Practice Exam 1 PDF - Economics Questions

Use the following information for the next 3 questions: Dennis and Frank can produce two goods, green eggs and t-shirts. In one day, if Dennis uses all his resources he can make either 40 green eggs or 120 t-shirts. Using all his resources Frank can in one day make either 70 green eggs or 140 t-shir...

Use the following information for the next 3 questions: Dennis and Frank can produce two goods, green eggs and t-shirts. In one day, if Dennis uses all his resources he can make either 40 green eggs or 120 t-shirts. Using all his resources Frank can in one day make either 70 green eggs or 140 t-shirts. 1. Frank’s opportunity cost of producing a single green egg is _____________? a. 0.5 t-shirts b. 140 t-shirts c. 2.0 t-shirts d. 3.0 t-shirts 2. Based on this information for Dennis and Frank, ___________has a comparative advantage in producing green eggs, and ____________ has an absolute advantage in producing t-shirts. a. Frank, Dennis b. Frank, Frank c. Dennis, Frank d. Dennis, Dennis 3. Using the above information, which of the following points is NOT on the economy wide production possibilities curve (PPC)? a. 70 green eggs, 120 t-shirts b. 80 green eggs, 90 t-shirts c. 0 green eggs, 260 t-shirts d. 40 green eggs, 140 t-shirts Use the following information for the next 2 questions: Bob can make either burgers or pizza. Below is Bob’s Production Possibilities Frontier (PPF). Pizza *A *D *B *C Burgers 4. Which of the following points is inefficient on Bob’s PPF? a. A b. B c. C d. D 5. Samuel’s marginal benefit schedule for phone charger cords is below. If the price of a phone charger cord is $8, how many phone charger cords he purchase? Marginal benefit($) Quantity of pants 15 1 10 2 7 3 5 4 3 5 2 6 a. 2 b. 3 c. 4 d. 5 6. Suppose that public transportation is an inferior good. If income of all individuals decreases which of the following happens in the market for public transportation? a. Increase in Supply b. Decrease in Supply c. Increase in Demand d. Decrease in Demand 7. Which of the following would increase the equilibrium price for beer? a. An increase in the number of breweries (sellers/producers of beer) b. An improvement in technology for brewing beer c. An increase in price of burgers, a complementary good for beer d. An increase in the tax on alcohol (beer) to producers 8. Suppose that beer and hard seltzers are substitutes in consumption. If the price of beer increases, then the equilibrium quantity of hard seltzers _________ and the equilibrium price of hard seltzers ____________. a. Decreases; Increases b. Decreases; Decreases c. Increases; Decreases d. Increases; Increases 9. Suppose that gasoline companies experience increases in their input costs to produce gas, while at the same time there is an increase in the population (number of consumers). The equilibrium quantity of gasoline will ____________, and equilibrium price of gasoline will ____________. a. Increase ; can not determine change b. Can not determine change, Increase c. Decrease ; can not determine change d. Can not determine change ; Decrease Use the following information for the next 2 questions: Demand and Supply equations in the market for airpods are given below. Use this information to answer the following four questions: P=160−3 QD P=20+ 4 Q S 10. What is the marginal cost of the 3rd airpod? a. $32 b. $12 c. $151 d. $9 11. What is the marginal benefit of the 4th airpod? a. $12 b. $36 c. $148 d. $151 12. The equilibrium quantity for a Bluetooth headphone is ____________, and the equilibrium price of a Bluetooth headphone is ____________. a. 20 ; 100 b. 15.7 ; 122.8 c. 15 ; 20 d. 180 ; 40 Use the following table with the price, quantity demanded,Q D, and quantity supplied, Q D , for Purdue Football tickets for the next 3 questions: Price ($) QD QS 10 140 20 20 120 40 30 100 60 40 80 80 50 60 100 60 40 120 70 20 140 80 0 160 13. What is the equilibrium quantity and price in the market for Purdue Football tickets? a. 20 ; $120 b. 120 ; $20 c. 40 ; $80 d. 80 ; $40  Use the table above or the graph below to answer the following question: 90 Supply 80 70 60 50 40 30 20 10 Demand 0 0 20 40 60 80 100 120 140 160 14. Suppose the university decides to ensure more students can attend the games and sets a price ceiling of $20 for Purdue Football tickets. Which of the following is true? a. A shortage of 120 units exists b. A surplus of 120 units exists c. A shortage of 80 units exists d. A surplus of 80 units exists 15. Suppose instead the University sets the price at $60. Relative to when the market is in equilibrium, which the following is true? a. A shortage exists b. The quantity demanded is lower c. The new price on the market is lower d. The quantity supplied is lower 16. Suppose that when the price of textbooks increases by 20% that the quantity supplied of textbooks increases by 40% and the quantity demanded decreases by 5%, then which of the following is true? a. The demand for textbooks is elastic b. The demand for textbooks is unit elastic c. The supply of textbooks is inelastic d. The supply of textbooks is elastic 17. If the demand curve is vertical, demand is _____________ with a price elasticity of demand equal to ____________. a. Perfectly inelastic; 0 b. Perfectly inelastic; 1 c. Unite elastic; 1 d. Perfect elastic; infinity 18. Suppose that in 2019 Peter’s income was $40,000 and he purchased 10 pairs of shoes. His income increased in 2020 to $50,000 and he purchased 12 pairs of shoes. The income elasticity of demand for pairs of shoes is __________, implying that a pair of shoes are __________ for Peter. (You can use the values of 40 and 50 to represent the income values if that helps in your calculation.) a. 0.818 ; normal goods b. -0.818 ; inferior goods c. 1.222 ; normal goods d. -1.222 ; inferior goods 19. Suppose the cross-price elasticity of Alcohol and Marijuana is 1.8, then Alcohol and Marijuana are which of the following? a. Normal Goods b. Inferior Goods c. Substitute Goods d. Complementary Goods 20. Assume that when the price of a bottle of water decreases from $1 to $0.75 and the elasticity of demand from the price change is calculated to be -3.4. The result of this price change will cause which of the following: a. Total Revenue will decrease b. Total Revenue remains unchanged c. Total Revenue will increase d. Total Revenue could increase or decrease