e) None of the above.. 31) If goods are complements, for sure their a) Cross price elasticities are positive. b) Cross price elasticities are negative. c) Cross price elasticities are zero. d) Income elasticity is negative e) Income elasticity is positive. 32) Demand is perfectly inelastic when a) The good in questions has perfect substitutes b) Shifts in the supple curve results in no change in price. c) Shifts in the supply curve results in no change in quantity demanded. d) Shifts in the supply curve results in no change in the total revenues e) An upward shift in the supply curve results in a decrease in the total revenues 33) The income elasticity of demand is high for a) shelter b) luxuries c) clothing d) food e) inferior goods

11 34) To say that turnips are necessity goods means that the income elasticity a) is definitely greater than 1. b) is negative. c) is greater than 0 but less than 1. d) is equal to 1. e) is equal to 0. 35) The fact that the PPF usually bows away from the origin implies that … a) as the production of any good increases, there is an increase in the opportunity cost of producing it. b) as the production of any good increases, there is a decrease in the opportunity cost of producing it. c) getting more of one good means getting less of another good. d) getting more of one good means getting more of another good. e) resources are perfectly fungible, easily moved between alternative uses to satisfy consumer demand. 36) What are the two distinguishing characteristics of a public good? a) It is provided by the core sphere; it is freely available to anyone. b) It is provided by the public purpose sphere; it is freely available to anyone. c) It is freely available to anyone; use by one person diminishes the ability of another person to use it. d) It is freely available to anyone; use by one person does not diminish the ability of another person to use it. e) It is provided at low cost; use by one person does not diminish the ability of another person to use it. 37) Which one of the following statements is false? a) A laissez-faire economy is an economy with little government regulation.

12 b) A laissez-faire view of the economy favors unregulated markets. c) A laissez-faire view is that self-interested individuals interact in a socially beneficial way. d) Laissez- faire is a French term that means “let it be.” e) A laissez-faire economy is an economy with central planning. 38) The term “effective demand” refers to … a) a change in demand sufficient to change the market price. b) a change in demand that increases efficiency. c) demand that is aggregated among individuals. d) demand backed by the willingness and ability to pay. e) a change in demand that leads to a change in supply. 39) Which one of the following is not a nonprice determinant of demand? a) The number of consumers b) Producer expectations of future prices c) Tastes and preferences d) Prices of related goods and services e) Available assets 40) Suppose we observe a large increase in the price of corn but the quantity of corn sold stays the same. What is the most plausible explanation (or combination of explanations) below? a) A drought occurred in corn-growing regions. b) A drought occurred in corn-growing regions and a medical report was issued that corn is good for your health. c) A drought occurred in corn-growing regions and a medical report was issued that corn is bad for your health. d) A new fertilizer was invented that doubles corn yields. e) A new fertilizer was invented that doubles corn yields and a medical report was issued that corn is bad for your health.

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13 41) If the sellers of a good are unable to set their own prices (i.e., there is a “going price”), the demand for the good faced by a particular seller is ... a) perfectly elastic. b) moderately elastic. c) perfectly inelastic. d) moderately inelastic. e) zero. 42) If a rise in the price of oranges from $7 to $9 a bushel, caused by a shift of the demand curve, increases the quantity of bushels supplied from 4,500 to 5,500 bushels, the a) demand for oranges is elastic. b) supply of oranges is elastic. c) demand for oranges is inelastic. d) supply of oranges is inelastic. e) demand for oranges is unit elastic. 43) Suppose we observe a large increase in the price of corn but the quantity of corn sold stays the same. What is the most plausible explanation (or combination of explanations) below? a) A drought occurred in corn-growing regions. b) A drought occurred in corn-growing regions and a medical report was issued that corn is good for your health. c) A drought occurred in corn-growing regions and a medical report was issued that corn is bad for your health. d) A new fertilizer was invented that doubles corn yields. e) A new fertilizer was invented that doubles corn yields and a medical report was issued that corn is bad for your health.

14 44) Suppose we observe that the price of paper has increased and the quantity of paper sold has decreased. What is the most plausible explanation? a) Consumers demand less paper because of increased use of the Internet. b) The price of pens and pencils increased dramatically. c) The number of children in schools decreased dramatically. d) More logging for pulpwood was permitted in National Forests. e) A new law was enacted that forces all paper producers to use expensive non-chlorine bleaching methods. 45) “During 2013, the price of personal computers (PCs) fell drastically, but the quantity supplied increased.” This statement … a) refutes the so- called “law of supply.” b) illustrates the fact that the supply curve of PCs is downward- sloping. c) suggests that the supply of PCs increased during 2013. d) implies that PCs are complementary goods. e) suggests that the supply of PCs decreased during 2013.

Microeconomics_FinalExam

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