Practice Exam#1

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Economics

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Feb 20, 2024

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Practice Problems Microeconomics (UGBA 101) 1. Microeconomics is the branch of economics that deals with which of the following topics? A) The behavior of individual consumers B) Unemployment and interest rates C) The behavior of individual firms and investors D) B and C E) A and C Answer: E 2. The basic premise behind worker trade-offs in a market economy is that: A) firms decide how much workers must work, and workers decide how much leisure to have. B) workers don't decide how much leisure to have. The amount of leisure depeworkn the number of hours they must work, which is determined by the firm. C) workers decide how to allocate their time between work and leisure. D) the trade-off between work and leisure is determined by factors other than what workers or firms would determine to be optimal. Answer: C 3. In the definition of a market, economists consider: A) only actual interactions between buyers and sellers, not potential interactions. B) both actual and potential interactions between buyers and sellers. C) neither actual nor potential interactions between buyers and sellers. D) actions by third parties that do not include buyers or sellers in the market. Answer: B 4. Use the following two statements to answer this question: I. A market is a collection of buyers and sellers that, through actual or potential interactions, determine the price for a product or set of products. II. An industry is a collection of markets for similar or closely related products. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false. Answer: B 5. Washington, D.C.'s metro train system is being extended further into the neighboring states of Maryland and Virginia, thereby reducing the cost of commuting into the United States' capitol. Other things being held constant, this can be expected to: A) decrease the extent of the market for housing around Washington, D.C.

Practice Problems Microeconomics (UGBA 101) B) increase the extent of the market for housing around Washington, D.C. C) have no effect on the extent of the market for housing around Washington, D.C. as the actual geography remains unchanged. D) have no effect on the extent of the market for housing around Washington, D.C. as the range of houses available has not changed. E) have no effect on the extent of the market for housing around Washington, D.C. as property taxes have not changed. Answer: B 6. Since last year, the price of gold has risen from $1100 to $1420. What annual inflation rate would leave the real price of gold unchanged over the last twelve months? A) Approximately 29% B) 40% C) Approximately 71% D) 320% E) none of the above Answer: A 7. A supply curve reveals: A) the quantity of output consumers is willing to purchase at each possible market price. B) the difference between quantity demanded and quantity supplied at each price. C) the maximum level of output an industry can produce, regardless of price. D) the quantity of output that producers are willing to produce and sell at each possible market price. Answer: D 8. Sugar can be refined from sugar beets. When the price of those beets falls, A) the demand curve for sugar would shift right. B) the demand curve for sugar would shift left. C) the supply curve for sugar would shift right.

Practice Problems Microeconomics (UGBA 101) D) the supply curve for sugar would shift left. Answer: C Figure 1 9. Refer to Figure 1 above. Lower material costs — indeed lower costs of any kind — make production more profitable. Starting at point A , which of the following best represents this assertion? A) The move from A to B B) The move from A to C C) A move from A to B , and then to C D) A move from A to C , and then to B Answer: B 10. Refer to Figure 1 above. Starting from point A , how do the firms in the market react when the price of coffee increases from $6.00 to $7.50 per pound? A) The supply curve shifts to the right and the quantity supplied increases to 10 million pounds per year. B) The supply curve shifts from S1 to S2, but the market moves from A to B , so the quantity supplied increases to 9 million pounds per year. C) The market moves from A to B temporarily, but eventually will settle at point C , where the quantity supplied will be 10 million pounds. D) The supply curve does not shift, but the quantity supplied increases from 7 to 9 million pounds per year. Answer: D 11. The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that: A) good A is used to produce good B. B) good B is used to produce good A. C) goods A and B are substitutes. D) goods A and B are complements. E) none of the above Answer: D

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