5. Which of the following would be most likely to cause an ...
Econ 210, F02:Folland Economic Principles Quiz 1
1. Which of the following would be most likely to cause a rightward shift of the demand curve for electricity (Hints: Some houses heat with electricity, others with heating oil, yet others with natural gas; while most air conditioners are electric)?
A. a decrease in the price of electricity
B. an increase in the price of air conditioners
(C. an increase in the price of heating oil
D. a decrease in the price of natural gas
2. The slope of the production possibilities frontier (PPF) is
A. the efficiency of production
B. the elasticity
(C. the opportunity cost of one good in terms of the other
D. the feasibility of one good in terms of the other
3. Which of the following would be most likely to cause a rightward shift of the demand curve for eggs?
A. a rise in the price of chicken feed
B. increased rainfall in egg-farming regions
(C. the rise in popularity of a new cookbook for scrambled eggs
D rise in the price of bacon
4. Which of the following is most likely to be an inferior good for a typical population?
(A. used clothing (think Good Will)
B. BMWs
C. ski trips (package deals to Aspen, Colorado)
D. food (imagine a typical bag of groceries)
5. Which of the following pairs of goods is most likely to describe complements?
A. hot dogs and hamburgers
B. paperback novels and hardcover novels
(C. hot dogs and hot dog buns
D. leather and vinyl
6. If the government imposed a price floor above the equilibrium price for corn, which of the following would be true in theory?
(A. the quantity demanded would determine the quantity exchanged in the market
B. there would be a shortage of corn in the market
C. the price corn was sold at would be lower than the market equilibrium price
D. the quantity supplied would be less than the quantity demanded
7. Which of the following would be most likely to cause a rightward shift of the demand curve for apples (a normal good)?
A. a decrease in the price of apples
B. an increase in the price of caramel (the kind used to make carameled apples)
(C. an increase in the average personal income in the market area
D. a decrease in the price of oranges
Free, instructor error. 8. Which is true under supply and demand theory (with the usually sloped supply and demand curves) when the minimum wage is raised (remember that "necessarily" means that in theory this will always happen)?
A. unemployment will necessarily increase
B. the number employed will necessarily fall
C. the total income to the laboring class will necessarily rise
D. the wage at which the workers are hired will necessarily rise
9. On scratch paper, draw an economy’s PPF between Guns (on the horizontal) and Butter (on the vertical) and shaped as is typical economic theory. Insert a Point X inside the curve, a Point Y outside the curve, and two different Points A and B both on the curve. Which of the following is true in theory?
A. Point Y is more efficient than Point A
B. the PPF is convex (bowed toward) viewed from the origin
C. Point A is more efficient than Point B
(D. Point X indicates some unemployment of resources
E. all of the above
10. Using your own drawing from #9 and assuming your drawing is true to the textbook version, which of the following would occur in theory if the technology of producing butter were improved with no change in resources or other technologies?
(A. the Butter intercept moves upward
B. the Guns intercept moves rightward
C. the Guns and Butter intercepts both move outward
D. the economy moves off its PPF
E. nothing at all changes
11. Cities, like Salt Lake City, that bid for the Olympic Games, are notorious for their bad economic luck. The cost side is often bigger than they expect: building new stadiums, new roads, new communications that tend to be underused after the games. But, which of the following reflect logically possible benefits consistent with supply and demand theory?
A. demand for local restaurants increases during the games due to population influx
B. glamour attracts more people, permanent population that the city may want
C. continued rental of stadiums afterwards made possible by the building of the stadiums
D. rejuvenation of infrastructure (communication systems, restaurants, roads etc) partly paid for by the games
E. (all of the above
12. According to textbook theory and generally in accord with experience, which tends to happen to the market for apples in the Fall?
A. the prices tend to rise
B. (the supplies increase and prices drop
C. Fall bonuses (incomes rise) mean less demand for inferior goods, such as apples
D. the inevitable injuries from bobbing-for-apples results in less demand
apples, which are harvested during Spring, tend to rot by the Fall
13. Suppose that during the potato famine in Ireland that the government put a price ceiling on potatoes; this fixed the price to be the same as it was before the potato fungus hit the crops and caused a reduction in potato supply. The goverment intended to help the poor by keeping the price from rising. Which of the following best describes the economist’s analysis?
A. the fixed price was inefficient, but it did increase the consumption of potatoes
B. the fixed price was hard on the sellers, but it was an effective rationing mechanism
(C. the fixed price kept sellers from making an extra effort to import or grow more
potatoes
D. the fixed price was higher than what the market would have charged anyway
E. none of the above
14. Suppose two countries, U and J, begin with the identical production possibilities frontiers and J chooses a point on the curve indicating a relatively higher level of capital investment than U. Which of the following outcomes is most likely according to theory?
A. nothing, investment is not relevant to growth
(B. J's economy will grow more rapidly
C. U's economy will grow more rapidly
D. it can't be determined from these assumed facts
15. If a hurricane sweeps through North Carolina and a cleanup operation gets going, which of the following best describes the effect of all this on the local market for rental of pickup trucks?
A. the demand shifts left and the supply is unaffected in the short term
B. the supply shifts right and the demand is unaffected in the short term
C. (the demand shifts right and the supply is unaffected in the short term
D. the supply and demand both shift left in the short term
16. Suppose that an oil spill curtailed lobster fishing off the Maine coast and then, simultaneously, a recession reduced consumers’ incomes. Compared to the equilibrium price and quantity in the market for lobster before these events, in the new equilibrium
A. The price will be lower and the quantity will be lower
B. The price will be higher and the quantity will be lower
C. The price will be lower,: the effect of the events on quantity cannot be determined without further information
(D. The effect of the events on price cannot be determined without further information; the quantity will be lower
17. Suppose that a war in the Middle East caused the world supply of oil to be reduced and that the U.S. had to rely much more heavily on domestic (on U.S. soil or seashore) produced oil. To deal with this crisis, which of the following government policies is the most logical, whether or not its effect would be big enough to really matter?
A. “freeze” the price of domestic oil at its pre-crisis level
B. place taxes on oil substitutes, such as corn-ethanol
C. (discourage nonessential car travel by the use of advertising
D. close down domestic oil producers as a retribution against the Arabs
E. eliminate the gasoline tax at the pump
18. Which of the following is suggested by supply and demand theory in the case of the government putting a rent control price ceiling substantially below the market equilibrium?
A. the market will more likely meet conventionally accepted criteria for equity
B. the actual rental price will tend to grow higher than the original equilibrium price
(C. there will be a decay in the quality of apartments over time
D. the quantity supplied will tend to exceed the quantity demanded
E. all of the above
19. Which of the following is closer to the economist's definition of "scarcity"?
A. goods are scarce when they have a zero price
B. goods are scarce at 2am when there is no all night store selling them
(C. goods are scarce when they have a positive opportunity cost
D. goods are scarce when their current price is above their typical price
E. goods are scarce when they cost more than you can afford
20. Which of the following best describes the empirical literature on the effects of the minimum wage?
A. there are bona fide cases where a minimum wage hike was followed by increased employment levels
B. over the century the weight of evidence has tended to side with the economic theory
C. a reported reexamination of studies that assessed the minimum wage effect on total payroll found that the minimum wage tended to reduce total payroll
D. the comparison study of Pennsylvania-New Jersey found little or no change in employment levels, a particularly clear result for New Jersey
(E. all of the above
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