ECONOMICS MICHAEL PARKIN ANSWERS
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1.
2.
3.
Student: _________
Date: _________
Instructor: Ufuk Tutan
Course: BUS211 – Microeconomics (2020 Spring) Assignment: Preparation Test
A university decides to change its late-night bus service between the campus and student housing from a fare-based service to a free service.
This statement means that the incentive to ride the bus . The university’s decision is a _ decision.
A. remains the same; macroeconomic
B. changes; macroeconomic
C. changes; microeconomic
D. remains the same; microeconomic
is an example of .
A. Ben Cohen of Ben and Jerry’s Ice Cream; labor
B. An auto worker; capital
C. An assembly line at Ford; entrepreneurship
D. Niagara Falls; land
Resource use is efficient when .
A. retail stores sell goods and services at a price that results in them just covering their costs
B. everyone who wants a job has a job
C. a situation cannot be improved upon
D. shortages do not occur
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4.
5.
A choice on the margin is a choice that is made by comparing all the relevant _ systematically and .
Marginal cost is the that arises from one unit in an activity.
Marginal benefit is the that arises from one unit in an activity.
A. alternatives; incrementally;
opportunity cost; increase;
benefit; increase
B. profits; totally;
total cost; increase;
opportunity cost; decrease
C. prices; incrementally;
opportunity cost; decrease;
revenue; increase
D. costs; incrementally;
total cost; decrease;
benefit; decrease
An economic model is a description of some features of the economic world that includes features assumed necessary to explain the __facts. A. only those; observed B. only those; unobserved C. all the; unobserved D. all the; observed 5/19/2020 Preparation Test https://xlitemprod.pearsoncmg.com/api/v1/print/en-us/econ 3/27 6. 7. The graph shows _.
A. an inverse linear relationship
B. a negative relationship becoming steeper
C. a negative relationship becoming less steep
D. a relationship that is positive because as the value of
x increases, the value of y decreases by larger and
larger amounts
0 2 4 6 8 10
0
10
20
30
40
50
x
y
Kong Tops the Box Office
Movie
Theaters
(number)
Revenue
(dollars per
theater)
A Kong: Skull Island 3,846 $15,867
B Logan 4,071 $9,362
C Get Out 3,143 $6,600
D The Shack 2,888 $3,465
Source: boxofficemojo,
Data for weekend of February 14-17, 2014
The graph shows a scatter diagram of the data in the table.
Calculate the slope of the relationship between 3,846 and 4,071 theaters.
The slope of the relationship between 3,846 and 4,071 theaters is
− 28.91 dollars per theater.
Answer to 1 decimal place.
If your answer is negative, include a minus sign. If your answer is positive,
do not include a plus sign.
2400 2800 3200 3600 4000 4400
2000
4000
6000
8000
10000
12000
14000
16000
18000
Theaters (number)
Revenue (dollars per theater)
3846
15867
4071
9362
3143
6600
2888
3465
A
B
C
D
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8.
9.
The line in the graph shows a relationship between two variables, x and y.
What is the slope of this relationship?
The slope of this relationship is − 1.25 .
Answer to 2 decimal places.
If the slope is negative, use a minus sign. If the slope is positive, do not use
a plus sign.
0 2 4 6 8 10
0
2
4
6
8
10
12
x
y
The figure shows a relationship between two variables, x and y.
Calculate the slope of this relationship at points A and B.
The slope of the relationship at point A is − 2 .
The slope of the relationship at point B is − .25 .
Answer to 2 decimal places.
If the slope is negative, use a minus sign. If the slope is positive, do not use
a plus sign.
0 2 4 6 8
0
2
4
6
8
10
x
y
2
6
6
1.5
1
8
4
2
A
B
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- The line in the graph shows a relationship between two variables, x and y.
What is the slope of this relationship?
The slope of this relationship is − 1 .
If the slope is negative, use a minus sign. If the slope is positive, do not
use a plus sign.
0 1 2 3 4 5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
x
y
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11.
1: Reference
Click on the icon to study the Economics in the News. Then answer the following questions. 1 - Robots _.
A. have an undetermined effect on U.S.
production possibilities
B. have no effect on U.S. production
possibilities
C. make U.S. workers more productive
and increase U.S. production
possibilities
D. take jobs away from U.S. workers and
decreases U.S. production possibilities - Advances in technologies for producing services _.
A. increase U.S. production possibilities
B. decrease U.S. production possibilities
C. have an undetermined effect on U.S.
production possibilities
D. have no effect on U.S. production
possibilities - Assume that the U.S. PPF measures steel production on the x-axis and
production of services on the y-axis.
If robots are the only technological advance, _.
A. the U.S. PPF does not change
B. the U.S. PPF shifts outward, increasing
the x-axis intercept and the y-axis
intercept
C. the U.S. PPF rotates outward,
increasing the y-axis intercept with no
change in the x-axis intercept
D. the U.S. PPF rotates outward,
increasing the x-axis intercept with
no change in the y-axis intercept - If robots had been the only technological advance, the opportunity cost of
producing steel would have been .
A. equal to the opportunity cost of
producing services
B. the same as it actually was
C. lower than it actually was
D. higher than it actually was
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12.
2: Reference
Click on the icon to study the Economics in the News. Then answer the following question. 2
If robots had been the only technological advance, the opportunity cost of producing steel would have been .
A. lower than it actually was
B. the same as it actually was
C. equal to the opportunity cost of producing services
D. higher than it actually was
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13.
3: Reference
Click on the icon to read the news article. Then answer the following questions. 3
An Act of the United States Congress increased U.S. production of corn by
mandating a . As the production of corn increases, the opportunity cost of corn .
A. decrease in the use of ethanol and an
increase in the quantity of corn produced
as food; decreases because of the
principle of decreasing marginal cost
B. steady increase in the production of
ethanol; increases because resources
are not equally productive in all
activities
C. decrease in the use of ethanol and an
increase in the quantity of corn produced
as food; increases because resources
are not equally productive in all activities
D. steady increase in the production of
ethanol; decreases because opportunity
cost is a ratio
In the rest of the world, a movement along the PPF occurred due to _ in the quantity of land devoted to producing corn. The PPF also shifted
due to drought, which increased the cost of producing corn.
A. a decrease; inward
B. a decrease; outward
C. an increase; outward
D. an increase; inward
The United States achieves allocative efficiency in corn production if its
marginal benefit marginal cost. A. is greater than B. equals C. is less than or equal to D. is greater than or equal to The Rising Opportunity Cost of Food US Farmers’ Corn Drive Set to Curtail Land for Soybeans Financial Times March 31, 2012 Food commodity prices were sent gyrating after U.S. farmers signaled plans to sow the most corn in 75 years, leaving less land for soybeans, which are facing a fall in supplies due to droughts in South America. A U.S. government survey of 84,500 farm operators indicated they would plant 95.9m acres (38.4m hectares) with corn this spring, 4 percent more than last year, the most since 1937 and above expectations. Plantings of soybeans, often rotated with corn, would fall 1 percent from last year to 73.9m acres (29.6m hectares), with declines in such fertile states as Iowa, Missouri, and Nebraska. The U.S. is the world’s leading exporter of corn and vies with Brazil in soybean exports, so decisions made there are vital to global food markets. A growing world population and rising incomes in emerging economies have driven greater appetites for the crops, used in products from pig feed to vegetable oil. … «This is the annus horribilis for South American grain production. La Niña hit all the wrong places. …» said Nick Higgins, commodity analyst at Rabobank, the Dutch bank that is one of the biggest lenders to the agribusiness industry. … 5/19/2020 Preparation Test https://xlitemprod.pearsoncmg.com/api/v1/print/en-us/econ 13/27 Corn peaked at a record of almost $8 a bushel last June as growers sought to meet demand from livestock producers and the US ethanol industry. If farmers follow through with planting intentions and yields are good, this year’s crop could break records, helping ease concerns about food prices. … Copyright 2012 The Financial Times Ltd. All Rights Reserved 5/19/2020 Preparation Test https://xlitemprod.pearsoncmg.com/api/v1/print/en-us/econ 14/27 14. 4: Reference Click on the icon to study the Economics in the News. Then answer the following question. 4 If robots had been the only technological advance, the opportunity cost of producing steel would have been __.
A. lower than it actually was
B. the same as it actually was
C. equal to the opportunity cost of producing services
D. higher than it actually was
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15.
16.
A competitive market is a market that has , so can influence the price.
A. many buyers and one seller; no buyer
B. one buyer and many sellers; no seller
C. many buyers and sellers; both buyers and sellers
D. many buyers and sellers; no single buyer or seller
What are the influences on buying plans that change demand, and do these
influences increase or decrease demand?
Complete the following question about a change in demand.
The graph shows a demand curve for coffee makers.
Draw a demand curve that shows what happens in the market for
if but
all other influences on buying plans remain the same. Label the curve D1
.
coffee makers incomes decrease and a coffee maker is a normal good,
When an event occurs that changes the demand for , if
demand increases and if demand decreases. coffee makers A. a movement up along the demand curve occurs; a movement down along the demand curve occurs B. the demand curve shifts leftward; the demand curve shifts rightward C. the demand curve shifts rightward; the demand curve shifts leftward D. a movement down along the demand curve occurs; a movement up along the demand curve occurs 0 1 2 3 4 5 6 0 4 8 12 16 20 24 Quantity (millions of coffee makers per year) Price (dollars per coffee maker) Draw only the objects specified in the question. D0 D1 5/19/2020 Preparation Test https://xlitemprod.pearsoncmg.com/api/v1/print/en-us/econ 17/27 17. 18. Why does demand not change when the price of a good changes with no change in the other influences on buying plans? Consider the demand for hot dogs. The demand for hot dogs does not change when a change in _ occurs.
A. the population
B. the expected future price of a hot dog
C. the price of ketchup (ketchup is a complement of a hot dog)
D. the price of a hot dog
An increase in the price of a hot dog .
A. decreases the quantity of demanded and results in a movement up along the
demand curve for
hot dogs
a hot dog
B. increases the demand for hot dogs and shifts the demand curve for a hot dog rightward
C. decreases the demand for hot dogs and shifts the demand curve for a hot dog leftward
D. increases the quantity of demanded and results in a movement down along the
demand curve for
hot dogs
a hot dog
In January 2010, the price of gasoline was $2.70 a gallon. By spring 2010, the price had increased to $3.00 a gallon.
Assume that there were no changes in average income, population, or any other influence on buying plans.
Explain how the rise in the price of gasoline would affect
a. The demand for gasoline.
b. The quantity of gasoline demanded.
Given the law of demand, you would expect the rise in the price of gasoline to _ the quantity of gasoline demanded and the demand for gasoline.
A. increase; decrease
B. decrease; decrease
C. not change; decrease
D. decrease; not change
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19.
20.
Demand is , when all other influences on buying plans remain the same. A. the relationship between the quantity demanded of a good and income B. the quantity of a good that people plan to buy C. the is the quantity of a good that people want but can’t afford D. the relationship between the quantity demanded of a good and the price of the good The figure shows the demand curve for printers. Complete the following sentences. If the price of from $ to $ , while all other influences on buying plans are unchanged, the quantity of demanded _.
a printer rises 20 40
printers
A. does not change
B. decreases
C. increases
If the price of from $ to $ , while all other influences on
buying plans are unchanged, the quantity of demanded changes from
_ to .
a printer rises 20 40
printers
A. 6 million; 4 million
B. 6 million; 8 million
C. 4 million; 6 million
D. 8 million; 6 million
The change in the price of a printer illustrates the law of demand in action.
A. True
B. False
0 2 4 6 8 10
0
20
40
60
80
100
Quantity (millions of printers per year)
Price (dollars per printer)
D
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21.
22.
The figure shows the demand curve for sundaes.
Suppose that the price of but all other influences on
plans remain the same.
a sundae falls buyers’
Show the effect in the graph. Draw either an arrow on the demand curve
showing the direction of change or a new demand curve.
If the price of a sundae falls, a the demand curve occurs.
If any factor that influences buying plans other than the price changes, then a
_ the demand curve occurs.
A. leftward shift of; movement up along
B. movement up along; shift of
C. movement down along; shift of
D. rightward shift of; movement down along
0 10 20 30 40 50
0
2
4
6
8
10
Quantity (sundaes per day)
Price (dollars per sundae)
Draw only the objects specified in the question.
Hot dogs and burgers are substitutes.
If the price of a hot dog increases, how does the demand for burgers change?
If the price of a hot dog increases, the demand for burgers will _.
A. decrease, and the demand curve for burgers will shift leftward
B. increase, and the demand curve for burgers will shift rightward
C. increase or decrease, but the demand for hot dogs will not change
D. not change, but there will be a movement along the demand curve for burgers
D
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smartphones if the price of a smartphone
rises?
Draw a supply curve of smartphones. Label it.
Use any prices and quantities you wish but make your supply curve obey the
law of supply.
Then draw an arrow to indicate what happens to the quantity of smartphones
supplied when the price of a smartphone rises.
A in the price of a smartphone _ the quantity supplied and
supply.
rise
A. does not change; increases
B. increases; increases
C. does not change; does not change
D. increases; does not change
0 1 2 3 4 5
0
50
100
150
200
250
300
350
400
450
500
Quantity (millions of smartphones per year)
Price (dollars per smartphone)
Draw only the objects specified in the question.
S
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24.
25.
Dairies make low-fat milk from full-cream milk. In the process of making low-fat
milk, the dairies produce cream, which is made into ice cream.
The graph shows the supply curve of low-fat milk.
Suppose the price of cream rises.
Draw a new supply curve that shows the effect of this event. Label the curve.
200 300 400 500 600
0.00
1.00
2.00
3.00
4.00
5.00
Quantity (millions of quarts of low-fat milk per year)
Price (dollars per quart)
Draw only the objects specified in the question.
Which of the following statements by Aqua Springs demonstrates that the firm’s selling plans obey the law of supply?
A. We can easily decrease the production of plain water and increase the production of sparking
water.
B. If the price of bottled water falls and all the other influences on our selling plans
remain the same, we will cut back on production and lay off some workers
C. We’ve been hit by a rise in the price of plastic bottles and will lower production.
D. At a price of $1 bottle, we plan to sell 2,000 bottles per day.
S0
S1
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26.
27.
The figure shows the supply curve of coffee makers.
If the price of from $ to $ , while all other influences on
selling plans are unchanged, the quantity of supplied .
a coffee maker rises 20 80
coffee makers
A. decreases from 24 million to 6 million
B. increases by an unknown amount
C. increases from 6 million to 24 million
D. decreases by an unknown amount
0 6 12 18 24 30
0
20
40
60
80
100
Quantity (millions of coffee makers per year)
Price (dollars per coffee maker)
The figure shows the supply curve of magazines.
Draw an arrow to show what happens to firms’ plans if the price of
but all other influences on selling plans remain the same.
a magazine
rises
If the price of a magazine rises, a _ the supply curve occurs. If any factor that influences selling plans other than the price changes, then a the supply curve occurs.
A. movement down along; shift of
B. leftward shift of; movement up along
C. rightward shift of; movement down along
D. movement up along; shift of
0 10 20 30 40 50
0
2
4
6
8
10
Quantity (magazines per day)
Price (dollars per magazine)
Draw only the objects specified in the question.
S
S
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28.
29.
30.
How does the price elasticity of demand influence total revenue when a price cut occurs?
If a price cut increases total revenue, demand is . If a price cut decreases total revenue, demand is .
A. unit elastic; inelastic
B. elastic; unit elastic
C. elastic; inelastic
D. inelastic; elastic
If a price cut leaves total revenue unchanged, demand is .
A. elastic
B. inelastic
C. unit elastic
Complete the sentence.
When calculating the price elasticity of demand, we calculate the change in the quantity demanded as the percentage of the average price and the change in the
quantity as a percentage change of the average quantity because this method .
A. gives the same value for the elasticity regardless of whether the price falls or rises
B. is the only one that will calculate a value of zero when demand is perfectly inelastic
C. allows us to calculate the price elasticity of demand as a positive number
D. gives a units-free measure
Choose the statement that is true.
Price elasticity of demand .
A. is equal to the percentage change in price divided by the percentage change in quantity
demanded
B. is measured in dollars
C. and the slope of the demand curve are two different concepts
D. is a measure of the responsiveness of the quantity demanded of a good to a change in
income, when all other influences on buyers’ plans remain the same
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31.
32.
33.
When the price of potato chips falls by 50 percent, the quantity demanded of potato chips increases by 80 percent.
What is the price elasticity of demand for potato chips?
The price elasticity of demand for potato chips is 1.60 .
Answer to 2 decimal places.
If the quantity demanded of soda decreases by 1 percent when the price of soda rises by 10 percent, what is the price elasticity of demand for soda?
The price elasticity of demand for soda is 0.10 .
Answer to 2 decimal places.
Based on the number you’ve calculated, the demand for soda is .
A. elastic
B. unit elastic
C. inelastic
Complete the following sentence.
A decrease in tuition fees will decrease your college’s total revenue if the price elasticity of demand for college education is . A. greater than zero and less than 1 B. negative C. greater than 1 D. equal to 1 5/19/2020 Preparation Test https://xlitemprod.pearsoncmg.com/api/v1/print/en-us/econ 25/27 34. 35. With higher fuel costs, airlines raised their average fare from $ to $ per passenger mile and the number of passenger miles decreased from 2.5 million a day to 1.5 million a day. 0.75 1.25 What is the price elasticity of demand for air travel over this range? Describe the demand for air travel. Over the price range of $0.75 to $1.25 per passenger mile, the price elasticity of demand is 1.0 . Answer to 1 decimal place. Over this price range, the demand for air travel is _.
A. unit elastic
B. inelastic
C. elastic
(1) a normal
an inferior
(2) an inferior
a normal
When Yara’s income decreased from LBP (Lebanese pound) to LBP a week, she increased her demand for falafel sandwiches by percent and
decreased her demand for new clothes by percent.
100,000 65,000 15
15
Calculate Yara’s income elasticity of demand for falafel sandwiches and new clothes. Comment on the nature of both items.
Answer to 2 decimal places.
If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.
Yara’s income elasticity of demand for falafel sandwiches is − 0.35 .
Yara’s income elasticity of demand for new clothes is 0.35 .
Falafel sandwiches are (1) good, and new clothes are (2) good.
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36.
37.
38.
A rise in the price of sushi of from 98 to $1.02 a piece decreases the quantity of soy sauce demanded form 101 units to 99 units an hour and decreases the
quantity of sushi demanded by 1 percent an hour.
¢
Calculate the price elasticity of demand for sushi and the cross elasticity of demand for soy sauce with respect to the price of sushi.
Answer to 2 decimal places.
If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.
The price elasticity of demand for sushi is 0.25 .
The cross elasticity of demand for soy sauce with respect to the price of sushi is − 0.5 .
A rise in the price of a smoothie from $2 to $3 results in a decrease in the
quantity of smoothies demanded from 220 million to 180 million a day and at
today’s price of a muffin, $1.50, the quantity of muffins demanded increases
from 80 million to 100 million a day. - Calculate the cross elasticity of demand for muffins with respect to the price
of a smoothie.
The cross elasticity of demand for muffins with respect to the price of a
smoothie is 0.55 .
160 180 200 220
1.50
2.00
2.50
3.00
Quantitiy (millions of smoothies per day)
Price (dollars per smoothie)
The table gives some data on the supply of roses in a small town.
When the price rises from $ a to $ a , the elasticity of supply
is .
17 dozen 23 dozen
A. 1.50
B. 3.00
C. 0.33
D. 0.67
Price
(dollars per dozen)
Quantity supplied
(dozens per day)
17 9
23 11
D
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39.
40.
Complete the sentence.
The demand for air travel between two cities doubles. The elasticity of the supply of air travel between these cities will .
A. become more elastic, the longer the time since demand doubled
B. become less elastic, the longer the time since demand doubled
C. not change over time
D. adjusts to become equal to the price elasticity of demand over time
When the price of increases by percent and the price of a remains unchanged, the quantity of demanded increases by
percent.
a skateboard 5 scooter scooters 10
Calculate the cross elasticity of demand of scooters with respect to skateboards.
The cross elasticity of demand of scooters with respect to skateboards is 2 .
If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.