ECON 2106 Homework 1 Spring 2001 Barilla
1. Consider the market for bananas. Which one of the following best represents the Law of Demand as it applies to bananas.
a. An increase in the price of bananas will lead to an decrease in the demand for bananas.
b. An increase in the price of bananas
will lead to an increase in the quantity of bananas that are supplied.
c. A decrease in the price of bananas will lead to an increase in the quantity of bananas that are demanded.
d. None of the above.
2. Consider the market for shoes. Which of the following best represents the Law of Supply as it relates to the market for shoes?
a. A decrease in the price of a pair of
shoes will lead to an increase in the number of pairs of shoes that individuals
would like to buy.
b. A decrease in the price of a pair of shoes will lead to a decrease in the number of shoes that sellers would like to sell.
c. An increase in the price of shoes will lead to an increase in the supply of shoes.
d. Feet stink sometimes.
3. Assume that Guinness is a normal good. If people in the market area were to have more income,
a. The demand for Guinness would decrease.
b. The supply of Guinness would increase.
c. The demand for Guinness would increase.
d. The supply of Guinness would decrease.
4. If the price of tomatoes increases, there will be _________ for pizza.
a. A decrease in demand.
b. An increase in supply.
c. An increase in demand.
d. A decrease in supply.
5. The price of tickets for the Atlanta Braves (professional baseball) and Atlanta Falcons (professional football) are the same. I like baseball more than football and choose to go to the Falcon's game (football). What economic concept have I violated:
a. Marginal Analysis
b. Scarcity
c. Hypothesis
d. Rational Thinking
6. A rational producer's main goal is to maximize ______________, but they are constrained by their____________
a. profits, production costs
b. profits, income
c. utility, income
d. utility, profits
7. Ceteris Paribus, a decrease in price will generate:
a. an increase in demand
b. an increase in quantity demanded
c. a decrease in demand
d. a decrease in quantity demanded
8. Capital is a unique resource because capital is a resource that:
a. fixed
b. when its’ productivity increases so do the other resources
c. never unemployed
d. controlled by the government
9. If croutons and lettuce are complementary goods, then an increase in the price of lettuce will result in:
a. a decrease in the demand for croutons
b. a decrease in the demand for lettuce
c. an increase in the demand for lettuce
d. an increase in the quantity demanded for lettuce, but no change in the demand for lettuce
10. If Coke and Pepsi are substitute goods, then an increase in the price of Coke results in:
a. a decrease in the demand for Coke
b. a decrease in the demand for Pepsi
c. an increase in the demand for Pepsi
d. a decrease in the quantity demanded for Coke, but no change in the demand for Pepsi
11. All goods can be considered as normal or inferior, which of the following is the primary
determinant of good normality or inferiority?
a. consumer income
b. producer taxes
c. if the item is a "fad" good
d. if the product has a declining price expectation
12. If the banana market is in equilibrium. What would happen in the market if farmland rent increases.
a. the supply of bananas would decrease
b. the supply of bananas would increase
c. the demand of bananas would decrease
d. the demand of bananas would increase
13. Again the banana market is in equilibrium. What would happen in the market if the price of peanut butter increases. The cross price elasticity of peanut butter and bananas is -9.
a. the supply of bananas would decrease
b. the supply of bananas would increase
c. the demand of bananas would decrease
d. the demand of bananas would increase
14. Again the banana market is in equilibrium. What would happen in the market if the price of peanut butter (the cross price elasticity of peanut butter and bananas is -9) increases and farmland rents also increase. Market economists conclude that the rent increase will have a stronger impact than the peanut butter price increase.
a. the equilibrium price will decrease, while the equilibrium quantity decreases
b. the equilibrium price will increase, while the equilibrium quantity increases
c. the equilibrium price will decrease, while the equilibrium quantity increases
d. the equilibrium price will increase,
while the equilibrium quantity decreases
15. If apple market is in equilibrium. What would happen in the market if farmland rent decreases.
a. the supply of apples would decrease
b. the supply of apples would increase
c. the demand of apples would decrease
d. the demand of apples would increase
16. Again the apple market is in equilibrium. What would happen in the market if the price of an orange increases. The cross price elasticity of oranges and apples is 10.
a. the supply of apples would decrease
b. the supply of apples would increase
c. the demand of apples would decrease
d. the demand of apples would increase
17. Again the apple market is in equilibrium. What would happen in the market if the price of an orange (the cross price elasticity of oranges and apples is -10) increases and farmland rents also decrease. Market economists conclude that the rent decrease will have a weaker impact than the orange price increase.
a. the equilibrium price will decrease, while the equilibrium quantity decreases
b. the equilibrium price will increase, while the equilibrium quantity increases
c. the equilibrium price will decrease, while the equilibrium quantity increases
d. the equilibrium price will increase, while the equilibrium quantity decreases
18. Gin and Tonic have a cross price elasticity of -16. Given an increase in the price of Gin:
a. the demand for Gin will increase.
b. the demand for Tonic will decrease.
c. the quantity demanded of Gin will decrease.
d. the price of Tonic will increase.
e. two of the above
19. Which of the following is
an example of an externality?
a. You are studying for a test with your friends in the library. Leonard a student in your class but not in your study group is sitting at the table next to your group listening to your study session. Leonard manages to learn the material from you.
b. An increase in the price of jeans does not allow you to buy as many pairs as you wanted.
c. You watched TV instead of studying for an exam, and, therefore, you did poorly on that exam.
d. College textbooks are expensive, so students do not like to buy them.
20. A BMW sports car has an income elasticity of 7, which of the following are correct:
a. BMW sports cars are normal goods
b. BMW sports cars are inferior goods
c. BMW sports cars are luxury goods
d. two of the above are correct
e. none of the above are correct
21. If a "sane" person puts a sharp stick in their eye, is that person rational?
a. yes because the action was heroic
b. no because putting a sharp stick in your eye is never rational
c. yes if that action maximized their utility
d. no, because that person would be encountering diminishing marginal returns on utility
Use the following for questions 22, 23, 24 & 25
Price Quantity Demanded Quantity Supplied
$9 1100 1500
$8 1200 1400
$7 1300 1300
$6 1400 1200
$5 1500 1100
$4 1600 1000
22. The equilibrium price is:
a. $10 c. $7
b. $9 d. $5
23. At a price of $9, there is:
a. an equilibrium
b. a shortage equal to 1100
c. a shortage equal to 500
d. a surplus equal to 400
24. At a price of $4, there is:
a. a shortage of 600
b. a surplus of 600
c. a shortage of 400
d. an equilibrium
25. What is the equilibrium quantity:
a. 1400 c. 1200
b. 1300 d. 1100