Question # 1

The purpose of making assumptions in economic model building is to.

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Force the model to yield the correct answer

Minimize the amount of work an economist must do

simplify the model while keeping important details.

Express the relationship mathematically.

A Horizontal demand curve for a good could arise because consumers.

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Are irrational

Are not sensitive to price changes

View this good as identical to another good

Have no equivalent substitutes for this good

A specific tax on sellers will

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shift the demand curve to the right

Shift the demand curve the left

Shift the supply curve to the right

Shift the supply curve to the left

Suppose the demand curve for a good shifts rightward, causing the equilibrium price to increase this increase in the price of the good results in.

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A rightward shift of the supply curve

An increase in quantity supplied

A leftward shift of the supply curve

A leftward movement along the supply curve

If a government imposed price celling causes the observed price in a market to be below the equilibrium price.

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There will be excess demand

There will be excess supply

The curves will shift to make a new equilibrium at the regulated price

None of the above

If the price of automobiles were to increase substantially the demand curve for gasoline would most likely

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Shift leftward

Shift right ward

Become flatter

Become steeper

In the labor market if the government imposes a minimum wage that is below the equilibrium wage then.

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Workers who wish to work at the minimum wage will have a difficult time finding jobs.

Firms will hire fewer workers than without the minimum wage law.

Some workers may lose their jobs as a result

Nothing will happen to the wage rate or employment

To determine the total demand for all consumers sum the quantity each consumer demands.

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At a given price

At all prices and then sum this amount across all consumers

Both a and b will generate the same total demand

None of the above

A vertical demand curve for a particular good implies that consumers are.

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Sensitive to changes in the price of that good

Not sensitive to changes in the price of that good.

Irrational

Not interested in that good

If the demand curve for a good is horizontal and the price is positive then a leftward shift of the supply curve results in.

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a price of zero

An increase in price

A decrease in price

No change in price

If the price of automobiles were to decrease substantially the demand curve for public transpiration would most likely.

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shift rightward

Shift leftward

Remain unchanged

Remain unchanged while quantity demanded would change

Consumers and firms are known as price takers only it

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No market exists to determine the equilibrium price

they can set the market price

They cannot effect the market price

Excess demand exists

Economists tend to judge a model based upon

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the realty of its assumptions

The accuracy of its predications

Its simplicity

Its complexity

When two goods are substitutes a shock that raises the price of one good causes the price of the other goods to.

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Remain unchanged

Decrease

Increase

Change in an unpredictable manner

If price is initially above the equilibrium level.

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the supply curve will shift rightward

The supply curve will shift letward

Excess supply exists

All firms can sell as much as they want

Most Microeconomic models assume that decision makers wish to.

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Make themselves as well off as possible

Act selfishly

Not cooperate with others

None of the above

Which of the following is an example of a normative statement.

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Since this good is bad for you, you should not consume it.

this good is bad for you

If you consume this good you will get sick

People usually get sick after consuming this good

Holding all other factors constant consumers demand more of a good the

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Higher its price

Lower its price

Steeper the downward slope of the demand curve

Steeper the upward slope of the demand curve

If government regulations prohibit the production of a particular good the demand curve for that good will most likely.

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Shift leftward

Shift rightward

Remain unchanged

Disappear

An increases in the demand curve for orange juice would be illustrated as a.

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Leftward shift of the demand curve

Right ward shift of the demand curve

Movement up along the demand curve

Movement down along the demand curve

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