31												32
	PRINCIPLES OF MICROECONOMICS- EXAM 1   
	ECON 217 - SECTION ____

September 1997                                                                                                           Mr. Rothstein
Time:  60 minutes.    Choose the one best answer.


Table 1 for use with questions 1 through 3.    

				NOMINAL
YEAR	C.P.I.		Income
1998	  .90		33,000	______	______	______	______
1999	  .97		38,000	______	______	______	______
2000	 1.00		40,000	______	______	______	______
2001	 1.07		41,500	______	______	______	______

Use the following answer choices for questions 1 and 2:
	a.	 decreased
	b.	 between no change and increase of 2.99%
	c.	 increased between 3.00% and 6.99%
	d.	 increased between 7.00 and 10.99%
	e.  	 increased by 1.00% or more

1.	Between 1998 and 1999 real income changed by _____%.

2.  Between 2000 and 2001 real income changed by _____%.

3.  The inflation rate for 1999 was ______.
	a.  was negative
	b.  was between 0.00% and 2.99%
	c.  was between 3.00 and 6.99%
	d.  was between 7.00% and 10.99%.
	e.  was 11.0% or greater.

Table 2 for use with questions 5 and 6. (C.P.I. for 2000 = 100)
	    		UNITS  	PRICES		PRICES	PRICES
GOOD 	2000	 	2000 			 2001 		 2002 	
Food		 50	 	$ 10.00			$20.00		$16.00

Housing	 25	   	   50.00		  	0.00		 40.00

Trans.	   	 30	    	     5.00	   	 	10.00		 10.00

Fun		 20	                5.00		   	5.00		 15.00


Answer choices for questions 4 and 5:
	a.	120		c.	160		e.	145  
	b.	125		d.	125

4.	The C.P.I. for 2001 is (approximately)  ________.

5.	The C.P.I. for 2002 is (approximately)  ________.

6.	The basic themes of economics are
	a.	specialization	c.	exchange		e.	All of the above		
	b.	scarcity		d.	choice		

7.	Economics is the study of how people choose
	a.	abundance over scarcity.
	b.	to use limited resources.
	c.	to use their infinite resources.
	d.	scarcity over abundance.
	e.	None of the above.

8.	Which of the following is correct?  Positive economics
	a.	deals with economic theories that stress the positive rather than the negative aspects of humanity=s prospects.
	b.	deals with economic laws that have been established without doubt.
	c.	describes what is rather than what ought to be.
	d.	describes what ought to be rather than what is.
	e.	is practiced by a school of economists known as positivists.

9.	AUnemployment is a more serious problem than inflation.@  This statement is an example of
	a.	the fallacy of composition.
	b.	positive economics.
	c.	normative economics.
	d.	microeconomics.
	e.	the false-cause fallacy.

	Table 3 for use with question 10
		X	 8		10		12
		Y	 14		18		22	

10.	Table 3 shows data relating X (on the horizontal axis) and Y (on the vertical axis).  This relationship=s slope coefficient is
	a.	1		c.	2		e.	not possible to determine from the   	b.	-2		d.	-4			information given
	



	Table 4 for use with question 11
	
		X	10	 	15	20
		Y	28		31	34

11.	Table 4 shows data relating X (on the horizontal axis) and Y (on the vertical axis).  This relationship=s slope coefficient is	
	a.	+ 3/5		c.	+ 5/3		e.	impossible to determine from the 	
	b.	+ 3		d.	+ 5			information given.

	Figure 1 for use with questions 12 through 15
















12.	The slope of the function shown in the figure above is
	a.	- 1.2		c.	- 4		
	b.	- 3		d.	- 1/3

13.	In the figure above, the area of the rectangle labeled A is _____ units.
	a.	450		c.	600
	b.	750		d.	150

14.	In  the figure above, the area of the triangle labeled B is ______ units.
	a. 	1350		c.	150
	b.	450		d.	300

15.  In the figure above, the area of the rectangle labeled C is _____ units.
	a.	300		c.	150		e. 	600
	b.	450		d.	750	




   	Table 5 for use with questions 16 and 17

		Guns (hundreds)	1  		2	    3	4	      5
		Butter	          20	    18	   15        10         3	

16.	Table 5 shows the production-possibilities frontier for the economy of Moribundity.  If this economy were to produce 3 (hundred) guns and 12 (tons of) butter,
	a.	it would be operating beyond its production-possibilities frontier.
	b.	it would be utilizing its resources with maximum efficiency.
	c.	it would be on its production-possibilities frontier.
	d.	it could utilize resources more efficiently to produce 3 more (tons of) butter without 
		sacrificing any guns.
	e.	some change in technology must have occurred relative to the data in Table 5.

17.	Table 5 shows the production-possibilities frontier for the economy of Moribundity.  The opportunity cost of increasing gun production from 3 (hundred) guns to 4 (hundred) guns is	
	a.	1 ton of butter	c.	3 hundred guns		e.	15 tons of butter
	b.	5 tons of butter	d.	7 tons of butter

18.	The production-possibilities frontier shows
	a.	that production from given resources is limited.
	b.	that choosing to consume one good implies sacrificing other goods.
	c.	that producing more public goods reduces the available supply of private goods.
	d.	the maximum production of butter given the production of guns.
	e.	All of the above.

19.	The production-possibilities frontier between ale and bread will shift upward if
	a.	more ale is produced.
	b.	less ale is produced.
	c.	more bread is produced.
	d.	less bread is produced.
	e.	None of the above.
	
20.	Along a production-possibilities frontier the opportunity cost is
	a.	how much of each good is produced.
	b.	the sacrifice of one good required to produce one more unit of another good.
	c.	zero.
	d.	the amount by which the production of guns increases, when the production of butter increases.
	e.	the total dollar amount of each good produced.



21.	According to the law of diminishing returns, increasing the amount of one input in equal increments, _________________________, eventually brings about ever smaller increases in output.  The missing words are
	a.	at the expense of other inputs.
	b.	holding all other inputs constant.
	c.	matched by equal increases in other inputs.
	d.	while decreasing other inputs by the same amount.
	e.	while increasing other inputs in equal proportions.

	Table 6 for use with question 22

			Oil Bbls		Backpackers
		Combos	per month		per month
		  A	72,000	   	  	000		
	         B	60,000	   	  	800
		  C	48,000			1,500
		  D	36,000			2,100		
		  E	24,000			2,600	
		  F	12,000			3,000

22.	Table 6 shows the Forest Service=s production possibilities frontier for crude oil and backpackers.  The opportunity cost of an additional backpacker between alternatives D and E is ____ barrels of foregone oil.
      	a.	20	  	c. 	17		  	e.	40
	b.	30		d.	24

23.	A self-employed photographer earns $50,000 per year.  This person would earn $45,000 per year by working at a local photography studio.  He owns the studio where he now works but it would return $10,000 per year if it were rented to someone else.  An economist would argue that the opportunity cost of being self-employed is
	a.	$0		c.	$5,000		e.	$15,000
	b.	$10,000		d.	$50,000

24.	When the relative price of beef rises, the consumption of
	a.	pork will fall and chicken will rise.
	b.	pork will tend to fall.
	c.	chicken will tend to fall.
	d.	pork and chicken will tend to rise.
	e.	pork and chicken will fall only if their absolute prices don=t change.

25.	The circular-flow diagram illustrates
	a. 	the interdependence of economic activity.
	b.	how the income of consumers is linked to their own spending in the aggregate.
	c. 	how dollar movements flow in the opposite direction of good or resource movements.
	d.	that the resources furnished to business firms come from consumers.
 	e.	All of the above.


26.	Assume that Betty and Ann live on a desert island.  With a day=s labor, Ann can produce 8 fish or 4 coconuts;  Betty can produce 6 fish or 2 coconuts.  Ann=s opportunity cost of producing 1 coconut is
	a.	8 fish		c. 	6 fish		e. 	2 fish
	b.	2 fish		d. 	0 fish

27. 	If milk costs $4 a gallon (one gallon equals 4 quarts) and bread costs $1 a loaf, the relative price of milk is
	a.	4 gallons of milk	
       b.     4 loaves of bread
	c.	1 quart of milk
	d.	1 gallon of milk

28.	In 1970, an average 25 inch TV set sold for $300, while in 1989, a similar TV set sold for about $600.  On average, consumer buying power of $100 in 1970 could buy about $700 of goods and services in 1989.  The relative price of a TV set
	a.	decreased from 1970 to 1989.
	b.	was roughly the same in 1970 and 1989.
	c.	increased from 1970 to 1989.
	d.	may have risen or fallen; too little information is available to assess changes in relative price.

29.	Bill can prepare 20 hamburgers per hour or wait on 15 tables per hour.  Mike can prepare 40 hamburgers per hour or wait on 25 tables.  If Bill and Mike open a hamburger stand (and if they specialize according to the principle of comparative advantage),
	a.	Bill would be the waiter; Mike would cook hamburgers.
	b.	Mike would cook hamburgers and wait tables.
	c.	Bill would be the cook; Mike would wait tables.
	d.	Bill would cook hamburgers and wait tables.

30.	Which of the following is correct?  The demand curve
	a.	shows that quantity demanded falls as price falls at any given time.
	b.	shows that quantity demanded rises when price falls.
	c.	is an upward-sloping curve.
	d.	shifts to the right when the price drops.
	e.	shows that quantity demanded falls as income falls.

31.	The demand curve is downward-sloping because
 	a.	as income rises people spend less.
	b.	when the price of something goes down, people substitute other goods for its.
	c.	a higher price brings in more buyers.
	d.	The demand curve is not downward-sloping; it is upward-sloping.
	e.	None of the above.






32.	Economists make the distinction between an increase in quantity demanded and an increase in demand
	a.	because the supply curve shifts whenever there is an increase in quantity demanded.
	b.	to distinguish between those situations in which consumers purchase more of the good as price falls and those in situations in which consumers purchase more of the good at all possible prices.
	c.	because the demand curve shifts where there is an increase in quantity demanded.
	d.	because the demand curve stays the same whenever there is an increase in demand.
	e.	economists are only useful if no one else understands our jargon.

33.	An increase in the demand for wheat occurring at the same time as an increase in the supply of wheat
	a.	must increase the price of wheat.
	b.	must reduce the price of wheat and the quantity of wheat sold.
	c.	must reduce the quantity of wheat sold.
	d.	must increase the quantity of wheat sold.
	e.	may increase or decrease the price of wheat but must reduce the quantity of wheat sold.

34.	If the demand for automobiles falls due to a drop in consumer income, and if, at the same time, increases in factor prices cause the supply of automobiles to fall, the price of automobiles will
	a.	rise	  	c.	remain the same
	b.	fall		d.	be impossible to forecast from the information given

35.	The supply curve is upward-sloping because of
	a.	the law of diminishing returns.
	b.	higher prices.
	c.	the existence of substitutes for the good.
	e.	Technological progress.

36. 	The equilibrium price rises when
	a.	there is an increase in supply, ceteris paribus
	b.	there is a decrease in quantity demanded, ceteris paribus.
	c.	there is an increase in demand, ceteris paribus.
	d.	there is a decrease in quantity supplied, ceteris paribus.

37.	If there is a surplus of oil on the world market,
	a.	oil is no longer scarce.
	b.	at the prevailing price, the quantity demanded exceeds the quantity supplied.
	c.	at the prevailing price, the quantity supplied exceeds the quantity demanded.
	d. 	the quantity supplied equals the quantity demanded.
	e.	many OPEC oil ministers will lose their jobs.


38.	If the price of crackers goes up when the price of cheese goes down, crackers and cheese are
	a.	inferior goods.
	b.	substitutes.
	c.	both substitutes and complements.
	d.	complements.
	e.	normal goods.

39.	If the price of a good is kept above equilibrium by government controls and regulations,
	a.	there will be an excess supply of the good.
	b.	there will be a shortage of the good.
	c.	not all those willing to pay the post-regulation price will be able to purchase the good.
	d.	the good will no longer be scarce.
	e.	producers will be unable to keep up with consumer demand for the good.

40.	The demand curve will shift to the left for most consumer goods when 
	a.	incomes decrease.
	b.	the prices of substitutes fall.
	c.	the prices of complements increase.
	d.	the number of buyers falls.
	e.	All of the above.

41.	In the case of normal goods
	a.	an increase in price will decrease quantity demanded.
	b.	an increase in income will decrease demand.
	c.	an increase in price will not shift the demand curve.
	d.	an increase in income will shift the demand curve to the right.
	e.	an increase in the price of a related good will decrease demand.

42.	Which of the following is correct?  Public goods
	a.	will be provided by the invisible hand, according to Adam Smith.
	b.	are the result of a single seller having considerable control over the price.
	c.	will be paid for voluntarily by users.
	d.	are allocated in markets by supply and demand.
	e.	are not provided for by the price system.

43.	If the marginal benefits of increasing yours study time for this test are less than your marginal costs,
	a.	your study time should be decreased to zero.
	b.	your study time should not be increased.
	c.	no conclusion about the relative merits of more or less study time is possible.
	d.	you have studied too little pass this test.
	e.	your study time should be increased.


44.	Several consumer groups have called for interest rate ceilings on credit card debt.  If implemented, an interest rate ceiling is most likely to have the unintended consequence of
	a.	substantial losses by credit card companies.
	b.	issuance of new cards to make up for lost business.
	c.	decreased interest rates charged by credit card companies.
	d.	cancellation of credit cards held by the least credit-worthy customers.

45.	The price system does not always function well in the provision of public goods, such as national defense.  One explanation for this failure is because
	a.	it is easy to determine the benefits of public goods.
	b.	one of the three basic questions of economics is not involved.
	c.	it is difficult to prevent nonpayers from enjoying the benefits of the public good.
	d.	the supply of public goods typically exceeds their demand.
	e.	there are difficult tradeoffs in the production of public goods. 


	

	





_____________________________________			SSN _____________________
(print last name,         first)

	PRINCIPLES OF MICROECONOMICS
	EXAM 1 - SECTION ____
May 29, 1997                                                  Mr. Rothstein
Time 60 minutes.  Choose the one correct answer.

Use the following data for questions 1 through 4:
	                    				Nominal
	Year		C.P.I.	Income	_______	_______	_______

	2000		 90.0	20,000	_______	_______	_______

	2001		 95.3	21,700	_______	_______	_______

	2002		100.0	23,000	_______	_______	_______

	2003		109.0	28,500	_______	_______	_______

Use the following answer choices for questions 1 and 2:
	a.   decreased
	b.   between no change and increase of 2.99%
	c.   between increase of 3.00% and 6.99%.
	d.   between increase of 7.00% and 10.99%
	e.   increase of 11.00% or  more.


 1.	Between 2000 and 2001 real income changed by _____ %.

 2.	Between 2002 and 2003 real income changed by _____ %.

 3.	The inflation rate for 2002 was _____.
	a.   was negative.
	b.   was between 0.00% and 2.99%.
	c.   was between 3.00% and 6.99%.
	d.   was between 7.00% and 10.99%.
	e.   was 11.00% or greater.
	     	

USE THE FOLLOWING DATA FOR QUESTIONS 5 AND 6

	          	UNITS    PRICES         PRICES    		PRICES
	  GOOD   	 1995  	 	1995             1996  		 		1997 
	FOOD	100		$ 5.00	     $ 6.10				$10.00
	HOUSING	 20		 20.00 	      22.00		 		16.00
	TRANSP.	 30		 10.00	      17.00		 		20.00


Use the following answer choices for questions 4 and 5.
	a.  150		b.  125	 	c.  130		d.  165       e. 160

 4.	The C.P.I. for 1996 was approximately _____.

 5.	The C.P.I. for 1997 was approximately _____.



Econ 217, Exam 1, May 29, 1997 page 2.

 6.	A direct relationship between two variables is such that
	a.	as the value of one variable increases, the value of the other also increases.
	b.	as the value of one variable decreases, the value of the other remains the same.
	c.	as the value of one variable increases, the value of the other decreases.
	d.	as the value of one variable decreases, the value of the other increases.		
	
 7.	Microeconomics focuses on
	a.	issues such as economic growth, unemployment, and recessions.
	b.	issues such as inflation, stagflation, and monetary and fiscal policy.
	c.	the individual units that make up the whole of the economy.
	d.	the workings of the whole economy or large sectors of it.

 8.	The fundamental problem of economics is
	a.	to establish prices which accurately reflect the opportunity costs of resources.
	b.	that production of some goods also produces undesirable spillover effects such as pollution.
	c.	to achieve a more equitable distribution of income to society.
	d.	that productive resources are scarce relative to material wants.

 9.	If a society is operating inside its production possibilities frontier for antipollution devices and bundles of other goods, then
	a.	there is some unemployment of economic resources.
	b.	to produce more antipollution devices, the society must produce fewer bundles of other goods.
	c.	to produce more bundles of other goods, the society must produce fewer antipollution devices.
	d.	to produce more bundles of other goods, the society must produce more antipollution devices.

10.	In order to get a ticket to a Tar Hell basketball game, one must wait in line.  But students are not required to purchase their own tickets.  Which of the following correctly explains why the cost of a ticket is not the same for all students?
	a.	Some students care to sit closer to the playing floor than others.
	b.	Some students enjoy watching basketball more than others.
	c.	Some students are more loyal fans than others.
	d.	Some students have more valuable alternative uses of their time than others.

11.	Assume that the economy can produce two goods, A and B.  An increase in the technological know-how for producing good A will result in expanded production possibilities for
	a.	good B only.					c.  good A only.
	b.	neither good A nor B.			d.  both goods A and B.

12.	In a free-market economy, a decline in the price of a good is a signal that
	a.	consumers prefer to have more of the good.
	b.	fewer resources should be allocated to the production of the good.
	c.	suppliers of the good should increase the quantity being supplied.
	d.	suppliers of the good should not change the quantity being supplied.



Econ 217, Exam 1, May 29, 1997 page 3.



13.	Specialization of labor
	a.	reduces the importance of trade.
	b.	can occur only in a market economy.
	c.	is beneficial because people can better utilize their special skills.
	d.	can occur only in a barter economy.

14.	In a barter economy,
	a.	trading is easier than in a market economy.
	b.	specialization of labor is easier than in a market economy.
	c.	goods are traded for money.
	d.	goods are traded for goods.

15.	A monetary system permits specialization of labor because the existence of money
	a.	greatly lowers the effort and time necessary to exchange the good(s) one produces for the goods one consumes.
	b.	is essential to the creation of profits that lead to the efficient employment of labor.
	c.	guarantees that resources will be allocated efficiently among alternative uses.
	d.	tends to eliminate scarcity itself as an economic problem.

16.	The economic function of profits and losses from society's point of view is to
	a.	reallocate resources from less-desired to more-desired uses.
	b. 	equalize income distribution.
	c.	generate price stability.
	d.	bring about full employment.

17.	If above-normal profits are being earned in a market
	a.	these profits act as a signal to financial capital that it can earn more by moving out of this market.
	b.	the total sales revenue is less than the opportunity costs of resources employed in this market.
	c.	productive resources should move into this market.
	d.	these profits signal that firms in this market are highly inefficient.

18.	Adam Smith's notion of the invisible hand implies that
	a.	if individuals all work for the common good, the greatest possible level of output and satisfaction will be achieved.
	b.	individuals acting in their own self-interest will enhance the benefits of all society.
	c.	private greed will bring the downfall of capitalism.
	d.	labor, as if guided by an invisible hand, will react to being exploited and demand a greater share of profits.

19.	Any good whose benefits accrue only to those who purchase the good
	a.	is said to be subject to the exclusion principle.
	b.	is said to be subject to the inclusion principle.
	c.	is called a public good.
	d.	will be consumed mostly by the rich.



Econ 217, Exam 1, May 29, 1997 page 4.


20.	In a mixed economy, production of certain goods known as public goods is accomplished by the government rather than through private enterprise.  The economic reason for this is that
	a.	private markets fail to work in the case of public goods because individual consumers do not benefit from consuming these goods.
	b.	the provision of public goods by private enterprise would lead to a socially unacceptable distribution of income.
	c.	private markets fail to work in the case of public goods because no individual can be denied the benefits of another's consumption.
	d.	the provision of public goods requires use of large amounts of capital resources, which private firms cannot afford.

21.	In practically all market economies, the distribution of income
	a.	is determined by the ownership and use of society's resources.
	b.	may be changed so that no one is made worse off while some individuals are made better off.
	c.	is determined on the basis of need.
	d.	is determined by the number of consumers in the market.

22.	Assuming no government participation, no foreign trade, and no saving and investment, the simple circular flow model shows that
	a.	firms supply resources and households supply outputs.
	b.	households demand both resources and output.
	c.	firms supply both the inputs and outputs used in production.
	d.	firms supply output and households supply inputs.

23.	Financial markets play an important role in resource allocation because they
	a.	lower the costs of transactions and thus promote specialization of labor.
	b.	channel funds from savers to borrowers and they promote the growth of capital.
	c.	permit the economy to use profits to attract resources to industries where they are needed.
	d.	are necessary for the functioning of money as a medium of exchange.

24.	If sirloin steak and T-bone steak are substitutes for each other, then as the price of only T-bone steak rises,
	a.	T-bone steak becomes relatively less expensive than sirloin steak.
	b.	sirloin steak becomes relatively more expensive than T-bone steak.
	c.	there is no change in the relative expense of sirloin steak and T-bone steak since the price of sirloin steak is assumed constant.
	d.	sirloin steak becomes relatively less expensive than T-bone steak.

25.	An increase in the demand for a good could be caused by
	a.	an increase in the price of a substitute good.
	b.	an increase in the price of a complementary good.
	c.	a decrease in individual's taste for the good.
	d.	a decrease in the number of buyers in the market.

26.	A decrease in the demand for a good results from
	a.	an increase in the price of the good.
	b.	an increase in the price of a complementary good.
	c.	an increase in the price of a substitute good.
	d.	a decrease in the price of the good.




Econ 217, Exam 1, May 29, 1997 page 5.


27.	If lettuce and salad dressing are complementary goods, then an increase in the price of lettuce will result in
	a.	decrease in the demand for salad dressing.
	b. 	a decrease in the demand for lettuce.
	c.	an increase in the demand for salad dressing.
	d.	a decrease in the quantity of salad dressing demanded, but no change in the demand for salad dressing.

28.	A serious frost that damaged coffee plants would probably
	a.	shift the demand for coffee down and to the left.
	b.	raise the equilibrium price of tea, a coffee substitute.
	c.	shift the supply of coffee out and to the right.
	d.	raise the equilibrium price of coffee pots, a complementary good to coffee.

29.	The Daily Bugle reports that "the cost of gasoline has fallen by five cents, and gasoline sales have increased in South Carolina by two million gallons per day."  The news report describes
	a.	a shift in the gasoline demand schedule due to a lower price for gasoline.
	b.	a movement along the gasoline demand schedule.
	c.	a movement along the gasoline supply schedule.
	d.	a shift in the gasoline demand schedule due to higher incomes of consumers.

30.	Among the intuitive reasons for the law of supply are
	a.	incentives for increasing production and rational consumers.
	b.	greater profits and declining production costs.
	c.	incentives for increasing production and increasing production costs.
	d.	the law of demand and increasing profits.

31.	An increase in the prices of factors of production used in making good X would cause
	a.	an increase in the demand for X.
	b.	a decrease in the supply of X.
	c.	a decrease in the demand for X.
	d.	an increase in the supply of X.

32.	Which of the following would cause a rightward shift in the supply curve of good X?
	a.	an improvement in the technology for producing X.
	b.	the expectation that good X's price will be much higher in the near future.
	c.	an increase in the prices of other goods.
	d.	an increase in the prices of the factors of production.

33.	A leftward shift in the supply of good X would result from
	a.	a decrease in the prices of other goods.
	b.	an improvement in the technology for producing X.
	c.	a decrease in the number of suppliers of good X.
	d.	a decrease in the demand for good X.





Econ 217, Exam 1, May 29, 1997 page 6.


34.	Prices above equilibrium result in
	a.	surpluses.
	b.	shortages.
	c.	decreases in demand.
	d.	increases in supply.

35.	A competitive market rations goods by eliminating from the market those buyers and sellers whose
	a.	demand and supply prices are above the equilibrium price.
	b.	demand and supply prices are below the equilibrium price.
	c.	demand price is above, and supply price is below, the equilibrium price.
	d.	demand price is below, and supply price is above, the equilibrium price.

36.	Effective price ceilings generate
	a.	shortages.				c.  spillover benefits.
	b.	surpluses.				d.  spillover costs.

37.	Senator Foghorn has proposed that a price ceiling of $1.50 per gallon be placed on whole milk in order to guarantee that poor families can afford to feed their children.  Economists have estimated that without the ceiling, the price of milk would be $2 per gallon.  Which of the following statements is correct?
	a.	The quantity of milk demanded will not be affected by the imposition of the ceiling.
	b.	The quantity of milk consumed will actually decline after the ceiling is imposed.
	c.	The effect of the ceiling will be to create a surplus of milk.
	d.	The revenue of milk producers will increase as a result of the ceiling provided that demand is elastic.

38.	Suppose that in an uncontrolled market the equilibrium price of milk would be $1.50 a gallon, but that the government has imposed a price floor of $2 a gallon.  At that floor the quantity of milk supplied will be ______ than the quantity demanded, resulting in a ______.
	a.	greater; surplus			c.  greater; shortage
	b.	less; surplus 				d.  less;  shortage

39.	A government-imposed minimum price for wheat, if set above the equilibrium price, would be likely to
	a.	discourage production of wheat.
	b.	shift the supply curve for wheat to the right.
	c.	lead to a persistent surplus of wheat.
	d.	have no effect on the wheat market.

40.	Sales and excise taxes are levied on goods.  Sales taxes
	a.	and excise taxes are both levied on particular goods.
	b.	and excise taxes both apply to a broad range of goods.
	c.	apply to a broad range of goods while excise taxes are levied on particular goods.
	d.	are levied on particular goods while excise taxes apply to a broad range of goods.





Econ 217, Exam 1, May 29, 1997 page 7.


41.	An external cost exists in a market when
	a.	the total costs of production are paid by the producer.
	b.	the market is perfectly competitive.
	c.	some costs are borne by individuals other than producers.
	d.	quantity demanded equals quantity supplied.


TABLE 3 FOR QUESTION 42                     

	X 	100		200		300
	Y	 50		125		200


42.	Table 3 shows data relating X (on the horizontal axis) and Y (on the vertical axis).  This relationship's slope coefficient is
	a.	+ 1/2.
	b.	+ 4/3.
	c.	+ 2/3.
	d.	+ 3/4.
	e.	impossible to determine from the information given.

Figure 1 for questions 43 and 44


















43.	The slope of the function shown in the figure above is
	a.	+ .9.
	b.	+ 1.5.
	c.	+ 1.11.
	d.	+ 2

44.	In the figure above, the area of the rectangle labeled A is _____ units.
	a.	270
	b.	180
	c.	135
	d.	90





_____________________________________		SSN _____________________
(print last name,         first)

	PRINCIPLES OF MICROECONOMICS
	EXAM 1
June 9, 1998                                                  Mr. Rothstein
Time 60 minutes.  Choose the one correct answer.

TABLE 1:  Use the following data for questions 1 through 4:
	                    				Nominal
	Year		C.P.I.	Income	_______	_______	_______

	2000		 94.0		20,000	_______	_______	_______

	2001		100.0		21,000	_______	_______	_______

	2002		102.0		23,300	_______	_______	_______

	2003		111.0		26,500	_______	_______	_______

Use the following answer choices for questions 1 and 2:
	a.   decreased
	b.   between no change and increase of 2.99%
	c.   between increase of 3.00% and 6.99%.
	d.   between increase of 7.00% and 10.99%
	e.   increase of 11.00% or  more.


 1.	Between 2000 and 2001 real income changed by _____ %.

 2.	Between 2001 and 2002 real income changed by _____ %.

 3.	The inflation rate for 2003 was _____.
	a.   was negative.
	b.   was between 0.00% and 2.99%.
	c.   was between 3.00% and 6.99%.
	d.   was between 7.00% and 10.99%.
	e.   was 11.00% or greater.
	     	

TABLE 2:  USE THE FOLLOWING DATA FOR QUESTIONS 5 AND 6

	          	UNITS    PRICES         PRICES    		PRICES
	  GOOD   	 1998  	 1998          1999  		 	2000 
	FOOD	100		$ 5.00	     	$ 6.10			$10.00
	HOUSING	 20		 20.00 	 22.00		 	16.00
	TRANSP.	 30		 10.00	      	 15.00		 	20.00


The C.P.I. for 1998 = 100.  Use the following answer choices for 
questions 4 and 5.
	a.  150		b.  125	 	c.  130		d.  165       e. 160

 4.	The C.P.I. for 1999 was approximately _____.

 5.	The C.P.I. for 2000 was approximately _____.




		Diagram 1:  For use with questions 6 though 9.

				Y
			  60	|
				|
			  50	|
				|
			  40	|---------C--------------D-----
				|	s		t			
			  30	|------------------------B-----
				|
			  20	|    q		r
				|
			  10	|---------A--------------E-----
				|___________________________________X
				0	10	20	30	40	50	60	70

Instructions:  Draw a vertical line from the horizontal axis through A and C.  Draw another vertical line from the horizontal axis through E, B, and D.

6.  The slope of a line drawn through points A and B has what slope?
a.  -1.0			d.  +2/3
 b. +1.0			e.  none of these.
c.  -2/3		

7.  The slope of a line drawn through points C and B has what slope?
a.  -2/3			d.  +1/3
b.  +2/3			e.  none of these
c.  -1/3		

8.  You have drawn the vertical lines through A & C and E, B, & D.
Notice that q, r, s, & t represent rectangles.

What is the area of rectangle q?
a.  200  			d.  	600
b.  300				e.  none of these
c.  400			 

9.  What is the area of rectangle t?  Use answer choices of previous question.   ______

10.	A direct relationship between two variables is such that
	a.	as the value of one variable increases, the value of the other also 		increases.
	b.	as the value of one variable decreases, the value of the other remains the same.
	c.	as the value of one variable increases, the value of the other decreases.
	d.	as the value of one variable decreases, the value of the other increases.		
	
11.	Microeconomics focuses on
	a.	issues such as economic growth, unemployment, and recessions.
	b.	issues such as inflation, stagflation, and monetary and fiscal policy.
	c.	the individual units that make up the whole of the economy.
	d.	the workings of the whole economy or large sectors of it.





12.	The fundamental problem of economics is
	a.	to establish prices which accurately reflect the opportunity costs of resources.
	b.	that production of some goods also produces undesirable spill-over effects such as pollution.
	c.	to achieve a more equitable distribution of income to society.
	d.	that productive resources are scarce relative to material wants.

13.	If a society is operating inside its production possibilities frontier for antipollution devices and bundles of other goods, then
	a.	there is some unemployment of economic resources.
	b.	to produce more antipollution devices, the society must produce fewer bundles of other goods.
	c.	to produce more bundles of other goods, the society must produce fewer antipollution devices.
	d.	to produce more bundles of other goods, the society must produce more antipollution devices.

14.	In order to get a ticket to a Tar Hell basketball game, one must wait in line.  But students are not required to purchase their own tickets.  Which of the following correctly explains why the cost of a ticket is not the same for all students?
	a.	Some students care to sit closer to the playing floor than others.
	b.	Some students enjoy watching basketball more than others.
	c.	Some students are more loyal fans than others.
	d.	Some students have more valuable alternative uses of their time than others.

15.	Assume that the economy can produce two goods, A and B.  An increase in the technological know-how for producing good A will result in expanded production possibilities for
	a.	good B only.					c.  good A only.
	b.	neither good A nor B.			d.  both goods A and B.

16.	In a free-market economy, a decline in the price of a good is a signal that
	a.	consumers prefer to have more of the good.
	b.	fewer resources should be allocated to the production of the good.
	c.	suppliers of the good should increase the quantity being supplied.
	d.	suppliers of the good should not change the quantity being supplied.

17.	Economic growth is shown of the production-possibilities frontier as
	a.	a move from one point on the PPF to another. 
	b.	an outward shift in the PPF.
	c.	an inward shift in the PPF	.
	d.	the curvature of the PPF.
	e.		the increasing curvature of the PPF.

	







Table 3

	A
	B
	C
	D
General Seats
82,500
80,000
77,500
75,000
Executive Boxes
       32
       62
       90
     116

18.	Table 3 shows a professional football team=s alternative between public seating and executive boxes.  From the data, we can see that the football team can obtain a combination of 78,000 general seats and 130 executive boxes by
	a.	threatening to move to another city.
	b.	hiring a different architect to plan the stadium remodeling.
	c.	convincing the city to expand the stadium.
	d.	selling standing room only tickets.

19.	Assume that Betty and Ann live on a desert island.  With a day=s labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts.  Ann=s opportunity cost of producing 1 coconut is
	a.	8 fish					d.	0 fish
	b.	2 fish					e.	2 fish		
	c.	6 fish

20.	Assume that Betty and Ann live on a desert island.  With a day=s labor, Ann can produce 6 fish or 4 coconuts; Betty can producer 3 fish or 1 coconut.  Etty=s opportunity cost of producing 1 fish is
	a.	1/3 coconut				d.	4 coconuts
	b.	2/3 coconut				e.	3 coconuts
	c.	1 coconut

21.	Shortages and surpluses vanish when the invisible hand
	a.	uses its monopoly power.
	b.	sets equilibrium prices.
	c.	uses price controls.
	d.	uses the government to allocate goods and services.
	e.	none of the above .

22.	People search out substitutes for a good when its
	a.	relative price rises.
	b.	money price rises.
	c.	relative price falls.
	d.	money price falls.
	e.	its money price rises and its relative price falls.

23.	Assume that the world contains only two people, Bo and Joe.  With one day=s labor, Bo can produce 16 units of cloth or 32 units of food; Joe can produce 8 units of cloth or 8 units of food.  Joe=s opportunity cost of producing one unit of cloth is
	a.	1 unit of food				d.	4 units of food
	b.	8 units of food				e. 	none of the above
	c.	0.5 units of food




24.	Without specialization,
	a.	society would work more efficiently.
	b.	money would still be necessary.
	c.	people would be richer.
	d.	barter would not be necessary.
	e.	society=s output would be less.

25.	Which of the following is correct?  Interest rates are important
	a.	for property rights.
 	b.	in solving the problem of today=s free goods.
	c.	in explaining the necessity of barter.
	d.	in allocating goods between present and future consumption.
	e.	for capitalist economies but not for socialist economies.

26.	In 1990, computer diskettes were about $10 per box and were only $6 per box 2 years later.  The average bundle of goods purchased in 1990 was worth $1000/month and by 1992, it had decreased to $850.  The relative price of computer diskettes
	a.	decreased from 1990 to 1992.
	b. 	was roughly the same in 1990 and 1992.
	c.	increased from 1990 to 1992.
	d.	may have risen or fallen; too little information is available to assess changes in relative price.

27.	Which of the following is correct?  The demand curve
	a.	shows that quantity demanded falls as price falls at any given time.
	b.	shows that quantity demanded rises when price falls.
	c.	is an upward-sloping curve.
	d.	shifts to the right when the price drops.
	e.	shows that quantity demanded falls as income falls.

28.	The demand curve is downward-sloping because
	a.	as income rises people spend less.
	b.	when the price of something goes down, people substitute other goods for it.
	c.	a higher price brings in more buyers.
	d.	The demand curve is not downward-sloping; it upward-sloping.
	e.	None of the above.

29.	The number of personal computers sold annually in the United States has increased at a rapid rate.  The price of personal computers has fallen.  The rise in sales due to the lower price is called
	a.	an increase in quantity demanded.		
	b.	an increase in quantity supplied.
	c.	an increase in demand.
	d.	an increase in supply.
	e.	an inferior good.





30.	A decrease in the quantity demanded of a product occurs when
	a.	the price of the product rises.
	b.	the price of a substitute for the product rises.
	c.	the price of a complement for the product falls.
	d.	the price of the product falls.
	e.	income increases.

31.	Two explanations for the law of demand are
	a.	price and quantity effects.
	b.	substitution and income effects.
	c.	opportunity cost and substitution effects.
	d.	substitutes and inferior goods.

32.	An increase in demand, ceteris paribus, will usually cause
	a.	an increase in quantity demanded.
	b.	an increase in quantity supplied.
	c.	an increase in supply.
	d.	a higher quantity and lower price.
	e.	an increase in supply.

33.	Economists make the distinction between an increase in quantity demanded and an increase in demand
	a.	because the supply curve shifts whenever there is an increase in quantity demanded.
	b.	to distinguish between those situations in which consumers purchase more of the good as price falls and those in situations in which consumers purchase more of the good at all possible prices.
	c.	because the demand curve shifts when there is an increase in quantity demanded.
	d.	because the demand curve stays the same whenever there is an increase in demand.
	e.	economists are only useful if no one else understands our jargon.

34.	If the demand for automobiles falls due to a drop in consumer income, and if, at the same time, increases in factor prices cause the supply of automobiles to fall, the price of automobiles will
	a.	rise					c.	remain the same
	b.	fall					d.	be impossible to forecast from the information given

35.	When the price of gasoline increases due to a decrease in the supply of oil,
	a.	the price of cars will fall.
	b.	the price of cars will rise.
	c.	the output of cars will rise.
	d.	the quantity supplied of cars will rise.

36.	If the price of crackers goes up when the price of cheese goes down, crackers and cheese are
	a.	inferior goods				d.   complements
	b.	substitutes					e.	normal goods
	c.	both substitutes and complements

37.	Economic analysis teaches us that the behavior of individual economic agents is governed (mainly) by
	a.	economic incentives			d.	total benefits and total costs
	b.	government mandates and regulations            e.  economic theory
	c.	random events

38.	Which of the following is correct?  Marginal analysis
	a.	is concerned with total costs or benefits of increasing some activity.
	b.	does not apply to decisions to study more or less.
	c.	is used only in macroeconomics.
	d.	is used only in the airline business.
	e.	is concerned with extra costs or benefits of increasing some activity.

39.	An example in the text discussed housing prices and location (relative tot he city center).  If marginal analysis is a useful decision-making tool, we should discover that
	a.	housing prices in urban areas are unrelated to the distance to the city center.
	b.	most individuals will only be concerned with housing prices (and other neighborhood amenities) 		in choosing a housing location.
	c.	housing costs are higher further from the city center.
	d.	most individuals will balance the additional commuting costs and the additional decrease in 			housing costs in picking their housing location.

40.	If the marginal benefits of increasing your study time for this test are less than your marginal costs.
	a.	your study time should be deceased to zero.
	b. 	your study time should not be increased.
	c.	no conclusion about the relative merits of more or less study time is possible.
	d.	you have studied too little to pass this test.
	e.	your study time should be increased.

41.	The U.S. government implemented a complex set of gasoline price controls after the rapid rise in imported crude oil prices in the 1970s.  The price controls were intended to prevent hardship on the poor due to rising gasoline prices.  Instead, the unintended consequence was
	a.	a surplus of gasoline at the pump.
	b.	black market sales of gasoline.
	c. 	long lines at gasoline stations.
	d.	a surplus of crude oil available at the wholesale level.
	e.	widespread violations of the price controls by gasoline retailers.

42.	The price system does not always function well in the provision of public goods, such as national defense.  One explanation for this failure is because
	a.	it is easy to determine the benefits of public goods.
	b. 	one of the three basic questions of economics is not involved.
	c.	it is difficult to prevent nonpayers from enjoying the benefits of the public good.
	d.	the supply of public goods typically exceeds their demand.
	e.	there are difficult tradeoffs in the production of public goods.

43.	One of the unintended consequences of rent controls is
 	a.	a reduction in the quality of the stock of apartments.
	b.	an increase in the number of satisfied renters.
	c. 	an increase in the number of landlords.
	d.	a decrease in the city or county bureaucracy related to rental complaints.
	e.	an increase in the number of housing owners as opposed to renters.

  
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Principles of Microeconomics, Exam 1, Sept. 1997


Principles of Microeconomics, Exam 1, Sept. 1997


Principles of Microeconomics, Exam 1, Sept. 1997