Part I. Short Answer (5 Points Each)

03 Jun Part I. Short Answer (5 Points Each)

Question
Part I. Short Answer (5 Points Each)

________ Points

Carefully define, explain the usage, and an example of the following concepts:

1. Distinguish between demand and quantity demanded. Do the same for supply and
quantity supplied.
The difference between demand 633

2.

3.

Describe the field of economics known as microeconomics.

What is the cost-benefit principle?

2

Part II. Fully Explain in Essay Format (20 Points) ________ Points
Graphically prove or disprove the following statement. Explain your reasoning. After
last years strike, baseball has experienced a severe drop in attendance even though the
owners have reduced ticket prices and have held special events. Similarly players have
made themselves more available in the hopes of boosting attendance. So far nothing has
worked. In economic terms the law of demand does not hold since attendance at the
major league parks has dropped while at the same time ticket prices have fallen.

3

Part III. Matching (30 Points).

________ Points

_____Market Demand
_____Graphs
_____Negative
_____Positive
_____Supply Side
_____Vertical
_____Variable
_____Resources
_____Opportunity Cost
_____Necessity

A.

The _________________curve shows the relationship between the price
and the quantity demanded by all consumers, everything else being equal.

B.

On the __________________ of a market, producers indicate to consumers
what they are willing to sell, in what quantity and at what price.

C. Inputs in production processes are called Economic ______________.
D. Toothpaste is likely to be a ____________ product.
E.

A line that falls from left to right has a _________________ slope.

F.

In the Marshallian diagram, the ________________ axis denotes Price.

G. The ________________________ of any decision is the forgone value of
the next best alternative that is not chosen.
H.

There is a ___________________ relationship between two variables if
they move in the same direction.

I. _________________ are valuable because they facilitate interpretation of
data.
J.

A _______________ measures something that can take on different values.

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PartIV.Completethefollowing(20Points)
Supposethetotaldemandforalfalfaandthetotalsupplyofalfalfa
permonthintheDallasgrainmarketareasfollows:
Thousands

Thousands AmountofSurplus(+)

ofBushels

Priceper

ofBushels or

Demanded

Bushel

Supplied

85

$3.40

72

80

3.70

73

75

4.00

75

70

4.30

77

65

4.60

79

60

4.90

81

(a)

Shortage()

Whatwillbethemarketequilibriumprice?Whatisthe
equilibriumquantity?Usingthesurplusshortagecolumn,
explaininwordswhyyouranswerisvalid.

(b)

Whatisthesurplusorshortageatthepriceof$3.40?Whatis
thesurplusorshortageattheprice$4.90.

5

Part V. Assumethatthedemandforacommodityisrepresentedby
theequationP=10.2QdandsupplybytheequationP=2+.2Qs,where
QdandQsarethequantitydemandedandquantitysupplied,
respectively,andPistheprice.Usingtheequilibriumcondition
Qs=Qd.(HintSettwoequationsequaltoEachotherandsolve.)(15
Points)
(a)

Solvetheequationssimultaneouslytodeterminethe
equilibriumprice.Replacetheequilibriumpricebackinto
eitherofthetwoequationsanddetermineequilibriumquantity.

(b)

Describethegraphthetwoequations,includingequilibrium
priceandquantity,tosubstantiateyouranswer.

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Part VI. Multiple Choice (5 Points Each)
Exhibit 5-2

1. Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then
places a tax on the producers of good X-in effect, taxing them on each unit of good X they sell.
As a result, the supply curve
a. shifts (down and) rightward from S2 to S1.
b. shifts (up and) leftward from S1 to S2.
c. does not shift from S1.
d. There is not enough information to answer the question.
Exhibit 5-4

2. Refer to Exhibit 5-4. As a consequence of the depicted change in the supply of X, the demand

curve for Y shifted from D1 to D2. It follows that
a. X and Y are substitutes.
b. X and Y are complements.
c. X and Y are inferior goods.
d. demand for Y is price elastic.

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Exhibit 4-2

3. Refer to Exhibit 4-2, which shows supply and demand for freeway space at both 8 a.m. and 11
p.m. At a zero money price, there is a ________ of freeway space at 8 a.m. and ________ at 11
p.m.
a. shortage; a surplus
b. surplus; a shortage
c. surplus; equilibrium
d. shortage; equilibrium
Exhibit 4-4

4. Refer to Exhibit 4-4. At a wage of $7, there will be a __________ of unskilled workers equal to
__________ thousand.
a. shortage; 10
b. surplus; 20
c. surplus; 10
d. shortage; 20
e. none of the above
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5. Refer to Exhibit 4-4. Suppose the minimum wage is set at $5. The result will be
a. unemployment.
b. labor shortage.
c. no effect on the labor market.
d. none of the above
6. If variable X goes up as variable Y goes down, then X and Y are
a. directly related.
b. inversely related.
c. independent.
d. positively related.
7. The concept that relates how much one variable changes as another variable changes is
a. slope.
b. line.
c. curve.
d. graph.
8. The coordinates of point 1 are 50 units of X and 40 units of Y. The coordinates of point 2 are 60
units of X and 45 units of Y. The slope of the line between points 1 and 2 is
a. + 2.00
b. + 0.50
c. – 0.25
d. – 0.50
e. none of the above
9. When the price of a product increases, a consumer is able to buy less of it with a given money income. This
describes:
A. the cost effect.
B. the inflationary effect.
C. the income effect.
D. the substitution effect.

10. When product prices change, consumers are inclined to purchase larger amounts of the now cheaper
products and less of the now more expensive products. This describes:
A. the cost effect.
B. the price effect.
C. the income effect.
D. the substitution effect.
Table 2
QD = 189 – 2.25P
QS = 124 + 1.5P
11.
___
___
___
___

Using Table 2, the equilibrium price is:
a.
$84
b.
$82.67
c.
$17.33
d.
150

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12. Using Table 2, the equilibrium quantity sold is:
___