ECON 702 – A minimum wage law set below the current market equilibrium
1. A
minimum wage law set below the current market equilibrium:
Creates
a surplus of labor.
Is
justified because the burden of the law falls only on employers.
Creates
more employment opportunities for low skill workers.
None
of the above.
2. An increase in the price of one good can
cause an decrease in the demand for another good if the goods are:
Substitutes.
Complements.
Both
necessary goods.
Not
necessary and can therefore be cut from a consumer’s budget.
3. When a shortage exists:
Government
officials offer more subsidies.
Consumers
buy more of the good because they know a shortage exists.
Producers
reduce price in an attempt to decrease excess inventory.
None
of the above.
4. A leftward shift in a demand curve and a lefttward
shift in a supply curve both result in a:
Lower
equilibrium price.
Higher
equilibrium price.
Lower
equilibrium quantity.
Higher
equilibrium quantity.
5. A leftward shift of the market demand
curve, ceteris paribus, causes equilibrium:
Price
to increase and quantity exchanged to decrease.
Price
to increase and quantity exchanged to increase.
Price
to decrease and quantity exchanged to decrease.
Price
to decrease and quantity exchanged to increase.
6. Which of the following is a predictable
effect of a price ceiling set above the current price?
An
increase in the quantity demanded.
A
market surplus.
A
decrease in the quantity demanded.
None
of the above.
7. In economics, a public good:
Is
any good produced by the government.
Has
social costs of production lower than private costs of production.
Can
be denied to consumers who have not paid their taxes.
None
of the above.
8. Suppose that if your income is $50,000,
your tax is $10,000, but if your income is $90,000, your tax is $18,000. Such a
tax is:
Proportional.
Progressive.
Regressive.
Similar
to our current federal income tax structure.
9. Which of the following changes in the
market for HDTV’s can best explain an decrease in the equilibrium price?
An
increase in demand and a decrease in supply.
A
decrease in demand and an increase in supply.
An
increase in both demand and supply.
A
decrease in both demand and supply.
Calculate the values of the missing
information in the table below and use it to answer the following
questions.
Point on PPC
# of Stealth Bombers
Opportunity Cost of Steath Bombers
in Terms of B-1’s
# of B-1’s
Opportunity Cost of B-1’s in Terms
of Stealth Bombers
A
10
0
B
9
1
C
7
2
D
4
3
10. If this country wanted to produce more
Stealth bombers, the lowest per plane opportunity cost would be measured from:
point
A to point B.
point
B to point C.
point
A to point D.
None
of the above.
11. If this country wanted to produce more
Stealth bombers, the lowest per plane opportunity cost is:
0.1
B-1 per Stealth bomber.
0.33
B-1 per Stealth bomber.
0.5
B-1 per Stealth bomber.
2
B-1s per Stealth bomber.
12. As more satisfaction is achieved from
consuming a good with decreasing marginal utility, then total utility:
Increases
at a decreasing rate.
Increases
as long as marginal utility is negative.
Increases
at an increasing rate.
Is
negative as long as marginal utility is decreasing.
13. For product X, the price elasticity of
demand has an absolute value of 2. This means that quantity demanded will
increase by:
1
percent for each 2 percent decrease in price, ceteris paribus.
2
percent for each 10 percent decrease in price, ceteris paribus.
2
percent for each 1 percent decrease in price, ceteris paribus.
2
units for each $1 decrease in price, ceteris paribus.
14. Suppose a university raises its tuition
by 40 percent and as a result the enrollment of students decreases by 20
percent. The absolute value of the price elasticity of demand is:
0.20.
2.0.
4.0.
0.5
