Econ 201 Final Exam: Econ 201 Final Exam Study Guide (West Virginia University): Questions & Answers: Updated Solution

Which of the following would definitely result in a higher price in the market for Snickers? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase (Ans- a. demand increases and supply decreases When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged. (Ans- d. price may increase, decrease, or remain unchanged. New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for oak tables if the price of oak wood rises, and consumer income rises? a. Price will fall and the effect on quantity is ambiguous. b. Price will rise and the effect on quantity is ambiguous. c. Quantity will fall and the effect on price is ambiguous. d. Quantity will rise and the effect on price is ambiguous. (Ans- b. Price will rise and the effect on quantity is ambiguous. What will happen to the market for pens if the price of pencils falls, and the wages of pen-makers decrease? a. Price will rise and quantity may rise or fall. b. Price will fall and quantity may rise or fall. c. Quantity will rise and price may rise or fall. d. Quantity will fall and price may rise or fall (Ans- b. Price will fall and quantity may rise or fall. If two supply curves pass through the same point and one is steep and the other is closer to horizontal, which of the following would be correct? a. The flatter supply curve is more inelastic. b. The steeper supply curve is more inelastic. c. The elasticity of supply will be the same for both curves. d. Nothing can be said about their relative elasticities (Ans- b. The steeper supply curve is more inelastic. The discovery of a new type of wheat increases the supply of wheat, which most likely causes a. consumer surplus to fall and total surplus to increase. b. consumer surplus to fall and total surplus to fall. c. consumer surplus to rise and total surplus to fall. d. consumer surplus to rise and total surplus to rise. (Ans- d. consumer surplus to rise and total surplus to rise. Suppose that the demand for picture frames is price elastic and the supply is inelastic. The burden of a tax of $1 per frame will fall a. entirely on consumers. b. more on consumers than on producers. c. more on producers than on consumers. d. on consumers or producers, depending on who gets the tax bill from the government. (Ans- c. more on producers than on consumers. Chad is willing to pay $4.00 for a latté. If he buys a latté for $3.75, his consumer surplus is a. $0.25. b. $0.50. c. $3.75. d. $4.00. (Ans- a. $0.25. Taxes on luxury goods cause deadweight losses because a. the government always wastes the money collected. b. they prevent buyers and sellers from realizing some of the gains from trade. c. they take more money from the rich than the poor. d. they treat equally well-off people unequally. (Ans- b. they prevent buyers and sellers from realizing some of the gains from trade. The greater the elasticities of demand and supply the a. smaller the deadweight loss from a tax. b. less intrusive a tax will be on a market. c. greater the deadweight loss from a tax. d. more equitable the distribution of a tax between buyers and sellers. (Ans- c. greater the deadweight loss from a tax. If the labor supply curve is nearly vertical, a tax on labor a. has a large deadweight loss. b. will raise small amounts of tax revenue. c. has little impact on the amount of work workers are willing to do. d. will be fair. (Ans- c. has little impact on the amount of work workers are willing to do. Which of the following would NOT shift the demand curve for a good or service? a. a change in income b. a change in the price of the good or service c. a change in expectations about the price of the good or service d. a change in the price of a related good (Ans- b. a change in the price of the good or service