BE 301 - Midterm 2 Exam Questions with Verified Solutions Graded A+
Suppose the demand for pens increases and the supply for pens decreases. What effect will it
have on the quantity? - Answers uncertain
A recent research signified the large health benefits of eating cooked tomatoes. Holding other
things constant, this will cause - Answers the demand curve for tomatoes to shift to the right
How does an increase in income affect the market of iPads (normal good) - Answers the
demand curve for ipads to shift to the right
The price of peanuts (an input in the production of peanut butter) increases. At the same time,
we see the price for Jelly (a complement in the consumption of peanut butter) rise. How does
this affect the market for peanut butter? - Answers the demand curve will shift to the left, the
supply curve will shift to the left
Based on question 4, the price for peanut butter _____, and the quantity demanded for peanut
butter ______. - Answers uncertain; decreases
Suppose there are 11 buyers and 11 sellers, each willing to buy or sell one unit of a good, with
values ($14, 13, 12, 11, 10, 9, 8, 7, 6, 5, 4). Assume no transaction costs and a competitive
market, what is the equilibrium price? - Answers 9
If the government imposes a price floor at $10 in the market in question 6, how many goods will
be traded? - Answers five
Changes in the price of a good cause - Answers -movement along the demand curve
-movement along the supply curve
Which of the following will cause shifts in the demand curve - Answers -the price of related
goods
-the number of buyers of the good
A market is said to be in equilibrium if - Answers -the market clears
-quantity supplied = quantity demanded
-there are no unconsummated wealth-creating transactions
-total surplus is maximized
These are characteristics of a perfectly competitive industry, EXCEPT
a. many sellers
b. no barriers to entry
, c. homogenous products
d. limited information - Answers d. limited information
In the long-run, a perfectly competitive firm will achieve - Answers zero economic profits
A sudden rise in the market demand in a competitive industry leads to which of the following? -
Answers a market equilibrium price higher than the original equilibrium in the short-run
Suppose a market has many buyers, a few sellers, product differentiation, barriers to entry, and
perfect information. How would we classify this market? - Answers oligopoly
Monopolies are characterized by which of the following
a. one firm
b. many firms
c. no close substitutes
d. product homogeneity - Answers a. & c.
Monopolists will maximize profits by producing and selling the quantity where:
a. price is equal to marginal cost
b. price is equal to marginal revenue
c. price is equal to short-run average cost
d. none of the above - Answers d. none of the above
Lipitor, a medication with few substitutes, should have an own-price elasticity of demand that is
- Answers relatively inelastic
Based on the idea of risk premiums, what should we expect people with higher FICO scores to
pay in terms of interest rates relative to people with average FICO scores? - Answers Higher
FICO scores lead to lower interest rates
Which of the following most closely resembles a monopolisticcally competitive market?
a. the market for brand-name basketball shoes
b. the market for patented pharmaceuticals
c. the market for wheat
d. the market for smart phones - Answers a. the market for brand-name basketball shoes
Suppose the demand for pens increases and the supply for pens decreases. What effect will it
have on the quantity? - Answers uncertain
A recent research signified the large health benefits of eating cooked tomatoes. Holding other
things constant, this will cause - Answers the demand curve for tomatoes to shift to the right
How does an increase in income affect the market of iPads (normal good) - Answers the
demand curve for ipads to shift to the right
The price of peanuts (an input in the production of peanut butter) increases. At the same time,
we see the price for Jelly (a complement in the consumption of peanut butter) rise. How does
this affect the market for peanut butter? - Answers the demand curve will shift to the left, the
supply curve will shift to the left
Based on question 4, the price for peanut butter _____, and the quantity demanded for peanut
butter ______. - Answers uncertain; decreases
Suppose there are 11 buyers and 11 sellers, each willing to buy or sell one unit of a good, with
values ($14, 13, 12, 11, 10, 9, 8, 7, 6, 5, 4). Assume no transaction costs and a competitive
market, what is the equilibrium price? - Answers 9
If the government imposes a price floor at $10 in the market in question 6, how many goods will
be traded? - Answers five
Changes in the price of a good cause - Answers -movement along the demand curve
-movement along the supply curve
Which of the following will cause shifts in the demand curve - Answers -the price of related
goods
-the number of buyers of the good
A market is said to be in equilibrium if - Answers -the market clears
-quantity supplied = quantity demanded
-there are no unconsummated wealth-creating transactions
-total surplus is maximized
These are characteristics of a perfectly competitive industry, EXCEPT
a. many sellers
b. no barriers to entry
, c. homogenous products
d. limited information - Answers d. limited information
In the long-run, a perfectly competitive firm will achieve - Answers zero economic profits
A sudden rise in the market demand in a competitive industry leads to which of the following? -
Answers a market equilibrium price higher than the original equilibrium in the short-run
Suppose a market has many buyers, a few sellers, product differentiation, barriers to entry, and
perfect information. How would we classify this market? - Answers oligopoly
Monopolies are characterized by which of the following
a. one firm
b. many firms
c. no close substitutes
d. product homogeneity - Answers a. & c.
Monopolists will maximize profits by producing and selling the quantity where:
a. price is equal to marginal cost
b. price is equal to marginal revenue
c. price is equal to short-run average cost
d. none of the above - Answers d. none of the above
Lipitor, a medication with few substitutes, should have an own-price elasticity of demand that is
- Answers relatively inelastic
Based on the idea of risk premiums, what should we expect people with higher FICO scores to
pay in terms of interest rates relative to people with average FICO scores? - Answers Higher
FICO scores lead to lower interest rates
Which of the following most closely resembles a monopolisticcally competitive market?
a. the market for brand-name basketball shoes
b. the market for patented pharmaceuticals
c. the market for wheat
d. the market for smart phones - Answers a. the market for brand-name basketball shoes
