ECO111 Microeconomics

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Term: Summer2021

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ECO_111__No__Q01
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. In a market economy, supply and demand are important because they
a. play a critical role in the allocation of the economy’s scarce resources.
b. determine how much of each good gets produced.
c. can be used to predict the impact on the economy of various events and policies.
d. All of the above are correct.

____ 2. In general, elasticity is a measure of

a. the extent to which advances in technology are adopted by producers.
b. the extent to which a market is competitive.
c. how firms’ profits respond to changes in market prices.
d. how much buyers and sellers respond to changes in market conditions.

____ 3. The two words most often used by economists are

a. prices and quantities.
 b. resources and allocation.
c. supply and demand.
d. efficiency and equity.

____ 4. The forces that make market economies work are

a. work and leisure.
b. politics and religion.
c. supply and demand.
d. taxes and government spending.

____ 5. In a market economy, supply and demand determine

a. both the quantity of each good produced and the price at which it is sold.
b. the quantity of each good produced, but not the price at which it is sold.
c. the price at which each good is sold, but not the quantity of each good produced.
d. neither the quantity of each good produced nor the price at which it is sold.

____ 6. Equilibrium
a. is a concept unique to economics.
b. always occurs where supply equals demand.
c. results when opposing forces fail to cancel each other out.
d. indicates balance.
e. all of the above

____ 7. In the supply and demand model, equilibrium occurs when

a. all buyers and sellers are satisfied with their respective quantities at the market price.
b. supply and demand intersect.
c. quantity supplied equals quantity demanded.
d. the price has no tendency to change.
e. all of the above

____ 8. A price above equilibrium price will lead to a (n)

a. surplus.
b. shortage.
c. excess demand.
d. price increase.
e. none of the above

____ 9. To have an effect on a market, a price ceiling must

a. be above equilibrium.
b. be equal to equilibrium.
c. be below equilibrium.
d. result in a surplus.
e. none of the above
____ 10. The socially optimal quantity maximizes

a. economic surplus.
b. producer surplus.
c. consumer surplus.
d. quantity demanded.
e. quantity supplied.

____ 11. When it is not possible for individuals to arrange a transaction that creates additional economics
Surplus. When:
a. price is above equilibrium.
b. price is below equilibrium.
c. price is at equilibrium.
d. there is a shortage.
e. there is a surplus.
____ 12. When a firm pollutes,
a. markets will be efficient.
b. the output level is socially optimal.
c. the output level is above the socially optimal level.
d. the output level is below the socially optimal level.
____ 13. An increase in price will
a. decrease demand.
b. decrease quantity demanded.
c. increase demand.
d. increase quantity demanded.
e. not affect quantity demanded.

____ 14. An increase in the price of a complement will

a. decrease demand.
b. decrease quantity demanded.
c. increase demand.
d. increase quantity demanded.
e. not affect quantity demanded.

____ 15. If an increase in income leads to a decrease in the demand for a good, the good is a(n)
a. substitute good.
b. complementary good.
c. inferior good.
d. normal good.
e. superior good.
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