Supply and Demand and Demand Curve Essay

Online Quizzes 1-6 Quiz 1 1. Economics is best defined as the study of how A. prices and quantities of goods and services are determined in markets B. private firms and households respond to taxes and subsidies C. people make choices in the presence of scarcity and the results of those choices. D. interest rates and exchange rates are determined 2. The scarcity principle implies that A. people will never be satisfied with what they have B. as wealth increases, making choices becomes less necessary C.

the prices of scarce goods must rise due to excess demand D. hoices must be made and tradeoffs will occur 3. The ‘no-free-lunch’ principle is another name for the A. cost-benefit principle B. the scarcity principle C. the ceteris paribus principle D. the marginal (not average) principle 4. You currently go to the gym three times each week. Each visit costs you $15 and you get $90 worth of benefits from your current weekly gym routine. Given this information A. you should go to the gym a fourth time each week B.

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you should reduce the number of times you go to the gym each week C. you should not change your gym routine D. t is impossible to say whether you should go to the gym more often than three times a week 5. To earn her allowance of $30 Janie must either mow the lawn or wash clothes. She dislikes both chores, but prefers working outdoors. If both jobs take the same amount of time Janie will choose to mow because the ______________ is greater. A. marginal benefit B. average benefit C. economic surplus D. opportunity cost 6.

Suppose Xena is willing to pay $1,000 for a new sword, but she is able to purchase one for $900. Her ___________ is __________. A. total benefit; $100 B. opportunity cost; $100 C. economic surplus; $1,000 D. conomics surplus; $100 7. Ontel engineers proposed developing a 2 gigahertz microprocessor in early 1999 at a cost of $20 million for a working prototype. By mid 2000, the $20 million had been spent with no prototype yet developed. The engineers requested a further $10 million to complete the project. In early 1999 sunk costs of this project were __________ and in mid 2000 sunk costs were __________. A. 0; $20 million B. 0; $30 million C. $20 million; $20 million D. $20 million; $30 million 8. The marginal cost of an activity is the A. change in the costs of the activity that results from an extra unit of the activity B. lways the same as the average cost of the activity C. ratio of the total cost of the activity to the level of the activity D. change in the level of the activity divided by the change in the costs of the activity 9. What is the opportunity cost of living in a house that you already own? A. Zero, because you already own it B. That depends on how much you like living there C. The rent you could receive if you rented the house out to someone else D. The total amount you have to spend on maintenance, rates and insurance each year 10. The meaning of the ceteris paribus assumption is A. old everything constant. B. vary all things at a constant rate C. hold everything else constant. D. hold one thing constant Quiz 2 1. A market is A. always associated with a particular physical location B. a group of buyers and sellers who work together to produce the best outcome possible C. a group of sellers who work together to secure the best price possible. D. a group of buyers and sellers of a particular good 2. Which of the following statements is correct? Substantial barriers to firms entering is characteristic of A. a monopoly and monopolistic competition B. monopoly and oligopoly

C. monopolisitic competition and oligopoly D. perfect competition 3. Which of the following is not a characteristic of a perfectly competitive market A. Many buyers and sellers B. No non-price competition C. Firms are price-makers D. All firms produce an identical good 4. The bundle of goods X and Y shown by point Z for individual A is A. efficient and attainable B. inefficient and attainable C. efficient and unattainable D. inefficient and unattainable 5. The oportunity cost of a unit of good X for individual A is A. 2 units of X B. 1/2 unit of X C. 2 units of Y. D. 1/2 unit of Y . The principle of comparative advantage suggests that A. A should produce X and B should produce Y B. B should produce X and A should produce Y C. A and B should both produce X and Y D. It does not matter who produces X and Y 7. If A and B were to agree on the rate at which good X will be traded for good Y, A would insist that A. B give her at least 1/2 unit of X for 1 unit of Y B. B give her at least 2 units of X for 1 unit of Y C. B give her 1 unit of X for 1 unit of Y D. B give her all of the X she produces 8. A linear production possiblities curve indicates that A. here are increasing opportunities costs B. opportunity costs are constant C. the person/country is much better at producing one good that they are at producing the other D. there can be no gains to trade 9. An outward shift of a countrie’s PPC could reflect A. population growth B. technological improvements C. higher standards of education D. Any of the above 10. The PPC and the CPC will be the same when A. a country does not trade B. countries specialise and trade according to comparative advantage C. countries specialise and trade according to absolute advantage D. ne country has both an absolute and advantage in producing all goods

Quiz 3 1. The law of demand states that a fall in the price of a good will result in 1) an increase in quantity demanded. 2) a decrease in quantity demanded. 3) an increase in demand. 4) a decrease in demand. 2. At each level of quantity, the supply curve shows the ________ of the last unit supplied. 1) marginal benefit 2) average benefit 3) marginal cost 4) average cost 3. A fall in the price of a good results in 1) an increase in real income and the good becoming cheaper relative to substitutes. ) an increase in real income and the good becoming more expensive relative to substitutes. 3) a decrease in real income and the good becoming cheaper relative to substitutes. 4) a decrease in real income and the good becoming more expensive relative to substitutes. 4. Adam would be happy to pay up to $50 for a meal at his favourite restaurant. The meal costs Adam $30. Adam’s reservation price for the meal is 1) $20 2) $30 3) $50 4) Impossible to identify 5. A fall in the price of a substitute good will shift the 1) supply curve to the left. 2) supply curve to the right. ) demand curve to the left. 4) demand curve to the right. 6. Consider the market for luxury cars. An increase in income will result in 1) an increase in price and a fall in quantity. 2) an increase in price and an increase in quantity. 3) a decrease in price and a fall in quantity. 4) a decrease in price and an increase in quantity. 7. A simultaneous fall in demand and increase in supply results in a fall in 1) quantity and price. 2) quantity and an increase in price. 3) quantity but an indeterminate effect on price. 4) price but an indeterminate effect on quantity. 8. Cash on the table means that ) buyer’s and seller’s reservation prices are the same. 2) buyer’s reservation price is above the seller’s reservation price. 3) seller’s reservation price is above the buyer’s reservation price. 9. Which of the following statements is NOT correct? 1) Competitive market equilibrium will sometimes be socially optimal. 2) When a competitive market is in equilibrium there will be no ‘cash on the table’. 3) At competitive market equilibrium buyer’s and seller’s would like to exchange more of the good. 4) At competitive market equilibrium buyers and sellers are both ‘satisfied’. 10.

A law that sets the price of a good below its equilibrium level results in 1) a shortage. 2) cash on the table. 3) a fall in the quantity sold. 4) All of the above are correct. Quiz 4 1. Mike’s total benefit schedule for apples is shown in the table below. If Mike is currently consuming 15 apples per week, the marginal benefit (MB) of an extra apple is 1) $70. 2) $5. 3) $4. 66. 4) $1 2. Mandy’s total benefit schedule for movies is shown in the table below. If the cost of a movie falls from $20 to $10 the number of movies Mandy wants to see each week will increase from 1) 1 to 2. 2) 2 to 3. 3) 3 to 4. ) Impossible to determine from the data provided. 3. Paul can eat as many muffins as he likes each week for free. He should continue to eat more muffins each week so long as 1) marginal benefit is positive. 2) total benefit increases. 3) marginal benefit exceeds marginal cost. 4) All of the above answers are correct. 4. Adam spends his weekly pay on food and entertainment. Food costs $5/unit and entertainment costs $10/unit. The marginal utility of the last unit Adam consumes each week of the two goods is 10 utils and 5 utils respectively. Adam could increase his total utility by spending 1) more on food and less on entertainment. ) more on entertainment and less on food. 3) equal amounts on food and entertainment. 4) twice as much on food as on entertainment. 5. The area under a demand curve is a measure of 1) marginal benefit. 2) average benefit. 3) total benefit. 4) consumer surplus. 6. A firm that faces a horizontal demand curve sells its good in a ___ market and is called a ___. 1) monopoly; price-maker 2) monopoly; price-taker 3) perfectly competitive; price maker 4) perfectly competitive; price-taker 7. Which of the following statements is correct for a firm in perfect competition? 1) Average and marginal revenue are the same. ) Average revenue is greater than marginal revenue. 3) Average revenue is less than marginal revenue. 4

Average revenue is sometimes greater than and sometimes less than marginal revenue. Quiz 5 1. The shape of a firm’s AVC curve is best explained by the 1) Law of Supply. 2) Law of Demand. 3) Law of Diminishing Utility. 4) Law of Diminishing Returns. 2. A firm produces 100 units of output each day. ATC equals $80/unit and AVC equals $60/unit. Therefore AFC equals ________ and TVC equals ________. 1) $20/unit; $2000/day 2) $20/unit; $6000/day 3) $140/unit; $2000/day ) $140/unit; $6000/day 3. Economic profit is equal to 1) TR – TC 2) Q x (P – ATC) 3) TR – TVC 4) More than one of the above is correct. 4. The price at which ___________ is called the breakeven price. 1) P = AVC 2) P = ATC 3) P = AFC 4) P = MC 5. The competitive firms’ short-run supply curve is shown on the diagram below as the line segment 1) ab. 2) ac. 3) ad. 4) bd. 6. Which of the following is NOT a characteristic of long run equilibrium in a competitive market? 1) MR = MC for each firm. 2) Each firm’s MR curve is the same as the market demand curve. 3) Each firm makes a normal profit. ) Output is produced at minimum ATC. 7. A firm has fixed costs of $1,000 and marginal costs of $1/unit. Average total cost when the firm produces 1,000 units is: 1) impossible to determine from the data. 2) $1/unit. 3) $2/unit. 4) $1,000/unit. 8. The cost of using a warehouse a firm owns to store its inventory in is an example of ________________ cost. 1) a marginal 2) a sunk 3) an explicit 4) an implicit 9. Andy and Sarah are both farmers who face identical cost and market conditions other than for the fact that Andy owns the land he farms and Sarah rents the land she farms.

This means that: 1) Sarah’s economic profit will be higher than Andy’s. 2) Sarah’s economic profit will be lower than Andy’s. 3) Sarah and Andy will have the same economic profit. 4) Neither Sarah or Andy will have any economic profit. 10. Kaye owns a business that produces a good using labour and machines. In the short-run Kaye can decrease output by 1) decreasing both labour and machines. 2) decreasing labour only. 3) decreasing the scale of the business. 4) leaving the market. 11. If average product (AP) is falling this must be because 1) total product is falling. ) marginal product is falling. 3) marginal product is below it. 4) marginal product is above it. 12. The amount of interest paid on a bank loan is an example of 1) an explicit cost. 2) an implicit cost. 3) a marginal cost. 4) an average cost. Quiz 6 1. When the price of babysitting is $20 per hour John is willing to babysit 5 hours per week. When the price of babysitting is $25 per hour he is willing to babysit for an extra hour each week. John’s elasticity of supply is 1) 0. 2. 2) 0. 8. 3) 1. 25. 4) 5. 2. The price of bottled water increases by 2 percent and the demand falls by 5 percent.

The demand for bottled water is 1) elastic. 2) inelastic. 3) unit elastic. 4) undefined. 3. All else held constant, we would expect the elasticity of supply to be greater the 1) shorter the periods of time it is measure over. 2) less mobile inputs are. 3) more alternative uses inputs have. 4) larger the share of income buyers spend on the good. 4. A monopolists demand curve will always be 1) above it s MR curve. 2) below its MR curve. 3) the same as its MR curve. 4) unrelated to its MR curve. 5. Along a downward sloping linear demand curve price elasticity of demand 1) is constant. ) is always equal to unity. 3) increases as we move up and to the left. 4) decreases as we move up and to the left. 6. Joe faces a downward sloping demand curve. Demand is elastic at the price he sells his good at. If he increases his price his price total revenue will 1) rise. 2) fall. 3) be unchanged. 7. Joe has noticed that the change of price of petrol seems to occur at the same time as the price of cars change. This is an example of what type of elasticity? 1) Elasticy of demand. 2) Income elasticity of demand. 3) Cross-price elasticity. ) Elasticity of supply. 8. When an increase in average household income causes the demand for tinned beans to fall, we can determine that this what type of good? 1) An inferior good. 2) A superior good. 3) A normal good. 4) A abnormal good. 9. Complementary goods will have a cross-price elasticity that is ____. 1) equal to 0. 2) above 0 (positive). 3) below 0 (negative). 4) impossible to determine. 10. Which of the demand curves in the diagram below is most likely to represent the supply for a genuine antique jewelrey in the short-run? 1) S0 2) S1 3) S2 4) S3

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