Econ_198_Spr_07_Exam__1 - Introduction to Microeconomics...

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Introduction to Microeconomics Allen R. Sanderson Economics 19800 Spring 2007 FIRST HOUR EXAMINATION Name (Please Print): ______________________________________ [40 Points Possible] Part I. Multiple Choice. Circle letter corresponding to your answer. One point each; 20 points total. 1. A surplus in a market: a. will cause the market price to fall and the quantity supplied to decrease. b. illustrates a situation in which supply is greater than demand. c. means that we have achieved economic efficiency and eliminated scarcity. d. could be the result of having an effective price floor. e. means that the quantity demanded is greater than the quantity supplied at a given price. 2. If the income elasticities for good A and good B both have negative values, this means that the two goods are: a. Complements; b. substitutes; c inferior; d. normal; e. inelastic. 3. The figure to the right shows the market for oranges. Which of the following would not be illustrated by the diagram as shown? a. a change in consumer preferences for more orange juice and less coffee b. an increase in the price of bananas c. a change in consumer incomes d. a decrease in the price of oranges e. an income elasticity of demand for oranges > 1 4. The price elasticity of demand measures: a. the slope of the demand curve. b. how much demand shifts when the price changes. c. how much demand changes when consumers’ incomes change. d. the percentage change in price divided by the percentage change in quantity demanded. e. None of the above. 5. Jewelers were worried about the effect of the release of the movie “Blood Diamonds” (about the illicit ‘conflict diamond’ trade) in early December 2006 on sales during the normally lucrative holiday period. In terms of our course’s material, this concern could be thought of as: a. a shift – that is, a decrease – in the demand for diamonds and diamond jewelry. b. diamonds becoming inferior goods. c. the low and maybe even negative cross elasticity between diamonds and other jewelry items. d. the high price elasticity of demand for jewelry. e. disruptions in the supply of diamonds, leading to shortages of this product at a critical time. 6. If the quantity demanded changes by a very large amount as a result of a small change in the price, we would say that: a. demand is very elastic. b. the good in question must be inferior. c. the loss in consumer surplus would not be very great. d. this is a good candidate for something to tax if the government wanted to collect some easy – and substantial – revenue. e. there must not be many substitutes for this good. 1
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7. If the price of gasoline increased by 30 percent and this caused the quantity demanded to fall by 15 percent, then the price elasticity of demand for gasoline is: a. – 0.15; b. – 0.20; c. – 0.3.0; d – 0.45; e. – 0.50. 8.
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This test prep was uploaded on 04/07/2008 for the course ECON 198 taught by Professor Sanderson during the Spring '08 term at UChicago.

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Econ_198_Spr_07_Exam__1 - Introduction to Microeconomics...

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