# PRACTICE QUIZ 1

Management

Oct 28, 2013 (4 years and 6 months ago)

96 views

PRACTICE QUIZ 1

1.

To celebrate its 50
th

anniversary, a gasoline station sells gasoline at the price it charged on its first day of
operation: \$0.10 per gallon. As you drive by the gasoline station, you notice that there is a long line of
people waiting to

buy gasoline. What types of people would you expect to join the
line?_________________________________________________________________________________
_____________________________________________________________________________________
___________________
__________________________________________________________________

2.

“The cost of a masters degree in engineering equals the tuition plus the cost of books.” True or false?
Explain.__________________________________________________________________________
____
_____________________________________________________________________________________
_____________________________________________________________________________________

3.

Suppose a nation picks 1,000 young adults at random to serve in the army. What i
nformation do you
need to determine the cost of using these people in the army?
_____________________________________________________________________________________
_____________________________________________________________________________________
______
_______________________________________________________________________________

4.

Explain the logic behind the economist’s quip that “There is no such thing as a free lunch.”
___________________________________________________________________________________
__
_____________________________________________________________________________________
____________________________________________________________________________________

5.

In March of 1996, many news reports predicted that the price of coffee was about to

rise sharply, possibly
by as much as 20%, within a short period of time. The reason for the expected increase was a poor coffee
crop in much of South and Central America and labor problems in Brazil and Columbia that had driven
up wages.

A.

What would be th
graph.

B.

What would happen in the market for tea? For donuts and other goods commonly consumed
with coffee?

______________________________________________________________________________
___
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
__________
_______________________________________________________________________
_________________________________________________________________________________
________________________________________________________________________________

6.

Complete the statement

with "increase" or "decrease": When a price increases, the law of demand
suggests that the quantity demanded will _________, while the law of supply suggests that the quantity
supplied will __________.

7.

List the variables that are held fixed in drawin
g a market demand curve.
_____________________________________________________________________________________
_____________________________________________________________________________________
____________________________________________________________
_________________________
_____________________________________________________________________________________

8.

List the variables that are held fixed in drawing a market supply curve.
_______________________________________________________________________
______________
_____________________________________________________________________________________
_____________________________________________________________________________________
________________________________________________________________________
_____________

9.

Complete the statement: The market equilibrium is shown by the intersection of the ___________ curve
and the ______________ curve.

10.

Complete the statement with “
less
” or “
greater
”: Excess demand occurs when the price is _________
than the eq
uilibrium price; excess supply occurs when the price is _________ than the equilibrium price.

11.

Complete the statement with "supply" or "demand": A maximum price below the equilibrium price causes
excess ________, while a minimum price above the equilibriu
m price causes excess _________.

12.

Which of the following items go together?

A. Change in demand

D. Movement along the demand curve

B. Change in quantity demanded

E. Shifting the demand curve

C. Change in price

F. Change in income

13.

What's wrong w
ith the following statement? "Demand increased because the demand curve shifted."

________________________________________________________________________________

14.

Complete the statement with “
right
” or “
left
”: An increase in the price of cassette tapes

will shift the
demand curve for CDs to the _________________; an increase in the price of CD players will shift the
demand curve for CDs to the _____________________.

15.

From the variables,
quantity of pencils
,
number of potential consumers
,
price of penci
ls
,
price of pens,
consumer income
, circle the change as we move along the market demand curve for pencils, and cross out
those that are assumed to be fixed.

16.

Which of the following items go together?

A. Change in quantity supplied

D. Shifting the sup
ply curve

B. Change in production cost

E. Change in price

C. Change in supply

F. Movement along the supply curve

17.

True or False, and explain: An increase in the wage of computer workers will shift the supply curve for
computers to the left.

18.

Fr
om the variables,
quantity of housing
,
number of potential consumers
,
price of wood, price of houses
,
consumer income,

circle those that change as we move along the market supply curve for housing, and
cross out those that are assumed to be fixed.

19.

Comple
te the statement with "supply" or "demand": If the price and quantity change in the same
direction, ____________ is changing; if the price and quantity change in opposite directions, __________
is changing.

20.

Suppose a freeze in Florida wipes out 20% of t
he orange crop. How will this affect the equilibrium price

_____________________________________________________________________________________
_________________________________________________________
____________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
__________________________________________________________
__________________________

21.

Suppose that between 1997 and 1999, the equilibrium price and the equilibrium quantity of VCR both
decrease. Draw a supply and demand diagram that explains these changes.

_____________________________
____________________________
____________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
__________________________________________________________
___________________________
_____________________________________________________________________________________
_____________________________________________________________________________________