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Microeconomics/Econ202 Practice Test 1
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Questions in this quiz (29)
1Traditionally, most models in Economics analyze policies and offer suggestions that maximize
efficiency in the economy (as opposed to maximizing equity). Which statement best explains why
this happens:- AEfficiency is really the only outcome that matters in society in terms of well-being
- BMaximizing equity requires normative evaluation, while maximizing efficiency does
not - CEconomists are not concerned about the level of equity in society
- D. All of the above
2Suppose that college tuition is higher this year than last year and that more students are enrolled
in college this year than last year. Based on this information, we can best conclude that:- AThe demand curve for a college education must be positively sloped
- BEverything you have ever believed in has been a lie
- CThe law of demand is invalid
- DDespite the increase in price, enrollment increased due to some other factor(s)
changing in the market
3Suppose the market for ice cream is in equilibrium. Then a change occurs, and the equilibrium
price decreases while the equilibrium quantity also decreases. According to economic theory,
what change could have occurred in the market to cause these changes to price and quantity?- ADecrease in demand
- BDecrease in supply
- CIncrease in demand
- DIncrease in supply
4Which of the following is the best example of the opportunity cost of the (approximately) one
hour spent taking this exam?- AThe stress/anxiety you experience while taking the exam
- BThe tuition money spent to enroll in ECON 202
- CThe wages you could be earning if you spent this hour working at a job
- DThe time spent studying for this exam
5 According to economic theory, if a country decides to reduce restrictions and increases its level
of trade with the rest of the world, we predict:- ASocial surplus in that country to increase
- BSocial surplus in that country to remain the same
- CSocial surplus in that country to decrease
- DAny of the above is equally likely to occur when a country increases its level of trade
6Which of the following is true regarding the federal minimum wage in the United States?
- AThe federal minimum wage has been adjusted regularly to account for the increased
cost of living over the past 20 years. - BA full-time worker earning the current federal minimum wage will earn enough income
to be above the official poverty line. - CNone of the statements about the federal minimum wage are true.
- DAll of the statements about the federal minimum wage are true
- EThe majority of workers that earn the minimum wage are teenagers
- AThe federal minimum wage has been adjusted regularly to account for the increased
7Suppose the market for bananas is in equilibrium. What are the predicted market outcomes if a
natural disaster destroys a large percentage of the banana crop in a particular year?- APrice will increase, quantity will increase
- BPrice will decrease, quantity will decrease
- CPrice will decrease, quantity will increase
- DSad monkeys
- EPrice will increase, quantity will decrease
8 Suppose that the market for a good is in equilibrium, then two major factors change. The first
change causes the demand to increase. The second change causes the supply to increase. Based
on this information, what outcomes do you predict in this market?- AThe price will decrease, the quantity may increase or decrease
- BThe quantity will increase, the price may increase or decrease
- CThe quantity will decrease, the price may increase or decrease
- DThe price and quantity will both increase
- EThe price will increase, the quantity may increase or decrease
9Which of the following best describes the marginal cost to a company from hiring an additional
worker?- AThe increase in total output (amount produced) of the company after the new worker is
hired - BThe total amount paid towards worker wages after the new worker is hired
- CThe total output (amount produced) of the company after the new worker is hired
- DThe increase in the total amount paid towards worker wages after the new worker is
hired
- AThe increase in total output (amount produced) of the company after the new worker is
10In Economics, the definition of an “inferior” good, (for example, Top Ramen) is a good for which
people will actually buy more as the price increases.- ATrue
- BFalse
11According to economic theory, if a country decides to reduce restrictions and increases its level
of trade with the rest of the world, we predict:- ASocial surplus in that country to decrease
- BSocial surplus in that country to remain the same
- CSocial surplus in that country to increase
- DAny of the above is equally likely to occur when a country increases its level of trade
12According to economists, efficiency in the market occurs when:
- AProducer surplus is maximized
- BSocial surplus is maximized
- CConsumer surplus is maximized
13Suppose the supply curve in the market for milk shifts to the right. Which of the following best
describes how the supply and demand model predicts consumers will respond?- AThe demand curve will shift to the left
- BThe demand curve will shift to the right
- CThe demand curve remains the same, quantity demanded will decrease
- DThe demand curve remains the same, quantity demanded will increase
14 If the price in the market is initially set at $5, what is the result in the market, and what will
eventually happen to move the market to equilibrium?
- AShortage, price increase
- BSurplus, price decrease
- CShortage, price decrease
- DSurplus, price increase
15Suppose the government sets a binding price floor in the market for milk.
Based on this, we would expect the outcome to be a [blank_start]surplus[blank_end] in the market for milk. If a black
market for milk develops, then the price in that market will be [blank_start]lower[blank_end] than the price floor.- Asurplus
- Bshortage
- Clower
- Dhigher
16In economic terms “producer surplus” is :
- AA terrible name for a band
- BThe opportunity cost of purchasing one particular good
- CThe value a buyer receives from purchasing a good minus the price they had to pay for it
- DThe amount of money a seller receives from the buyer minus the minimum amount
they would have accepted to sell the product - EThe number of units by which supply is greater than demand
17Suppose the market for a particular good is in equilibrium. Then the demand in the market
increases (the demand curve shifts to the right). What do we expect will happen to our welfare
calculations?- AProducer surplus will increase, consumer surplus may increase or decrease
- BProducer surplus will decrease, consumer surplus may increase or decrease
- CConsumer surplus will increase, producer surplus may increase or decrease
- DConsumer surplus will decrease, producer surplus may increase or decrease
18According to the graph, what labeled area(s) represent producer surplus before the price floor is
put into place?
- AA only
- BA, B, and C
- CB and D
- DC and E
- ED and E
19According to the graph, what labeled area(s) represent producer surplus after the price floor is
put into place?- AA only
- BA, B, and C
- CB and D
- DC and E
- ED and E
20If the government’s primary goal in setting tax policy is to minimize the amount of deadweight
loss that is created, they should impose the highest amount of sales tax on:- ARestaurant meals
- BGroceries
- CBreakfast cereal, specifically
- DThe deadweight loss caused will be the same no matter which of these goods is taxed at
the highest rate (it does not matter which goods you tax)
21Suppose the information in the table above reveals the actual willingness to pay for a ticket to
watch Dan perform close-up magic and juggle various household items. If there is only 1 ticket
left and buyers bid against each other in an auction to purchase it, which of the following is the
most likely price?
- A$101
- B$99
- C$61
- D$59
- E$35
22Based on the graph , what is the producer surplus when the market depicted is in
equilibrium?
- A800
- B300
- C250
- D150
- E30
23According to the economic concept of thinking incrementally, in general, the efficient level of an
activity occurs at the point at which:- AThere are no opportunity costs
- BThe total costs equal the total benefits
- CThe marginal costs equal the marginal benefits
- DAll of these are true
24Which of the following would be expected to cause an increase in the supply for a certain good?
- AAn increase in the price of the good
- BA decrease in the price of the good
- CAn increase in the cost of raw materials used to produce this good
- DA decrease in the cost of raw materials used to produce this good
25Suppose that at a price $6 the quantity demanded in a market is 22, and at a price of $8 the
quantity demanded in the market is 21. If we use this information to create a linear demand
equation, what will that equation be?- AP = -5 + (1/2)QD
- BP = -38 + 2QD
- CP = 50 - 2QD
- DP = 17 – (1/2)QD
26Consider our discussion of the impact of the Coronavirus on the market for respirator masks. The
prices of masks are rapidly increasing, and shortages are happening in some countries. If the
governments of these countries begin to enforce binding price ceilings for these masks, this is
likely to:- AHave no measurable impact on the number of people that are able to actually purchase
masks - BIncrease the number of people that are able to actually purchase masks
- CDecrease the number of people that are able to actually purchase masks
- AHave no measurable impact on the number of people that are able to actually purchase
27As discussed in class, one main reason a government might impose a non-binding price floor
policy is that:- APolicymakers want to prevent price-gouging in the case of emergency situations, such as
natural disasters - BPolicymakers want to promote competition and protect the interests of producers in
the market in case market conditions change - CPolicymakers want to lower the price below current levels to ensure that consumers can
afford the good or service - DPolicymakers want to assert their dominance over the citizens in their district
- APolicymakers want to prevent price-gouging in the case of emergency situations, such as
28Suppose the market in the graph is originally in equilibrium at a price of P2. If the government
implements a price ceiling at price P1, what will be the new market outcome?
- ASurplus of 62
- BShortage of 62
- CSurplus of 30
- DShortage of 30
- ENo impact on market outcomes from the price ceiling (remain in equilibrium)
29If the government decides to set a price floor at price P1 in this market, how much of this good do
you expect will be sold (legally)?- A38
- B50
- C68
- D80
- E100
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- Description
- Study quiz for UofI's microecon first test of the semester
- Author
- Lauren Beets
- Language
- English
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- 35
- History
- Created on 21 Feb 2020 · updated on 21 Feb 2020
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