Quiz1

Microeconomics
Division G
Date: 03.07.15
Time 15 minutes

1.

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be
explained by saying that oil and natural gas are:
A. complementary goods and the higher price for oil increased the demand for natural gas.
B. substitute goods and the higher price for oil increased the demand for natural gas.
C. complementary goods and the higher price for oil decreased the supply of natural gas.
D. substitute goods and the higher price for oil decreased the supply of natural gas.

2.

If products C and D are close substitutes, an increase in the price of C will:

A. tend to cause the price of D to fall.
B. shift the demand curve of C to the left and the demand curve of D to the right.
C. shift the demand curve of D to the right.
D. shift the demand curves of both products to the right.

3.

Refer to the above diagram, which shows three supply curves for corn. Which of the following would cause
the change in the supply of corn illustrated by the shift from S1 to S2?
A. An increase in the price of fertilizer
B. A change in consumer tastes away from cornbread
C. A decrease in consumer incomes
D. The development of a more effective insecticide for corn rootworm

4.

Assume product A is an input in the production of product B. In turn product B is a complement to product
C. We can expect a decrease in the price of A to:
A.
B.
C.
D.

Increase the supply of B and increase the demand for C.

Decrease the supply of B and increase the demand for C.
Decrease the supply of B and decrease the demand for C.
Increase the supply of B and decrease the demand for C.

5.

Refer to the above diagram. If the price were $2 per gallon, there would be a:
A. Shortage of 8 million gallons
B. Shortage of 10 million gallons
C. Surplus of 10 million gallons
D. Surplus of 8 million gallons
6.

The market system automatically corrects a surplus condition in a competitive market by:
A. Raising the price of the commodity in question while increasing the quantity demanded
B. Raising the price of the commodity in question while decreasing the quantity demanded
C. Reducing the price of the commodity in question while increasing the quantity demanded
D. Reducing the price of the commodity in question while decreasing the quantity demanded

7.

Assume in a market that price is initially below the equilibrium level. We can predict that price will:
A. Decrease, quantity demanded will decrease, and quantity supplied will increase.
B. Decrease and quantity demanded and quantity supplied will both decrease.
C. Increase, quantity demanded will increase, and quantity supplied will decrease.
D. Increase, quantity demanded will decrease, and quantity supplied will increase.

8.

In the above market, economists would call a government-set minimum price of $50 a:
A.
B.
C.
D.
9.

Price ceiling.
Price floor.
Equilibrium price.
Fair price.

Assume that a consumer has Rs. 120 in income and she can buy only two goods, apples or bananas. The
price of an apple is Rs. 15 and the price of a banana is Rs. 7.50.
For this consumer, the opportunity cost of buying one more apple is
A. 0.5 of a banana
B. 0.75 of a banana
C. 1 banana
D. 2 bananas

10. The price-elasticity coefficients are 2.6, .5, 1.4, and .18 for four different demand schedules D1, D2, D3, and
D4, respectively. A 2 percent increase in price will result in an increase in total revenues in which of the
following cases?
A. D1 and D3
B. D1 and D4
C. D2 and D4
D. D1, D2, and D3

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