UNIT 2 Microeconomics SAMPLE QUESTIONS MULTIPLE-CHOICE

1 Advanced Placement Economics Microeconomics : Student Activities National Council on economic Education, New York, the letter of each correct A downward sloping demand curve can beexplained marginal marginal the substitution the income effect.(A) I only (B) II only (C) I and III only(D) I and IV only(E) I, III and IV only2. Which of the following will notchange thedemand for oranges?(A) A change in consumers incomes(B) A change in the price of grapefruits, a sub-stitute for oranges(C) A change in the price of oranges(D) A change in consumers taste for oranges(E) An expectation that the price of orangeswill increase in the future3. If there is an increase in demand for a good,what will most likely happen to the price andquantity of the good exchanged?PriceQuantity(A) No change No change (B) IncreaseIncrease(C) IncreaseDecrease (D) DecreaseIncrease (E) DecreaseDecrease4.

2 If hot dogs are an inferior good, an increase inincome will result in(A) an increase in the quantity demanded forhot dogs.(B) an increase in the demand for hot dogs.(C) a decrease in the quantity demanded forhot dogs.(D) a decrease in the demand for hot dogs.(E) no change in the quantity demanded forhot An increase in the price of gasoline will causethe demand curve for tires to shift in whichdirection?(A) To the left, because gasoline and tires aresubstitutes(B) To the left, because gasoline and tires arecomplements(C) To the right, because gasoline and tires aresubstitutes(D) To the right, because gasoline and tires arecomplements(E) To the right, because an increase in the priceof gasoline makes consumers poorer andthus not willing to pay as much for tires6. Assume that coal is a normal good. If the priceof coal increases and the quantity sold increas-es, which of the following is consistent withthese observations?

3 (A) The price of oil increased, oil and coalbeing substitutes.(B) A wage increase was given to coal miners.(C) New machinery made coal mining moreefficient.(D) Consumers incomes fell.(E) The demand curve is MULTIPLE-CHOICE Questions2 MicroeconomicsSAMPLE QUESTIONS multiple -CHOICEUNIT112 Advanced Placement Economics Microeconomics : Student Activities National Council on economic Education, New York, During a football game, it starts to rain and thetemperature drops. The senior class, whichruns the concession stand and is studying eco-nomics, raises the price of coffee from 50 centsto 75 cents a cup. They sell more than everbefore. Which answer explains this?(A) The supply of coffee increased.(B) The demand curve for coffee was elastic.(C) The supply of coffee decreased.(D) The demand for coffee increased.(E) The demand curve for coffee was Which of the following statements best reflectsthe law ofdiminishing marginal utility?

4 (A) I have to have a scoop of ice cream on mypie. (B) I ll never get tired of your cooking. (C) The last bite tastes just as good as thefirst. (D) I couldn t eat another doughnut if youpaid me. (E) I prefer to eat several small meals a day,rather than three large ones. 9. Which of the following will notcause thedemand curve for athletic shoes to shift?(A) A change in tastes for athletic shoes (B) Widespread advertising campaign for ath-letic shoes(C) Increase in money incomes of athletic-shoeconsumers (D) Expectations that the price of athleticshoes will decrease in the future(E) A decrease in the price of athletic shoes 10. Assume that the demand for apples is down-ward sloping. If the price of apples falls from$.80 per pound to $.65 per pound, which of thefollowing will occur?(A) A smaller quantity of apples will bedemanded.(B) A larger quantity of apples will be demand-ed.

5 (C) Demand for apples will decrease.(D) Demand for apples will increase.(E) Supply of apples will On the graph above, what area represents con-sumer surplus when the price is $10?(A) A (B) B(C) C(D) A and B(E) B and C 2 MicroeconomicsSAMPLE QUESTIONS multiple -CHOICEUNIT(continued)5 SDABC$10 QUANTITYPRICEA dvanced Placement Economics Microeconomics : Student Activities National Council on economic Education, New York, If the cost of producing automobiles increases,the price, equilibrium quantity and consumersurplus will most likely change in which of thefollowing ways?PriceQuantityConsumer Surplus(A) IncreaseIncreaseIncrease (B) IncreaseIncreaseDecrease(C) IncreaseDecreaseDecrease(D) DecreaseIncreaseDecrease(E) DecreaseDecreaseDecrease 13. Compare 2000 with 2001. Which of thefollowing statements is (are) true?YearQuantity SoldPrice2000 30,000$10200150,000$20 has demanded has Supply has Quantity supplied has has decreased.

6 (A) I only(B) V only(C) I and IV only(D) I and V only(E) I, II and III only 14. Producer surplus is the (A) area under the supply curve to the left ofthe amount sold.(B) area under the supply curve to the right ofthe amount sold.(C) amount the seller is paid plus the cost ofproduction.(D) amount the seller is paid less the cost ofproduction.(E) cost to sellers of participating in a During the 1990s, the price of VCRs fell byabout 30 percent, and quantity sold decreasedby the same amount. The demand for VCRsmust (A) be inelastic.(B) be elastic.(C) be unit elastic.(D) have shifted to the right.(E) have shifted to the Which of the following will occur if a legalprice floor is placed on a good below its free-market equilibrium?(A) Surpluses will develop.(B) Shortages will develop.(C) Underground markets will develop.(D) The equilibrium price will ration the good.

7 (E) The quantity sold will A marketing survey shows that gate receiptswould increase if the price of tickets to a sum-mer rock concert increased, even though thenumber of tickets sold would fall. What doesthis imply about the price elasticity of demandfor concert tickets? (A) Demand is inelastic.(B) Demand is elastic.(C) Demand is unit elastic.(D) Demand is perfectly inelastic.(E) Demand is perfectly QUESTIONS multiple -CHOICEUNIT(continued)114 Advanced Placement Economics Microeconomics : Student Activities National Council on economic Education, New York, According to the graph above, which of the fol-lowing will occur if a legal price ceiling isimposed at price X?(A) Shortages will occur.(B) Surpluses will occur.(C) Demand will increase.(D) Q1will be purchased.(E) Supply will Which of the following statements about pricecontrols is true?

8 (A) A price ceiling causes a shortage if the ceil-ing price is above the equilibrium price.(B) A price floor causes a surplus if the pricefloor is below the equilibrium price.(C) A price ceiling causes an increase indemand if the ceiling price is set below theequilibrium price.(D) A price ceiling causes a decrease in demandif the price floor is set above the equilibri-um price.(E) Price ceilings and price floors result in amisallocation of If the price of lunch at the school cafeteriaincreases and cafeteria revenue remains con-stant, the elasticity of demand for a schoollunch must be(A) elastic.(B) perfectly elastic.(C) unit elastic.(D) inelastic.(E) perfectly If an excise tax is imposed on a product, con-sumer surplus and producer surplus for thisgood will most likely change in which of thefollowing ways?Consumer Surplus Producer Surplus(A) DecreaseDecrease(B) DecreaseIncrease(C) DecreaseNot change(D) Not changeIncrease(E) Not changeNot change22.

9 If the price of paperback books increases andconsumer expenditures on paperback booksalso increase, which of the following is neces-sarily true?(A) Paperback books are normal goods.(B) Paperback books are inferior goods.(C) The demand for paperback books is unitelastic.(D) The demand for paperback books is elastic.(E) The demand for paperback books is QUESTIONS multiple -CHOICEUNIT(continued)QQ1 SDXQUANTITY OF TICKETSPRICEA dvanced Placement Economics Microeconomics : Student Activities National Council on economic Education, New York, The substitution effect causes a consumer tobuy less of a product when the price increasesbecause the(A) product is now less expensive compared tosimilar products.(B) product is now more expensive comparedto similar products.(C) consumer s real income has decreased.(D) consumer s real income has increased.(E) consumer will buy more inferior goodsand fewer normal Change% Change inProductin IncomeQuantityA+5+5B+5 5C 10 5D 10+1024.

10 Based on the information in the table above,which product(s) is / are inferior?(A) Product A only(B) Product B only(C) Product D only(D) Product A and C only(E) Product B and D only 25. Brooke is spending all of her income consum-ing products X and Y. If MUx/ Px= 10 andMUy/ Py= 6, what should Brooke do to maxi-mize her satisfaction?(A) Buy more X and more Y.(B) Buy more X and less Y.(C) Buy less X and less Y.(D) Buy less X and more Y.(E) Make no If the price of a good decreases by 3 percentand total revenue increases, the elasticity ofdemand for the good could possibly be(A) (B) 1(C) (D) (E) 0 27. Advocates of higher minimum wages forunskilled labor defend their position by argu-ing that(A) low-income workers deserve to earnincomes above the poverty level.(B) higher wages boost worker productivityand efficiency.(C) higher wages will cause employers toreduce the payroll, but the total wages ofremaining workers will be higher.