BLC Mock Exam 1 - Mock Exam 1. Consider the market for...

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1 Mock Exam 1. Consider the market for paper textbooks. Suppose teachers begin to rely less on textbooks and more often make slides of lecture notes available on the internet. At the same time, the cost of paper increases. Which of the following regarding the equilibrium price and quantity of paper textbooks is true? a. Equilibrium price decreases and equilibrium quantity is ambiguous. b. Equilibrium price is ambiguous and equilibrium quantity decreases. 2. Fill in the blank: When the production possibility frontier between two goods is bowed out from the origin, the opportunity cost of producing a good _________ as more of the good is produced. a. Decreases b. Increases 3. Popcorn is an inferior good. If people's incomes decrease at the same time that the price of soda decreases (assume soda is a complement to popcorn) then the quantity demanded of popcorn will a. Be indeterminate since there are two changes occurring and we do not know the magnitude of the changes. b. Increase relative to its initial level. 4. A price ceiling is imposed by the government on the price of housing. This price ceiling is effective and results in an excess demand for housing of 20 units. If the demand for housing is given by the equation P = 100 – 2Q and the supply of housing is given by the equation P = 2Q, then the price ceiling must be equal to a. $40 b. $30 5. Air conditioners and fans are substitutes. If the price of air conditioners goes up, what will happen to the demand curve for fans? a. Demand for fans shifts left b. Demand for fans shifts right 6. A certain market has perfectly elastic demand and an upward sloping supply curve. If the government imposes an excise tax on producers in this market, who bears the economic incidence of the tax? a. Producers b. Consumers 7. Cnn.money.com wrote the following statement regarding the 2008 stimulus plan: “The package will pay individual taxpayers $600 and $1,200 for married taxpayers filing joint returns as long as they are below income caps of $75,000 for individuals and $150,000 for couples.” This statement is: a. Positive b. Normative 8. Jeremy’s research interests include the behavior of GDP (Gross Domestic Product) of the United States and various European countries, unemployment, and the inflation rate. Jeremy’s interests belong to the field of: a. Microeconomics b. Macroeconomics
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2 9. The graph below shows the Production Possibility Frontiers for Ann and Ben. Who has the comparative advantage in producing cheese? a. Ann b. Ben 10. Apple, the manufacturer of iPods, lowers the price of its product to attract new customers. Holding everything else constant, the change in the quantity demanded is a result of: a. A shift to the right of the demand for iPods b. A movement along the demand curve 11. In the market for cereal, demand is given by D: P = 10 – Q and supply is given by S: P = Q + 2. If the government institutes a price support at a price of $4, then the cost to the government of this program will be
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BLC Mock Exam 1 - Mock Exam 1. Consider the market for...

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