Exam Code: 104 - University of Alberta

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a. both equilibrium price and quantity will fall.b. both equilibrium price and quantity will increase.c. equilibrium price will increase and equilibrium quantity will decrease.d. equilibrium quantity will fall but equilibrium price may rise fall or remain constant.e. equilibrium price will fall but equilibrium quantity may rise, fall or remain constant.519. Suppose that in Freedonia, consumer tastes have changed so that smoking cigarettes is considered less sociallyacceptable. However, at the same time, advances in tobacco farming have occurred. The result of theseevents will bea. a decrease in equilibrium price and an increase in equilibrium quantity.b. an increase in equilibrium quantity and price.c. a decrease in the equilibrium quantity and no price change.d. a decrease in equilibrium price and an uncertain change in equilibrium quantity.e. a increase in equilibrium quantity and an uncertain change in equilibrium price.20. The data in box B represent two equilibria in the market for good Y. Select the explanation that is mostconsistent with these data.a. The wages of workers that produce good Y rose.b. The cost of materials used to produce good Z, a substitute for good Y, fell.c. Economic profits earned in the production of good Y induced entry of new producers.d. Incomes fell and good Y is an inferior good.e. The producers of good Y formed a successful cartel.Box BYear Price of good Y Quantity of good Y1 $ 20 1002 $ 10 30021. Political and Legal forces are referred to asa. the Invisible Hand.b. the Invisible Elbow.c. the Invisible Handshake.d. the Invisible Foot.e. the Invisible Headbutt.22. A price floor is aa. price set by the government at which all goods or services must be legally sold.b. maximum price above which sales cannot legally be made.c. price above which there would be no demand.d. price below which there would be no supply.ce minimum price below which sales cannot legally be made.23. A price ceiling set above the equilibrium price results ina. excess demand.b. excess supply.c. the equilibrium price.d. an increase in supply.e. a decrease in demand.24. European Economic Community (EEC) countries have been accumulating butter and cheese mountains andwine lakes. These surpluses are consistent witha. floor prices for agricultural products that are below market prices.
. floor prices for agricultural products that are above market prices.c. ceiling prices for agricultural products that are below market prices.d. ceiling prices for agricultural products that are above market prices.e. quotas for agricultural products.625. If an effective price ceiling is in effect and if the demand for the product increases, one consequence would bea. the quantity exchanged would increase.b. the quantity exchanged would remain constant.c. a decrease in the amount of excess supply.d. an increase in the amount of excess demand.e. b and d.26. The country of Anviliania produces only one product, anvils. Freedonia and Outer Slobovia buys anvils fromAnviliania as well as producing their own anvils. Suppose that the supply of anvils (domestic and foreign) inFreedonia is identical to the supply of anvils (domestic and foreign) in Outer Slobovia. However, inFreedonia, consumers have many substitutes for anvils. Consumers in Outer Slobovia have no substitutes foranvils. Suppose that the governments of Freedonia and Outer Slobovia impose identical quotas on Anvilianiananvils. Then we can conclude that the;a. price of Anvilianian anvils will increase more in Freedonia that it will in Outer Slobovia.b. quantity of Anvilianian anvils will decrease more in Freedonia that it will in Outer Slobovia.c. price of Anvilianian anvils will increase by the same amount in Freedonia and in Outer Slobovia.d. the increase in demand for Outer Slobovian anvils in Outer Slobovia will be greater than theincrease in demand for Freedonian anvils in Freedonia.e. None of the above.27. In an April 2009 edition of the New England Journal of Medicine, a study suggested that for every 10 %increase in the price of soft drinks, consumption drops by 7.8 %. From this information we can conclude thatthe demand for soft drinks isa. elastic.b. inelastic.c. perfectly elastic.d. perfectly inelastic.e. unit elastic.28. Business people often speak about elasticity of demand without using the actual term. Which oneof the following quotes reflects elastic demand for a product?a. “My customers are real bargain hunters. Since I set my prices just a few cents below mycompetitors, customers have flocked to the store and sales are booming.”b. “A price cut won’t help me. It won’t increase sales, and I’ll just get less money for each unit.”c. “I don’t think that a price cut will make any difference to my bottom line. What I gain fromselling more, I would lose on eh lower price.”d. “With the recent economic recovery, people have more income to spend and sales arebooming, even at the previous prices.”e. none of the above.29. Suppose the price of a money clip increases from $0.75 to $1.90 and the quantity demanded falls from10,000 units to 8,100 units. Given this information, the arc elasticity of demand isa. 0.82.b. 0.24c. 1.d. 4.16e. None of the above.
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Exam Code: 104 - University of Alberta

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