Exam 3

# Exam 3 - Introduction to Microeconomics Spring 2011 Exam 1...

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Introduction to Microeconomics Spring 2011 Exam 1 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. ____ 2. ____ 3. ____ 4. ____ 5. The minimum wage, if it is binding, raises the incomes of a. only those workers who cannot find jobs. b. all workers. c. only those workers who have jobs. d. no workers. The supply curve for coffee a. shifts when the price of coffee changes because the quantity supplied of coffee is measured on the horizontal axis of the graph. b. shifts when the price of coffee changes because the price of coffee is measured on the vertical axis of the graph. c. does not shift when the price of coffee changes because the price of coffee is measured on the vertical axis of the graph. d.does not shift when the price of coffee changes because the quantity supplied of coffee is measured on the horizontal axis of the graph. If the price elasticity of demand for a good is 0.4, then a 10 percent increase in price results in a a. 40 percent decrease in the quantity demanded. b. 2.5 percent decrease in the quantity demanded. c. 4 percent decrease in the quantity demanded. d. 0.4 percent decrease in the quantity demanded. New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages, and automobile insurance becomes more expensive? a. Price will rise. b. Price will stay exactly the same. c. The price change will be ambiguous. d. Price will fall. Table 5-2 The following table shows a portion of the demand schedule for a particular good at various levels of income. Refer to Table 5-2. Using the midpoint method, at a price of \$12, what is the income elasticity of demand when income rises from \$5,000 to \$10,000? a. 0.41 b. 0.00 c. 1.00 Price Quantity Demanded (Income = \$5,000) Quantity Demanded (Income = \$7,500) Quantity Demanded (Income = \$10,000) \$24 2 3 4 \$20 4 6 8 \$16 6 9

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12 \$12 8 12 16 \$8 10 15 20 \$4 12 18 24 ____ ____ ____ d. 6. If a a. b. c. d. 2.45 good is inferior, then an increase in income will result in an increase in the demand for the good. a movement down and to the right along the demand curve for the good. a movement up and to the left along the demand curve for the good. a decrease in the demand for the good. Figure 4-14 Pe' Pe Pe Pe' D D' quantity Pe Pe' Pe' Pe D' D quantity S' S price price price SS Panel (a) Panel (b) Qe Qe' Panel (c) Qe' Qe Panel (d) Qe Qe' DD quantity Qe' Qe quantity S S' 7. Refer to Figure 4-14 . Which of the four panels represents the market for peanut butter after a major hurricane hits the peanut-growing south? a. Panel (a) b. Panel (c) c. Panel (b) d. Panel (d) 8. Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users? a. The price elasticity of demand for illegal drugs is 1.3.
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