Question

1. The United States does not allow oranges from Brazil​ (the world's largest producer of​ oranges) to enter the United States.

If Brazilian oranges were sold in the United​ States, oranges and orange juice would be cheaper.

Use the laws of demand and supply to explain whether the above statement is true or false.

If Brazilian oranges are sold in the U.S.​ market, then the​ _________ will​ increase, the price of oranges ​ _________.

A.

quantity of oranges​ supplied; will​ fall, and the statement is true

B.

supply of​ oranges; will​ fall, and the statement is true

C.

quantity of oranges​ supplied; will​ rise, and the statement is false

D.

supply of​ oranges; will​ rise, and the statement is false

If Brazilian oranges are sold in the U.S.​ market, the​ _________ will increase because​ _________.

A.

supply of orange​ juice; the cost of producing orange juice will fall and the quantity demanded will increase

B.

price of orange​ juice; the demand for orange juice will decrease

C.

quantity supplied of orange​ juice; it will be cheaper to produce orange juice and the quantity demanded will increase

D.

quantity of orange juice​ demanded; the quantity supplied will increase and its price will fall

17. Which of the following events in the market for smartphones illustrates the law of​ demand?

1. The price of a smartphone falls.

2. Producers announce that smartphone prices will fall next month.

3. The price of a call made from a smartphone falls.

4. The price of a call made from a​ land-line phone increases.

5.An increase in memory makes smartphones more popular.

A.

Events​ #1, #3, and​ #4

B.

Only Event​ #2

C.

Only Event​ #1

D.

Events​ #2, #3,​ #4, and​ #5

E.

All 5 events

18. The​ free-rider problem arises from the inability of private provision to achieve allocative efficiency of

A.

private goods

B.

rival goods

C.

exculdable goods

D.

environmental goods

19. Karen pays a tax of​ $200 on her income of​ $40,000 while Bill pays a tax of​ $80 on his income of​ $20,000. This tax​ is:

A.

a flat tax

B.

proportional

C.

regressive

D.

progressive

20. Frictional unemployment is the result of

A.

the economic decline of major industries.

B.

an economic recession.

C.

people not getting along​ (having friction) with their employers.

D.

changing weather throughout the year.

E.

the normal process of jobs being created and destroyed.

21. El Nino takes toll on U.S. rice farmers

Dry weather has delayed rice planting and harvests will be low. But wheat is enjoying a bumper crop.

​

Using the demand and supply​ model, explain how the prices of rice and wheat will change and how the markets for rice and wheat will influence each other.

A poor rice harvest will​ _____ rice and​ ____ its price.

A.

decrease the demand​ for; raise

B.

decrease the supply​ of; raise

C.

decrease the demand​ for; lower

D.

decrease the supply​ of; lower

22. A bumper wheat crop ​ ____ wheat and​ ____ its price.

A.

increases the supply​ of; raises

B.

increases the demand​ for; raises

C.

increases the supply​ of; lowers

D.

increases the demand​ for; lowers

23. The markets of wheat and rice influence each other because wheat and rice​ are______.

A.

​substitutes, so a higher price of rice will increase the demand for wheat

B.

​substitutes, so a lower price of wheat will increase the demand for rice

C.

​complements, so a lower price of wheat will increase the demand for rice

D.

​complements, so a higher price of rice will decrease the demand for wheat

24. Suppose that your starting salary after graduating from WMU is​ $40,000. The CPI in the year you graduate is 400 using 1962 as the base year. When your father graduated from college in​ 1962, his starting salary was​ $12,000. After adjusting for inflation since​ 1962:

A.

your real starting salary equals your​ father’s nominal starting salary.

B.

your starting salary exceeds your​ father’s starting salary.

C.

your starting salary is less than your​ father’s starting salary.

D.

your starting salary is the same as your​ father’s starting salary.

25. The multiplier​ effect:

A.

equals the change in total spending divided by the change in total output.

B.

refers to the fact that a change in​ nonincome-determined spending leads to a larger change in total output and employment.

C.

allows for an​ increase, but not a​ decrease, in total output and income since wages and other incomes tend not to fall

D.

is larger the greater the portion of total spending going toward the purchase of imports.

18. If government officials break a natural monopoly up into several smaller​ firms, then

A.

the costs of production will decrease.

B.

competition will force firms to attain economic profits rather than accounting

profits..

C.

competition will force firms to produce surplus output which drives up price

D.

the costs of production will increase.

19. The incidence of a tax refers to

A.

the deadweight loss that a tax generates.

B.

the inefficiency of a tax.

C.

the revenue collected by government because of a tax.

D.

the division of the burden of a tax between buyers and sellers.

E.

the division of the burden of a tax between the public and the government.

20. If the CPI increases from 366 to 390 in a particular year and you lend your friend​ $10,000 at​ 9% simple interest for that​ year, what is the dollar value of the real interest you earn if she pays the debt on​ time?

A.

​$656

B.

​$615

C.

​$244

D.

​$285

E.

​$900

21. Suppose that Yellow Cab Company is granted a license by the Kalamazoo City Council to be the only company operating within the city limits of Kalamazoo. Granting this license is an example of

A.

legal barriers to entry

B.

a​ price-discriminating monopolist

C.

a case in which a single firm controls a resource necessary to produce the good

D.

natural barriers to entry

30. In the long​ run, a decline in the money supply​ ______ the price level and will lead to a​ ______ in real GDP.

a.​ lowers; reduction.

b.​ lowers; does not change.

c.​ lowers; increase.

d. does not​ change; increase.

A.

​lowers, reduction

B.

​lowers, does not change

C.

​lowers, increase

D.

does not​ change, increase

31. To stimulate the economy the Federal Reserve​ should:

A.

sell securities on the open​ market, raise the reserve​ requirement, and raise the discount rate.

B.

sell securities on the open​ market, lower the reserve​ requirement, and lower the discount rate.

C.

reduce the reserve​ requirement, reduce the discount​ rate, and reduce open market operations

D.

buy securities on the open​ market, lower the reserve​ requirement, and lower the discount rate.

32. Which of the following does NOT influence the price elasticity of​ demand?

A.

whether the good is a necessity or a luxury.

B.

the number of substitutes available to consumers

C.

the amount by which the demand curve shifts when the price of another good changes

D.

the time period buyers have to respond to a price change

E.

the price of the good relative to total income

33. International trade benefits

A.

only the importer.

B.

only the exporter.

C.

both the exporter and the importer.

D.

the exporter at all times and sometimes also the importer.

E.

neither the exporter nor the importer.

34. International trade benefits

A.

only the importer.

B.

only the exporter.

C.

both the exporter and the importer.

D.

the exporter at all times and sometimes also the importer.

E.

neither the exporter nor the importer.

35. Exotic holidays are​ ______ good and local holidays are​ ______ good.

A.

a​ normal; a normal

B.

neither an inferior good nor a normal​ good;

neither an inferior good nor a normal good

C.

an​ inferior; an inferior

D.

an​ inferior; a normal

E.

a​ normal; an inferior

36. Which of the following would be expected to cause the aggregate demand curve to shift to the​ left?

A.

A reduction in the level of real GDP.

B.

The​ Fed’s purchase of government securities.

C.

A reduction in the discount rate.

D.

An increase in the required reserve ratio that decreases money supply.

E.

An increase in the price level.

Answer 1

( 1 ) If Brazilian oranges are sold in the U.S.​ market, then the​ __supply of​ oranges__ will​ increase, the price of oranges ​ _will fall_.

The correct answer is ( B ).

Quantity of oranges supplied is generally used for a firm, for an economy we simply write supply. This statement is based on law of supply and demand which states that with increase in price of the item, its supply increases and demand decreases. Here, demand was already high along with price due to shortage of supply.

( 2 ) The correct answer is ( A ).

If Brazilian oranges are sold in the U.S.​ market, the​ __quantity of orange juice​ demanded__ will increase because​ _the quantity supplied will increase and its price will fall.

This answer is also based on the laws of demand and supply as explained above.

( 3 ) Which of the following events in the market for smartphones illustrates the law of​ demand?

1. The price of a smartphone falls.

The correct answer is statement ( 1 ) only as it relates to price of smartphone. The other answers such as when producer announces fall in price next month, or fall in price of calls are irrelevant answers and do not follow laws of demand supply in the smartphone market.

( 4 ) The​ free-rider problem arises from the inability of private provision to achieve allocative efficiency of rival goods.

The correct answer is ( B ).

Private goods are generally excludable goods which do not face free rider problem, and environmental goods is an irrelevant answer here.