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# test1aa - Introduction to Microeconomics Section 4 Exam No...

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Introduction to Microeconomics Section 4 Exam No. 1 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Suppose the equilibrium price of a physical examination ("physical") by a doctor is \$200, and the government imposes a price ceiling of \$150 per physical. As a result of the price ceiling, a. the supply curve for physicals shifts to the left. b. the number of physicals performed stays the same. c. the quantity demanded of physicals increases and the quantity supplied of physicals decreases. d. the demand curve for physicals shifts to the right. Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Labor Hours Needed to Make 1 Pound of Pounds Produced in 40 Hours Meat Potatoes Meat Potatoes Farmer 10 2 4 20 Rancher 4 8 10 5 ____ 2. Refer to Table 3-4. The farmer should specialize in the production of a. potatoes and the rancher should specialize in the production of meat. b. both goods and the rancher should specialize in the production of neither good. c. meat and the rancher should specialize in the production of potatoes. d. neither good and the rancher should specialize in the production of both goods. ____ 3. The invisible hand refers to a. how the decisions of households and firms lead to desirable market outcomes. b. the control that large firms have over the economy. c. government regulations without which the economy would be less efficient. d. how central planners made economic decisions. ____ 4. Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is a. the improvement in his grades from studying minus the enjoyment of playing tennis. b. the enjoyment and exercise he would have received had he played tennis. c. the improvement in his grades from studying for the hour. d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis. ____ 5. You lose your job and, as a result, you buy fewer romance novels. This shows that you consider romance novels to be a(n) a. luxury good. b. normal good. c. inferior good. d. complementary good. Figure 4-14

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Panel (a) Panel (b) D D' S Pe' Pe Qe Qe' quantity price D' D S Pe Pe' Qe' Qe quantity price Panel (c) Panel (d) D S' S Pe' Pe Qe Qe' quantity price D S S' Pe Pe' Qe' Qe quantity price ____ 6. Refer to Figure 4-14 . Which of the four panels illustrates a decrease in quantity demanded? a. Panel (c) b. Panel (b) c. Panel (a) d. Panel (d) ____ 7. Sarah buys and sells real estate. Two weeks ago, she paid \$280,000 for a house on Pine Street, intending to spend \$40,000 on repairs sell the house for \$350,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Sarah purchased. As a result of the city’s announced plan, Sarah is weighing two alternatives: She can go ahead with the \$40,000 in repairs and
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## This note was uploaded on 11/16/2011 for the course 220 102 taught by Professor Perry during the Fall '09 term at Rutgers.

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test1aa - Introduction to Microeconomics Section 4 Exam No...

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