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versiond1 - Introduction to Microeconomics Spring 2010 Exam...

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Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Two goods are complements when a decrease in the price of one good a. increases the demand for the other good. b. increases the quantity demanded of the other good. c. decreases the quantity demanded of the other good. d. decreases the demand for the other good. ____ 2. A minimum wage that is set above a market's equilibrium wage will result in a. an excess demand for labor, that is, unemployment. b. an excess demand for labor, that is, a shortage of workers. c. an excess supply of labor, that is, a shortage of workers. d. an excess supply of labor, that is, unemployment. ____ 3. Suppose the government has imposed a price ceiling on televisions. Which of the following events could transform the price ceiling from one that is not binding into one that is binding? a. The number of consumers buying televisions decreases. b. Firms expect the price of televisions to fall in the future. c. Consumers' income decreases, and televisions are a normal good. d. The number of firms selling televisions decreases. ____ 4. When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand a. first becomes smaller, then larger. b. always becomes smaller. c. always becomes larger. d. first becomes larger, then smaller. ____ 5. In the work-leisure model, suppose consumption and leisure are both normal goods. The income effect of a wage increase results in the worker choosing to a. possibly work more or less than before. b. work more than before with a higher level of consumption. c. work less than before. d. work more than before. ____ 6. Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800 once the repairs are complete. Mike discovers that, in addition to the $500 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $800 to potential buyers. He can sell the boat as it is now for $300. What should he do? a. He should sell the boat as it is now for $300. b. He should keep the boat since it would not be rational to spend $900 on repairs and then sell the boat for $800. c. He should complete the repairs and sell the boat for $800. d. It does not matter which action he takes; the outcome is the same either way. ____ 7. Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? a. Drug interdiction shifts the demand curve for drugs to the left. b. Drug interdiction can increase drug-related crime. c.
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versiond1 - Introduction to Microeconomics Spring 2010 Exam...

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