Question 1

Suppose the price of X is $15 per unit,the price of Y is $12 per unit,the consumer's income is $100,and the consumer's level of satisfaction is measured by XY + Y.The consumer's constraint is
A) X + Y ≤ 100
B) max XY
C) 15X + 12Y ≤ 100
D) Max XY + Y

Accepted Answer

The answer of Suppose the price of X is $15...

Question 2

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Which of the following statements is false?
A) Changes in exogenous variables are represented by shifts in the demand and/or supply curves.
B) Changes in endogenous variables are represented by movements along the supply and/or demand curves.
C) Price and quantity are the exogenous variables in this representation.
D) The equilibrium is represented as the intersection of supply and demand curves.

Accepted Answer

Price and quantity are not exogenous variables in this representation. They are endogenous variables that are determined by the intersection of the supply and demand curves. Exogenous variables are external factors that affect the market, such as changes in technology, input prices, or government policies.

Question 3

What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable
A) Equilibrium impact.
B) Comparative statics.
C) Independent impact.
D) Marginal impact.

Accepted Answer

The term in microeconomics that tells us how a dependent variable changes as a result of adding one unit of an independent variable is called the marginal impact. It is the change in the dependent variable divided by the change in the independent variable.

Question 4

If we were to build a model measuring the supply of corn,which of the following could be an example of an exogenous variable in the model?
A) The price of corn.
B) The quantity supplied of corn.
C) The quantity of rain.
D) The demand for corn.

Accepted Answer

The quantity of rain is an exogenous variable because it is outside the control of the market for corn. It can affect the supply of corn but it is not affected by the supply of corn. The other options (price of corn, quantity supplied of corn, demand for corn) are endogenous variables because they are dependent on the supply of corn.

Question 5

Which of the following statements is true?
A) Endogenous changes to demand are supply curves cause them to shift.
B) Exogenous changes can never affect both the demand and supply curves.
C) Exogenous changes can sometimes affect both the demand and supply curves.
D) Movement along a demand curve means that only an endogenous factor is changing.

Accepted Answer

Exogenous changes can sometimes affect both the demand and supply curves. For example, a change in consumer preferences or a natural disaster can shift the demand and supply curves simultaneously.

Question 6

Suppose the equilibrium rent for apartments in New York City is $2000 per month.If the city authorities declared effective tomorrow that rents would not be allowed to exceed $1800 per month,what do you think would happen to the relationship between supply and demand for rental apartments in New York City?
A) The supply of rental apartments would go up and rents would fall below $1800 per month.
B) There would be very little new construction of apartments in New York City and shortages would develop.
C) People would move out of New York City because of the new restrictions.
D) The demand for apartments would fall short of available supply.

Accepted Answer

If the authorities declare a price ceiling on rents, it will create a situation of excess demand for rental apartments. This will discourage landlords from constructing new apartments, as they would not be able to charge a rent that would cover their costs of construction and operation. This would lead to shortages, as the supply of apartments would not keep up with the demand.

Question 7

Suppose the equilibrium price in a market is $5,and the government imposes a $4.50 price floor on the market.This will
A) create excess supply.
B) create excess demand.
C) shift the demand curve to the right.
D) have no effect on the market.

Accepted Answer

The answer of Suppose the equilibrium price in a market...

Question 8

Currently,100,000 units of a good are traded on a market.The government imposes a limit of a maximum of 50,000 units that may be traded on the market.This will:
A) create excess supply.
B) create excess demand.
C) raise price
D) have no effect on the market.

Accepted Answer

The answer of Currently,100,000 units of a good are traded...

Question 9

Another term for equilibrium would be
A) a point of infinite supply.
B) a point of insatiable wants.
C) a point of stability.
D) a point of scarcity.

Accepted Answer

Equilibrium refers to a situation where there is a balance between supply and demand, and there is no tendency for prices or quantities to change. Therefore, a point of stability is the best description for equilibrium. None of the other options accurately reflect the concept of equilibrium.

Question 10

Suppose the equilibrium price in a market is $5,and the government imposes a $4.50 price ceiling.This will
A) Create excess demand.
B) Create excess supply.
C) Shift the supply curve to the left.
D) Have no effect.

Accepted Answer

A price ceiling is a legal maximum price that can be charged for a good or service, and if it is set below the equilibrium price (in this case, $4.50 vs. $5), it will create excess demand - this means that the quantity demanded by consumers will be greater than the quantity supplied by producers at that price, resulting in shortages or rationing. Therefore, the correct answer is A).

Question 11

Currently,100,000 units of a good are traded on the market.The government imposes a tax on producers that raises the unit cost of production of the good.This will:
A) shift the supply curve to the left.
B) shift the supply curve to the right.
C) shift the demand curve to the left.
D) increase the quantity traded.

Accepted Answer

The tax on producers increases their costs of production, and thus disincentivizes them from producing as much of the good. This will cause them to supply less of the good at any given price, shifting the supply curve to the left. As a result, the equilibrium price will increase and the equilibrium quantity traded will decrease.

Question 12

Suppose that market demand for a good slopes downward and market supply slopes upward.Equilibrium price is now $10 and 500,000 units of the good are traded at this price.Suppose now that the cost at which each unit of the good is produced falls.What is the likely effect of this change on the market equilibrium?
A) Excess supply.
B) A fall in price.
C) A shift in demand to the right.
D) An increase in price.

Accepted Answer

A decrease in production costs shifts the supply curve to the right, leading to a lower equilibrium price if demand remains constant.

Question 13

A good example of marginal reasoning would be
A) the addition to total sales from spending an additional dollar on advertising.
B) the sales resulting from total spending on advertising.
C) the decision to shut down production.
D) the decision to maximize profits rather than sales.

Accepted Answer

Marginal reasoning involves analyzing the additional benefits (or costs) of making small adjustments to a decision. The example of the addition to total sales from spending an additional dollar on advertising shows the marginal benefit of spending more on advertising.

Question 14

Identify the truthfulness of the following statements: I.Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza.
II.Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Accepted Answer

Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced (II) but it cannot explain why you would always choose to eat Chinese food rather than pizza (I) as that decision may depend on personal preferences and tastes.

Question 15

Movements along a demand curve caused by a change in price probably means that:
A) There has been and endogenous shift in the demand curve.
B) There has been an exogenous shift in the demand curve.
C) There has been a shift in an exogenous factor that affects supply.
D) The supply curve is not shifting.

Accepted Answer

The answer of Movements along a demand curve caused by...

Question 16

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Which of the following statements is false?
A) The equilibrium remains unchanged unless an exogenous variable changes.
B) The equilibrium is represented as the intersection of supply and demand curves.
C) When a shift in demand or supply occurs, a comparative statics analysis compares the old and the new equilibrium points.
D) A change in price will cause a shift in the demand curve.

Accepted Answer

A change in price will cause a movement along the demand curve, not a shift in the demand curve. A shift in the demand curve is caused by a change in a non-price determinant of demand, such as income or preferences.

Question 17

Identify the truthfulness of the following statements: I.Equilibrium analysis helps economists determine the market-clearing price.
II.Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.
A) Both I and II are false.
B) Both I and II are true.
C) I is true; II is false.
D) I is false; II is true.

Accepted Answer

Both statements I and II are true. Equilibrium analysis is used to determine the market-clearing price in a market where supply and demand are equal. Comparative statics, on the other hand, are used to analyze the effects of changes in exogenous variables on the level of endogenous variables in an economic model. Both statements are true. Equilibrium analysis is used to determine the price at which the quantity demanded equals the quantity supplied, while comparative statics allows us to analyze how changes in exogenous variables affect endogenous variables in an economic model.

Question 18

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Let demand be a function of price and income,Q^d (P,I).Which of the following statements is true? A) A change in income will cause a shift in the supply curve. B) A change in income level is represented by a movement along the demand curve. C) Income is not represented on one of the axes, and so is treated as an exogenous variable in the graphical analysis. D) Price and income together must change in order to create a shift in the demand curve.

Accepted Answer

The answer of Suppose that we illustrate demand and supply...

Question 19

An equilibrium
A) is a condition that is reached eventually in any market.
B) is a state that will continue indefinitely as long as exogenous factors remain unchanged.
C) is a concept that is often meaningless because most markets never reach equilibrium.
D) is a temporary state.

Accepted Answer

An equilibrium is a state where supply and demand are balanced, and it will continue indefinitely as long as exogenous factors remain unchanged. It is a stable state that represents the absence of any inherent tendency to change, so it does not require any further adjustments.

Question 20

Comparative statics
A) examines how exogenous variables change as endogenous factors change.
B) examines how endogenous variables change as exogenous factors change.
C) presents a comparison of two separate markets at a single point in time.
D) is often rendered useless because exogenous variables can never be expected to remain constant for long.

Accepted Answer

Comparative statics examines how endogenous variables (variables determined within a model) change as exogenous factors (variables outside the model) change. It is concerned with the effects of changes in exogenous variables on the equilibrium values of endogenous variables in a model.

Quiz 1: Analyzing Economic Problems

Suppose the price of X is $15 per unit,the price of Y is $12 per unit,the consumer's income is $100,and the consumer's level of satisfaction is measured by XY + Y.The consumer's constraint is

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Which of the following statements is false?

What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable

If we were to build a model measuring the supply of corn,which of the following could be an example of an exogenous variable in the model?

Which of the following statements is true?

Suppose the equilibrium price in a market is $5,and the government imposes a $4.50 price floor on the market.This will

Currently,100,000 units of a good are traded on a market.The government imposes a limit of a maximum of 50,000 units that may be traded on the market.This will:

Another term for equilibrium would be

Suppose the equilibrium price in a market is $5,and the government imposes a $4.50 price ceiling.This will

Currently,100,000 units of a good are traded on the market.The government imposes a tax on producers that raises the unit cost of production of the good.This will:

A good example of marginal reasoning would be

Identify the truthfulness of the following statements: I.Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza. II.Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

Movements along a demand curve caused by a change in price probably means that:

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Which of the following statements is false?

Identify the truthfulness of the following statements: I.Equilibrium analysis helps economists determine the market-clearing price. II.Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Let demand be a function of price and income,Q^d (P,I) .Which of the following statements is true?

An equilibrium

Comparative statics

Quiz 1: Analyzing Economic Problems

Suppose the price of X is $15 per unit,the price of Y is $12 per unit,the consumer's income is $100,and the consumer's level of satisfaction is measured by XY + Y.The consumer's constraint is

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Which of the following statements is false?

What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable

If we were to build a model measuring the supply of corn,which of the following could be an example of an exogenous variable in the model?

Which of the following statements is true?

Suppose the equilibrium price in a market is $5,and the government imposes a $4.50 price floor on the market.This will

Currently,100,000 units of a good are traded on a market.The government imposes a limit of a maximum of 50,000 units that may be traded on the market.This will:

Another term for equilibrium would be

Suppose the equilibrium price in a market is $5,and the government imposes a $4.50 price ceiling.This will

Currently,100,000 units of a good are traded on the market.The government imposes a tax on producers that raises the unit cost of production of the good.This will:

A good example of marginal reasoning would be

Identify the truthfulness of the following statements: I.Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza. II.Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

Movements along a demand curve caused by a change in price probably means that:

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Which of the following statements is false?

Identify the truthfulness of the following statements: I.Equilibrium analysis helps economists determine the market-clearing price. II.Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Let demand be a function of price and income,Qd (P,I) .Which of the following statements is true?

An equilibrium

Comparative statics

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis.Let demand be a function of price and income,Q^d (P,I) .Which of the following statements is true?