Question

1. Society gains advantages through trade because of its ability to

A) attain absolute advantage in our trade with other nations.

B) specialize resources to the uses where opportunity cost is minimized.

C) align output to reflect society’s preferences.

2. Identify which of the following microeconomic topics can have an impact on macroeconomic topics?

A) How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

B) What combination of goods and services will best fit their needs and wants, given the budget they have to spend?

C) What determines what prices a firm will charge?

3. There is a tax rebate that everyone in the nation receives from the government of $1000. The market for laptops notices a shift because of this. What effect will this rebate have on the laptop market?

A)	This will increase demand.

B) This will increase the quantity demanded.

C)	This will decrease the quantity demanded.

4. A price floor creates ________ when it is set ________ the equilibrium price.

A)	excess supply; above

B	excess supply; below

C)	excess demand; below

5. Suppose the price for an Uber ride in Austin, TX decreases from $15 to $12 causing the quantity of rides demanded to increase from 1000 to 1600. Using the midpoint method, the price elasticity of demand for an Uber ride is ________.

A)

0.50

B)

2.08

C)

3.0

6. What happens to total revenue (TR) if the price decreases on a product with demand that is price elastic?

A)	Total profit will remain the same.

B)	Total revenue will rise.

C)	Total revenue will fall.

7. Why do most demand curves have a negative slope?

A)	Because consumers try to substitute away from the consumption for a commodity when the commodity’s price rises because of the substitution effect.

B)	Because consumers substitute higher quality goods for lower quality goods because of the substitution effect.

C)	Because the income effect causes consumers to reduce consumption of a commodity when income falls because an increase in price reduces real income.

Answer 1

a) "B" specialize resources to the uses where opportunity cost is minimized.

b) "A" How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means

c) "A" it will increase the demand as the income of the people has increased.

d) "A" it will create excess supply when it is set above the equilibrium price.

e) (1600 - 1000 ) / (1600 +1000) /2

= 600 / 1300

= 0.46

(12 -15) / (12 +15) /2

= -3 / 13.5

= -0.22

Elasticity = 0.46 / 0.22 = 2.09. The answer is "B".

f) "B" total revenue will rise.

g) "A" Because consumers try to substitute away from the consumption for a commodity when the commodity’s price rises because of the substitution effect.