Microeconomics/Econ202 Practice Test 1

Traditionally, most models in Economics analyze policies and offer suggestions that maximize efficiency in the economy (as opposed to maximizing equity). Which statement best explains why this happens:

Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that:

Suppose the market for ice cream is in equilibrium. Then a change occurs, and the equilibrium price decreases while the equilibrium quantity also decreases. According to economic theory, what change could have occurred in the market to cause these changes to price and quantity?

Which of the following is the best example of the opportunity cost of the (approximately) one hour spent taking this exam?

According to economic theory, if a country decides to reduce restrictions and increases its level of trade with the rest of the world, we predict:

Which of the following is true regarding the federal minimum wage in the United States?

Suppose the market for bananas is in equilibrium. What are the predicted market outcomes if a natural disaster destroys a large percentage of the banana crop in a particular year?

Suppose that the market for a good is in equilibrium, then two major factors change. The first change causes the demand to increase. The second change causes the supply to increase. Based on this information, what outcomes do you predict in this market?

Which of the following best describes the marginal cost to a company from hiring an additional worker?

In Economics, the definition of an “inferior” good, (for example, Top Ramen) is a good for which people will actually buy more as the price increases.

According to economic theory, if a country decides to reduce restrictions and increases its level of trade with the rest of the world, we predict:

According to economists, efficiency in the market occurs when:

Suppose the supply curve in the market for milk shifts to the right. Which of the following best describes how the supply and demand model predicts consumers will respond?

If the price in the market is initially set at $5, what is the result in the market, and what will eventually happen to move the market to equilibrium?

Suppose the government sets a binding price floor in the market for milk. Based on this, we would expect the outcome to be a [blank_start]surplus[blank_end] in the market for milk. If a black market for milk develops, then the price in that market will be [blank_start]lower[blank_end] than the price floor.

In economic terms “producer surplus” is :

Suppose the market for a particular good is in equilibrium. Then the demand in the market increases (the demand curve shifts to the right). What do we expect will happen to our welfare calculations?

According to the graph, what labeled area(s) represent producer surplus before the price floor is put into place?

According to the graph, what labeled area(s) represent producer surplus after the price floor is put into place?

If the government’s primary goal in setting tax policy is to minimize the amount of deadweight loss that is created, they should impose the highest amount of sales tax on:

Suppose the information in the table above reveals the actual willingness to pay for a ticket to watch Dan perform close-up magic and juggle various household items. If there is only 1 ticket left and buyers bid against each other in an auction to purchase it, which of the following is the most likely price?

Based on the graph , what is the producer surplus when the market depicted is in equilibrium?

According to the economic concept of thinking incrementally, in general, the efficient level of an activity occurs at the point at which:

Which of the following would be expected to cause an increase in the supply for a certain good?

Suppose that at a price $6 the quantity demanded in a market is 22, and at a price of $8 the quantity demanded in the market is 21. If we use this information to create a linear demand equation, what will that equation be?

Consider our discussion of the impact of the Coronavirus on the market for respirator masks. The prices of masks are rapidly increasing, and shortages are happening in some countries. If the governments of these countries begin to enforce binding price ceilings for these masks, this is likely to:

As discussed in class, one main reason a government might impose a non-binding price floor policy is that:

Suppose the market in the graph is originally in equilibrium at a price of P2. If the government implements a price ceiling at price P1, what will be the new market outcome?

If the government decides to set a price floor at price P1 in this market, how much of this good do you expect will be sold (legally)?