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1 Econ Midterm 1 Practice Problems 1. The overriding reason why households and societies face many decisions is that a. resources are scarce. b. goods and services are not scarce. c. incomes fluctuate with business cycles. d. people, by nature, tend to disagree. 2. Sophia is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that a. people respond to incentives. b. rational people think at the margin. c. people face tradeoffs. d. improvements in efficiency sometimes come at the expense of equality. 3. Efficiency a. and equality both refer to how much a society can produce with its resources. b. and equality both refer to how fairly the benefits from using resources are distributed between members of a society. c. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. d. refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources 4. When the government implements programs such as progressive income tax rates, which of the following is likely to occur? a. equality is increased and efficiency is increased. b. equality is increased and efficiency is decreased. c. equality is decreased and efficiency is increased. d. equality is decreased and efficiency is decreased. 5. Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that a. we should agree with Senator Brown. b. we should agree with Senator Johnson. c. a good decision requires that we recognize both viewpoints. d. there are no tradeoffs between equity and efficiency. 6. Ellie decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is a. the value of the knowledge she would have received had she attended class. b. the $24 she could have earned if she had worked at her job for those two hours. c. the value of her nap less the value of attending class. d. nothing, since she valued sleep more than attendance at class. 7. Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one- year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost? a. the cost of tuition and books to attend the graduate program b. the $30,000 salary that you could have earned if you retained your job at the bank c. the $45,000 salary that you will be able to earn after having completed your graduate program d. the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank 8. A rational decision maker takes an action only if the a. marginal benefit is less than the marginal cost. b. marginal benefit is greater than the marginal cost. c. average benefit is greater than the average cost. d. marginal benefit is greater than both the average cost and the marginal cost. 9. Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $5800. Bill discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do? a. He should sell the car now for $3800. b. He should keep the car since it wouldnt be rational to spend $6400 restoring a car and then sell it for only $5800. c. He should complete the additional work and sell the car for $5800. d. It does not matter which action he takes since the outcome will be the same either way. 10. Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a. more than $40, as the average benefit will exceed the marginal cost. b. more than $40, as the marginal benefit will exceed the marginal cost. c. more than $80, as the average benefit will exceed the marginal cost. d. more than $80, as the marginal benefit will exceed the marginal cost. 11. Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, residents in Massachusetts start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate? a. People respond to incentives b. Rational people think at the margin c. Trade can make everyone better off d. Markets are usually a good way to organize economic activity 12. The principle that "trade can make everyone better off" applies to interactions and trade between a. families. b. states within the United States. c. nations. d. All of the above are correct. 13. If Germany chooses to engage in trade, it a. will only benefit if it trades with countries that produce goods Germany cannot produce. b. cannot benefit if it trades with less developed countries. c. should first attempt to produce the good itself. d. can benefit by trading with any other country. 14. Which of the following statements about markets is most accurate? a. Markets are usually a good way to organize economic activity. b. Markets are usually inferior to central planning as a way to organize economic activity. c. Markets fail and are therefore not an acceptable way to organize economic activity. d. Markets are a good way to organize economic activity in developed nations, but not in less developed nations. 15. The invisible hand works to promote general well- being in the economy primarily through a. government intervention. b. the political process. c. peoples pursuit of self- interest. d. altruism. 16. The decisions of firms and households are guided by prices and self- interest in a a. command economy. b. centrally- planned economy. c. market economy. d. All of the above are correct. 17. When the government prevents prices from adjusting naturally to supply and demand, a. it equates the amount buyers want to buy with the amount sellers want to sell. b. it adversely affects the allocation of resources. c. it improves equality and efficiency. d. it improves efficiency but reduces equality. 18. Market failure can be caused by a. low consumer demand. b. equilibrium prices. c. externalities and market power. d. high prices and foreign competition. 19. The term "productivity" a. means the same thing as "efficiency." b. is seldom used by economists, as its meaning is not precise. c. refers to the quantity of goods and services produced from each unit of labor input. d. refers to the variety of goods and services from which households can choose when they shop. 20. Suppose a typical worker in India can produce 32 units of product in an eight- hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10- hour day. We can conclude that a. worker productivity in Bangladesh is higher than in India. b. the standard of living will likely be higher in India than in Bangladesh. c. productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India. d. there will be no difference between the standard of living in India and Bangladesh. 21. In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker a. decreased by about 6 percent between 2000 and 2008. b. remained unchanged between 2000 and 2008. c. increased by about 9 percent between 2000 and 2008. d. increased by about 18 percent between 2000 and 2008. 22. To promote good economic outcomes, policymakers should strive to enact policies that a. enhance productivity. b. enhance individuals' market power. c. result in a rapidly- growing quantity of money. d. All of the above are correct. 23. Most economists believe that an increase in the quantity of money results in a. an increase in the demand for goods and services. b. lower unemployment in the short run. c. higher inflation in the long run. d. All of the above are correct. 24. When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all a. rely upon the government to provide us with the basic necessities of life. b. rely upon one another for the goods and services we consume. c. have similar tastes and abilities. d. are concerned about one anothers well-being. 25. Ben bakes bread and Shawna knits sweaters. Ben and Shawna both like to eat bread and wear sweaters. In which of the following cases is it impossible for both Ben and Shawna to benefit from trade? a. Ben cannot knit sweaters and Shawna cannot bake bread. b. Ben is better than Shawna at baking bread and Shawna is better than Ben at knitting sweaters. c. Ben is better than Shawna at baking bread and at knitting sweaters. d. Both Ben and Shawna can benefit from trade in all of the above cases. 26. An economys production possibilities frontier is also its consumption possibilities frontier a. under all circumstances. b. under no circumstances. c. when the economy is self-sufficient. d. when the rate of tradeoff between the two goods being produced is constant. 27. For a self-sufficient producer, the production possibilities frontier a. is the same as the consumption possibilities frontier. b. is greater than the consumption possibilities frontier. c. is less than the consumption possibilities frontier. d. is always a straight line. Table 1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. Minutes Needed to Make 1 Bushel of Pound of Wheat Beef Andia 20 12 Zardia 15 10 28. Refer to Table 1. Which of the following combinations of wheat and beef could Andia produce in one 8-hour day? a. 6 bushels of wheat and 35 pounds of beef b. 9 bushels of wheat and 25 pounds of beef c. 15 bushels of wheat and 20 pounds of beef d. 24 bushels of wheat and 40 pounds of beef Table 2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Labor Hours Needed to Make 1 Cooler Radio Aruba 2 5 Iceland 1 4 29. Refer to Table 2. Which of the following represents Aruba's production possibilities frontier when 100 labor hours are available? a. c. b. d. Table 3 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. Hours Needed Amount To Make 1 Produced in 40 Hours mixer toaster mixers toasters Maya 8 5 5 8 Miguel 20 10 2 4 30. Refer to Table 3. We could use the information in the table to draw a production possibilities frontier for Maya and a second production possibilities frontier for Miguel. If we were to do this, measuring mixers along the horizontal axis, then a. the slope of Mayas production possibilities frontier would be -1.6 and the slope of Miguels production possibilities frontier would be -2. b. the slope of Mayas production possibilities frontier would be -0.625 and the slope of Miguels production possibilities frontier would be -0.5. c. the slope of Mayas production possibilities frontier would be 0.625 and the slope of Miguels production possibilities frontier would be 0.5. d. the slope of Mayas production possibilities frontier would be 1.6 and the slope of Miguels production possibilities frontier would be 2. Table 4 Summary of the Gains from Trade Alice Lemonade Pizzas (in pitchers) Without Trade Production and Consumption With Trade Production Trade Consumption Gains from Trade Betty Lemonade Pizzas (in pitchers) 200 100 180 180 400 Gives 193 a 0 Gets 110 b 0 Gets 193 c 300 Gives 110 d e f g h 31. Refer to Table 4. The values in the table represent the amounts of lemonade and pizzas that Alice and Betty can produce in one week without and with specialization and trade. What are Alice and Bettys gains from specialization and trade? a. Alice gains 7 pitchers of lemonade and 10 pizzas, while Betty gains 13 pitchers of lemonade and 10 pizzas. b. Alice gains 200 pitchers of lemonade and 100 pizzas, while Betty gains 180 pitchers of lemonade and 180 pizzas. c. Alice gains 207 pitchers of lemonade and 110 pizzas, while Betty gains 193 pitchers of lemonade and 190 pizzas. d. Alice gains 400 pitchers of lemonade and 0 pizzas, while Betty gains 0 pitchers of lemonade and 300 pizzas. Figure 1 Arturos Production Possibilities Frontier Dinas Production Possibilities Frontier 32. Refer to Figure 1. If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito? a. 1/4 hour b. 1/3 hour c. 3 hours d. 4 hours 33. Assume for the United States that the opportunity cost of each airplane is 100 cars. Which of these pairs of points could be on the United States' production possibilities frontier? a. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars) b. (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars) c. (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars) d. (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars) 34. Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is a. 0.36 bushel of corn. b. 2.8 bushels of corn. c. 14 bushels of corn. d. 70 bushels of corn. 35. The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good, a. has a low opportunity cost of producing that good, relative to the opportunity costs of other producers. b. has a comparative advantage in the production of that good. c. has an absolute advantage in the production of that good. d. should be the only producer of that good. 36. Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible? a. Kelly has a comparative advantage in repairing cars and David has a comparative advantage in cooking meals. b. Kelly has an absolute advantage in repairing cars and David has an absolute advantage in cooking meals. c. Kelly has a comparative advantage in repairing cars and in cooking meals. d. David has an absolute advantage in repairing cars and in cooking meals. 37. If labor in Mexico is less productive than labor in the United States in all areas of production, a. then neither nation can benefit from trade. b. then Mexico can benefit from trade but the United States cannot. c. then the United States will have a comparative advantage relative to Mexico in the production of all goods. d. then both Mexico and the United States still can benefit from trade. Table 5 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. Minutes Needed to Make 1 Bushel of Pound of Wheat Beef Andia 20 12 Zardia 15 10 38. Refer to Table 5. What is Andias opportunity cost of producing one bushel of wheat? a. 3/5 pound of beef b. 6/5 pounds of beef c. 4/3 pounds of beef d. 5/3 pounds of beef 39. Refer to Table 5. At which of the following prices would both Andia and Zardia gain from trade with each other? a. 6 bushels of wheat for 10.5 pounds of beef b. 12 bushels of wheat for 19 pounds of beef c. 24 bushels of wheat for 34 pounds of beef d. Andia and Zardia could not both gain from trade with each other at any price. Figure 2 Arturos Production Possibilities Frontier Dinas Production Possibilities Frontier 40. Refer to Figure 2. Which of the following is not correct? a. Arturo and Dina could each consume 100 tacos and 100 burritos without trade. b. Neither Arturo nor Dina could each consume 200 tacos and 200 without trade. c. burritos Arturo and Dina could each consume 200 tacos and 200 burritos with trade. d. Total consumption of burritos could not be 600 either with or without trade. 41. When a country has a comparative advantage in producing a certain good, a. the country should import that good. b. the country should produce just enough of that good for its own consumption. c. the countrys opportunity cost of that good is high relative to other countries opportunity costs of that same good. d. None of the above is correct. 42. In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine? a. Americans know less than Italians know about cooking noodles. b. The United States has an absolute advantage over Italy in producing noodles. c. Italy has a comparative advantage over the United States in producing wine. d. The opportunity cost of producing a gallon of wine is the same for Italy as it is for the United States. 43. The forces that make market economies work are a. work and leisure. b. politics and religion. c. supply and demand. d. taxes and government spending. 44. In a market economy, a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices. c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand. d. supply and demand determine prices and prices, in turn, allocate the economys scarce resources. 45. Most markets in the economy are a. markets in which sellers, rather than buyers, control the price of the product. b. markets in which buyers, rather than sellers, control the price of the product. c. perfectly competitive. d. highly competitive. 46. In a competitive market, the price of a product a. is determined by buyers, and the quantity of the product produced is determined by sellers. b. is determined by sellers, and the quantity of the product produced is determined by buyers. c. and the quantity of the product produced are both determined by sellers. d. None of the above is correct. 47. Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world? a. Perfectly competitive markets are the easiest to analyze because everyone participating in the market takes the price as given by market conditions. b. Some degree of competition is present in most markets. c. There are many buyers and many sellers in all types of markets. d. Many of the lessons that we learn by studying supply and demand under perfect competition apply in more complicated markets as well. 48. A movement downward and to the right along a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded. 49. A decrease in the price of a good would a. increase the supply of the good. b. increase the quantity demanded of the good. c. give producers an incentive to produce more to keep profits from falling. d. shift the supply curve for the good to the left. Figure 3 50. Refer to Figure 3. The movement from point A to point B on the graph shows a. a decrease in demand. b. an increase in demand. c. a decrease in quantity demanded. d. an increase in quantity demanded. 51. Refer to Figure 3. It is apparent from the figure that the a. good is inferior. b. demand for the good decreases as income increases. c. demand for the good conforms to the law of demand. d. All of the above are correct. 52. The following table contains a demand schedule for a good. Price Quantity Demanded $10 100 $20 Q1 If the law of demand applies to this good, then Q1 could be a. 0. b. 100. c. 200. d. 400. Table 6 Price $5 $4 $3 $2 $1 $0 Quantity Demanded by Michelle 5 6 7 8 9 10 Quantity Demanded by Laura 4 6 8 10 12 14 Quantity Demanded by Hillary 11 13 15 17 19 21 53. Refer to Table 6. If the market consists of Michelle, Laura, and Hillary and the price falls by $1, the quantity demanded in the market increases by a. 2 units. b. 3 units. c. 4 units. d. 5 units. 54. Refer to Table 6. Which of the following illustrates the market demand curve? a. c. b. d. Table 7 Price $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 Berts Ernies Grovers Oscars Quantity Quantity Quantity Quantity Demanded Demanded Demanded Demanded 20 16 4 8 18 12 6 6 14 10 2 5 12 8 0 4 6 6 0 2 0 4 0 0 55. Refer to Table 7. For whom is the good a normal good? a. Bert only b. Grover only c. Bert, Ernie, Grover, and Oscar d. This cannot be determined from the table. Figure 4 56. Refer to Figure 4. Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require junk food producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food. If the warning labels are successful, we could illustrate the plan as producing a movement from a. Point A to Point B in Panel 1. b. Point B to Point A in Panel 1. c. Point A to Point C in Panel 2. d. Point C to Point A in Panel 2. 57. Holding the nonprice determinants of demand constant, a change in price would a. result in either a decrease in demand or an increase in demand. b. result in a movement along a stationary demand curve. c. result in a shift of supply. d. have no effect on the quantity demanded. 58. Suppose that when income rises, the demand curve for doctors visits shifts to the right. In this case, we know doctors visits are a. inferior goods. b. normal goods. c. perfectly competitive goods. d. durable goods. 59. If macaroni and cheese is an inferior good, then an increase in a. the price will cause the demand curve for macaroni and cheese to shift to the left. b. the price will cause the demand curve for macaroni and cheese to shift to the right. c. a consumers income will cause the demand curve for macaroni and cheese to shift to the left. d. a consumers income will cause the demand curve for macaroni and cheese to shift to the right. 60. A likely example of complementary goods for most people would be a. butter and margarine. b. lawnmowers and automobiles. c. chips and salsa. d. cola and lemonade. 61. Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for a. hair gel to increase. b. razors to increase. c. combs to increase. d. shampoo to increase. 62. Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes so that high cigarette prices a. encourage marijuana use, and the evidence supports this argument. b. encourage marijuana use, but the evidence does not support this argument. c. discourage marijuana use, and the evidence supports this argument. d. discourage marijuana use, but the evidence does not support this argument. 63. Which of these statements best represents the law of supply? a. When input prices increase, sellers produce less of the good. b. When production technology improves, sellers produce less of the good. c. When the price of a good decreases, sellers produce less of the good. d. When sellers supplies of a good increase, the price of the good increases. Figure 6 64. Refer to Figure 6. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for tennis racquets? a. an increase in the price of tennis balls b. an expectation by firms that the price of tennis racquets will increase in the very near future c. a decrease in the price of tennis racquet strings d. a decrease in the number of firms selling tennis racquets 65. If something happens to alter the quantity supplied at any given price, then a. we move along the supply curve. b. the supply curve shifts. c. the supply curve becomes steeper. d. the supply curve becomes flatter. 66. A market supply curve is determined by a. vertically summing individual supply curves. b. horizontally summing individual supply curves. c. finding the average quantity supplied by sellers at each possible price. d. finding the average price at which sellers are willing and able to sell a particular quantity of the good. Table 8 Price $0 $2 $4 $6 $8 $10 Firm As Quantity Supplied 10 8 6 4 2 0 Firm Bs Quantity Supplied 0 3 6 9 12 15 Firm Cs Quantity Supplied 0 4 8 12 8 4 Firm Ds Quantity Supplied 0 5 10 15 20 25 67. Refer to Table 8. Which supply schedules obey the law of supply? a. Firm As only b. Firm Bs, Firm Cs, and Firm Ds only c. Firm As and Firm Cs only d. Firm Bs and Firm Ds only 68. Refer to Table 8. If these are the only four sellers in the market, then the market quantity supplied at a price of $4 is a. 4 units. b. 7.5 units. c. 10 units. d. 30 units. 69. Today, producers changed their expectations about the future. This change a. can cause a movement along a supply curve. b. can affect future supply, but not todays supply. c. can affect todays supply. d. cannot affect either todays supply or future supply. 70. 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. 71. Equilibrium quantity must decrease when demand a. increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. b. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. d. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. 72. When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged. 73. When the price of a good is higher than the equilibrium price, a. a shortage will exist. b. buyers desire to purchase more than is produced. c. sellers desire to produce and sell more than buyers wish to purchase. d. quantity demanded exceeds quantity supplied. 74. The current price of neckties is $30, but the equilibrium price of neckties is $25. As a result, a. the quantity supplied of neckties exceeds the quantity demanded of neckties at the $30 price. b. the equilibrium quantity of neckties exceeds the quantity demanded at the $30 price. c. there is a surplus of neckties at the $30 price. d. All of the above are correct. 75. If there is a shortage of farm laborers, we would expect a. the wage of farm laborers to increase. b. the wage of farm laborers to decrease. c. the price of farm commodities to decrease. d. a decrease in the demand for substitutes for farm labor. Table 9 Price $10 $8 $6 $4 $2 Quantity Demanded 10 20 30 40 50 Quantity Supplied 60 45 30 15 0 76. Refer to Table 9. The equilibrium price and quantity, respectively, are a. $2 and 50 units. b. $6 and 30 units. c. $6 and 60 units. d. $12 and 30 units. 77. Refer to Table 9. If the price were $8, a a. shortage of 20 units would exist, and price would tend to rise. b. surplus of 25 units would exist, and price would tend to fall. c. shortage of 25 units would exist, and price would tend to rise. d. surplus of 45 units would exist, and price would tend to fall. Table 10 The demand schedule below pertains to sandwiches demanded per week. Price Harrys Darbys Jakes Quantity Quantity Quantity Demanded Demanded Demanded $3 3 4 3 $5 1 2 x 78. Refer to Table 10. Regarding Harry and Darby, whose demand for sandwiches conforms to the law of demand? a. only Harrys b. only Darbys c. both Harrys and Darbys d. neither Harrys nor Darbys 79. Refer to Table 10. Regarding Harry and Darby, for whom are sandwiches a normal good? a. only for Harry b. only for Darby c. for both Harry and Darby d. This cannot be determined from the given information. Figure 7 80. Refer to Figure 7. Equilibrium price and quantity are, respectively, a. $15 and 200 units. b. $25 and 600 units. c. $25 and 400 units. d. $35 and 200 units. 81. Refer to Figure 7. At a price of $35, there would be a. a shortage, and the price would tend to rise from $35 to a higher price. b. a surplus, and the price would tend to rise from $35 to a higher price. c. excess demand, and the price would tend to fall from $35 to a lower price. d. excess supply, and the price would tend to fall from $35 to a lower price. 82. Refer to Figure 7. At what price would there be an excess supply of 200 units of the good? a. $15 b. $20 c. $30 d. $35 83. Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n) a. decrease in the demand for printers and a decrease in the quantity supplied of printers. b. decrease in the supply of printers and a decrease in the quantity demanded of printers. c. decrease in the equilibrium price of printers and an increase in the equilibrium quantity of printers. d. increase in the equilibrium price of printers and a decrease in the equilibrium quantity of printers. 84. Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? a. Consumers have experienced an increase in income, and beef-production technology has improved. b. The price of chicken has risen, and the price of steak sauce has fallen. c. New medical evidence has been released that indicates a negative correlation between a persons beef consumption and life expectancy. d. The demand curve for beef must be positively sloped. 85. The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high-quality diamonds enters the market, then the a. supply curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. b. supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. c. demand curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. d. demand curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. Figure 8 The diagram below pertains to the demand for turkey in the United States. 86. Refer to Figure 8. All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move from a. DA to DB. b. DB to DA. c. x to y. d. y to x. 87. Refer to Figure 8. All else equal, a large number of people becoming vegetarians would cause a move from a. DA to DB. b. DB to DA. c. x to y. d. y to x. Figure 9 Panel (a) Panel (b) Panel (c) Panel (d) 88. Refer to Figure 9. Panel (a) 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 quantity demanded and an increase in supply 89. Refer to Figure 9. Panel (d) shows which of the following? a. a decrease in demand and a decrease in quantity supplied b. a decrease in demand and a decrease in supply c. a decrease in quantity demanded and a decrease in quantity supplied d. a decrease in quantity demanded and a decrease in supply 90. Refer to Figure 9. Which of the four panels illustrates a decrease in quantity supplied? a. Panel (a) b. Panel (b) c. Panel (c) d. Panel (d) 91. In a market economy, who or what determines who produces each good and how much is produced? a. the government b. lawyers c. lotteries d. prices 92. Suppose the United States had a short-term shortage of farmers. Which mechanisms would adjust to remove the shortage? a. The government would provide tax incentives to encourage people to become farmers. b. The government would subsidize the production of food. c. The prices of food and the wages of farmers would adjust. ... View Full Document

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