Miami Dade College
ECO 2023.002 Principles of Microeconomics - Spring 2016
Practice Test #2
Miami Dade College
ECO 2013 Principles of Macroeconomics - Spring 2016
Practice Test #2
1. The gap between the demand curve and the market price is called:
A) consumer surplus.
B) deadweight loss.
C) profit.
D) producer surplus.
2. Suppose that a customer's willingness to pay for a product is $79, and the seller's
willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?
A) $4
B) $11
C) $15
D) $21
3. If you are willing to sell your old bicycle for $30, but someone offers you $40 for it, the
results of the transaction would yield:
A) $10 worth of producer surplus and unknown consumer surplus.
B) $10 worth of consumer surplus and unknown producer surplus.
C) $30 worth of consumer surplus and $10 worth of producer surplus.
D) $30 worth of producer surplus and $10 worth of consumer surplus.
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Use the following to answer question 4:
Figure: Determining Total Surplus
4. (Figure: Determining Total Surplus) In this graph, total surplus is shown by area:
A) acdf.
B) ace.
C) bce.
D) abe.
5. If the price of a good is higher than the equilibrium price:
A) consumer surplus is decreased and deadweight loss is increased.
B) consumer surplus is increased and deadweight loss is decreased.
C) producer surplus is decreased and deadweight loss is increased.
D) producer surplus is decreased and deadweight loss is decreased.
6. Suppose that the price of a good is $6 and equilibrium price is $8. Compared to market
equilibrium:
A) consumer surplus is decreased and deadweight loss is increased.
B) consumer surplus is increased and deadweight loss is decreased.
C) producer surplus is decreased and deadweight loss is increased.
D) producer surplus is decreased and deadweight loss is decreased.
7. A $2 maximum price on a gallon of gasoline would be an example of:
A) a price ceiling.
B) a price floor.
C) rent control.
D) laissez-faire.
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8. If a price ceiling is set above the market price, it is:
A) effective.
B) efficient.
C) ineffective.
D) inefficient.
9. Suppose the equilibrium price of a bunch of carrots is $1. The price floor instituted by the
government is $1.50.
A) We would expect to see a surplus of carrots.
B) There would be a shortage of carrots.
C) Farmers would switch from growing carrots to growing potatoes.
D) The price floor would have no impact on the market because it is higher than
equilibrium price.
10. Suppose the equilibrium price for a gallon of milk is $2.50, but due to government price
supports, the minimum legal price is $2.75 per gallon. Then this price floor:
A) causes a surplus of milk in the market.
B) causes a shortage of milk in the market.
C) has no impact on equilibrium in the market.
D) results in quantity demanded exceeding quantity supplied.
11. If ED = 4, then:
A) a price increase of 1% will reduce quantity demanded by 4%.
B) a price increase of 1% will increase quantity demanded by 4%.
C) a price decrease of 1% will decrease quantity demand by 4%.
D) the slope of the demand curve is equal to 4.
12. If a product's price rises by 6%, and its quantity demanded falls by 8%, then we can say
that demand for this product is:
A) perfectly inelastic.
B) inelastic.
C) unitary elastic.
D) elastic.
13. A grocery store announced a 50% decrease in the price of local honey. Sales increased by
200%. The price elasticity of honey is:
A) 0.25.
B) 0.04.
C) 0.4.
D) 4.
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14. A gas station owner in a large city learned in his microeconomics class that buyers are
relatively unresponsive to changes in the price of gasoline. If, based on that assumption,
he increases the price of gas at his station:
A) total revenue will increase.
B) total revenue will decrease.
C) total revenue will not change.
D) the sale of complementary goods at his station will increase.
15. A poultry rancher discovered what when she increased the price of organic eggs from
$0.75 to $1.00 per dozen, the sales of her eggs fell from 300 dozen per week to 200 dozen
per week. If she wants to increase her total revenue from egg sales, she should:
A) raise the price of eggs even more.
B) hold the price at $1.00.
C) reduce the price of eggs back to $0.75.
D) take up dairy farming.
16. When the price of good decreases from $10 to $8, the quantity supplied of it decreases
from 80 to 65. The price elasticity of supply is:
A) 0.75.
B) 0.80.
C) 0.93.
D) 0.60.
17. If the price of a product falls by 15%, and the quantity supplied falls by 25%, we can say
that the elasticity of supply is:
A) inelastic.
B) unitary elastic.
C) elastic.
D) perfectly elastic.
18. When a product's price changes from $26 to $10 and its quantity supplied changes from
200 to 100 units, the price elasticity of supply (using the midpoint method) equals:
A) 6.25.
B) 1.50.
C) 0.75.
D) 0.16.
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19. Alvaro pays $40 in tax on a $120 item. Nurul pays $80 on a $240 item. We can conclude
that this tax is a:
A) a flat tax.
B) a lump-sum tax.
C) a progressive tax.
D) a regressive tax.
Use the following to answer question 20:
Figure: Impact of Tax on Market Equilibrium
20. (Figure: Impact of Tax on Market Equilibrium) In the graph, the deadweight loss
created by the tax equals _____ and it is borne primarily by the ____ .
A) $60; buyer
B) $60; seller
C) $120; buyer
D) $120; seller
21. Suppose the price of a taco is $1 and the price of a soft drink is $2. If Mehmet has $5,
then he can buy:
A) four tacos and two soft drinks.
B) three tacos and two soft drinks.
C) four tacos and one soft drink.
D) three tacos and one soft drink.
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22. Xiao has a budget of $150 to spend on T-shirts and jeans. The jeans she likes cost $56, and
t-shirts with her college logo on them cost $10. The combination of three t-shirts and three
pairs of jeans would fall:
A) inside the budget line.
B) on the budget line.
C) outside the budget line.
D) cannot be determined based on the information.
Use the following to answer questions 23-24:
Figure: Bowling and Chinese Buffet
23. (Figure: Bowling and Chinese Buffet) Bill can consume 10 Chinese buffets or go bowling
five times this month (or specific other combinations). This graph represents Bill's:
A) utility curve.
B) demand curve.
C) production possibility frontier.
D) budget line.
24. (Figure: Bowling and Chinese Buffet) If the price of a Chinese buffet increases, the
budget line will rotate:
A) out and become flatter.
B) out and have the same slope.
C) in and have the same slope.
D) in and become steeper.
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25. Joni receives 8 utils from drinking a glass of water and 5 utils from watching her favorite
TV show. Which of the following statements is TRUE?
A) All else constant, Joni would prefer to drink a glass of water than watch TV.
B) Joni should never watch TV.
C) Because tap water has no price, its utility value must be zero and Joni is irrational.
D) Joni's preferences are wrong.
26. The main difference between marginal utility and total utility is that:
A) marginal utility looks at the satisfaction of the total bundle of goods and total utility
looks at the total quantity consumed.
B) marginal utility looks at the satisfaction of an additional unit, while total utility looks
at the satisfaction from the total quantity consumed.
C) total utility looks at societal satisfaction, while marginal utility looks at the
satisfaction of an individual person.
D) consumers maximize marginal utility only.
27. Kama gets 180 total utils from taking three yoga classes this month. The additional utility
derived from taking a fourth yoga class this month is 40 utils. Which of the following
statements would be TRUE?
A) The total utility from taking four yoga classes will be 140 utils.
B) The marginal utility from the fifth yoga class will be greater than 40 utils but less
than 220 utils.
C) The marginal utility of the third yoga class will be greater than 40 utils.
D) The marginal utility from the second yoga class will be less than 40 utils.
Use the following to answer question 28:
Q TU
0 0
1 25
2 B
3 53
4 D
5 71
MU
—
A
15
C
10
E
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28. (Table) The table shows the total utility and marginal utility for ice cream consumption.
In the table, the value for B is:
A) 35.
B) 40.
C) 45.
D) 50.
29. Marc and Jay spent $850 each for Super Bowl tickets. Unfortunately, the game was a
blowout, and both of them were bored to death by halftime. Marc wanted to leave to find
a party, but Jay refused to leave early because they paid so much for the tickets. Jay is
subject to:
A) altruism.
B) a framing bias.
C) overconfidence.
D) a sunk cost fallacy.
30. Bayram had the opportunity to choose between two investments. The first investment was
described as having a 30% chance of succeeding, while the second investment was
described as having a 70% chance of failing. Bayram opted for the first investment,
because he thought it sounded less risky than the second investment. The chances of
succeeding and failing are the same for the two investments, which implies Bayram is
subject to:
A) a framing bias.
B) overvaluing the present relative to the future.
C) overconfidence.
D) a sunk cost fallacy.
31. Jim Delaney employs five people to make pizzas for his neighborhood. He makes $4,000
profit per month, which he pays to himself. This firm is an example of a:
A) sole proprietorship.
B) partnership because he has five employees.
C) corporation because he sells to the public.
D) nonprofit corporation.
32. Jim Delaney sold his pizza firm to an investor who then sold stock to the public. Jim now
earns a salary of $5,000 a month, and all the profits are distributed to the stockholders.
This firm is an example of a:
A) sole proprietorship.
B) partnership because Jim Delaney partnered with an investor.
C) corporation.
D) nonprofit corporation.
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33. Craig Colby and his friend Jay Hogan own Cut Rate Legal Services. They make $16,190
in profits per month, which they split between them. Craig and Jay carry a hefty insurance
policy because they have unlimited liability. Cut Rate Legal Services is an example of a:
A) sole proprietorship.
B) partnership.
C) corporation.
D) LLC.
34. Staci's Sign Shoppe makes signs for businesses. Staci is currently producing 210 signs per
week with three employees. Staci hires an additional worker and total output per week
rises to 328. The marginal product of the last worker is ___________ signs.
A) 82
B) 118
C) 210
D) 378
Use the following to answer questions 35-36:
Labor
1
2
3
4
5
6
7
8
9
10
Total
Product
5
12
21
31
40
48
57
57
54
MP
AP
5
7
5
6
7
7.75
8
10
9
8
6
3
0
–3
7.71
7.12
6.33
5.4
35. (Table) In the table, what is the MP of the third worker?
A) 7
B) 8
C) 9
D) 10
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36. (Table) In the table, what is the AP of the sixth worker?
A) 8.5
B) 8
C) 7.75
D) There is not enough information to answer this question.
Use the following to answer question 37:
Figure: Determining Marginal Returns
Labor
1
2
3
4
5
6
7
8
9
10
Total
Product
5
12
21
31
40
48
54
57
57
54
MP
AP
5
7
9
10
9
8
6
3
0
–3
5
6
7
7.75
8
8
7.71
7.12
6.33
5.4
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37. (Figure: Determining Marginal Returns) Referring to both the table and the figure, if a
tenth worker is added, this leads to:
A) increasing marginal returns.
B) diminishing marginal returns.
C) constant marginal returns.
D) negative marginal returns.
Use the following to answer question 38:
Q
0
1
2
3
4
VC
$25
$40
$55
$70
$85
38. (Table) Referring to the table, suppose the coffee plant experiences fixed costs of $35,
then, at 2 units of production, the firm would have total costs of:
A) $60.
B) $20.
C) $90.
D) $55.
Use the following to answer question 39:
L
1
2
3
4
5
6
7
8
9
10
Q
5
12
21
31
40
48
57
57
54
MP
5
7
10
9
8
6
3
0
–3
AP
5
6
7
7.75
8
7.71
7.12
6.33
5.4
FC
500
500
500
500
500
500
500
500
500
500
VC
450
900
1,350
1,800
2,250
2,700
3,150
3,600
4,050
4,500
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TC
950
1,400
2,300
2,750
3,200
3,650
4,100
4,550
5,000
ATC
190
116.67
88.10
74.19
68.75
66.67
67.59
71.93
79.82
92.59
AVC
90
64.29
58.06
56.25
56.25
58.33
63.16
71.05
83.33
AFC
100
41.67
23.81
16.13
12.50
10.42
9.26
8.77
8.77
9.26
MC
64.29
50
45
56.25
75
150
–150
39. (Table) Referring to the table, _____ is the total cost when producing 21 units.
A) $850
B) $1,850
C) $2,050
D) There is not enough information to answer this question.
Use the following to answer question 40:
Q
0
8
17
27
40
54
66
76
84
91
96
FC
500
500
500
500
500
500
500
500
500
500
500
VC
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
40. (Table) In the table, the total cost of producing 54 units of output is:
A) $1,250.
B) $500.
C) $2,000.
D) $1,750.
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ECO 2023.002 Principles of Microeconomics - Spring 2016
Practice Test #2 - Answer Key
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