B. The demand curve will shift to the left, decreasing the price of pork.

EXAM IN MICROECONOMICS

(October, 2009)

VARIANT 1

SOLUTIONS

Section 1. Multiple choice questions

You have 60 minutes to do this part of the exam.

Marking scheme: 1 point for a correct answer, -0.25 for a wrong answer, 0 if the answer has not been given.

Use the following to answer questions 1-4:

The demand for Russian pancakes is given by: Qd = 700 – 10P where Qd is the quantity demanded per month and P is the price per pancake. The supply of Russian pancakes is given by: Qs = 500 + 10P where Qs is the quantity supplied per month by Matreshka & CO.

1. Determine the equilibrium price and quantity of Russian pancakes:

A. The quantity demanded exceeds the quantity supplied and price is equal to 10 RUB;

B. The price is equal to 15 RUB per pancake and equilibrium quantity is equal to 100 pancakes;

C. The market is in equilibrium with the quantity demanded equal to the quantity supplied and price 10 RUB;

D. The quantity demanded is equal to 100 pancakes, price is equal to 10 RUB and quantity supplied is unknown;

E. The equilibrium price is indeterminate and equilibrium quantity is equal to 600 pancakes.

2. If Matreshka & CO set the price at 5 RUB per pancake:

A. The quantity demanded will exceed the quantity supplied;

B. The quantity supplied will exceed the quantity demanded;

C. The market will be in equilibrium;

D. There is a shortage in the economy;

E. More than one answer is correct;

3. If price for Russian pancakes produced by Matreshka & CO (with price elasticity of demand greater than 1 in absolute value) increases one day we can conclude that:

A. Russian pancakes are Giffen good;

B. Total revenue of Matreshka & CO falls;

C. Total expenditures on Russian pancakes increase;

D. As demand for Russian pancakes is inelastic with respect to change in price, total revenue will increase;

E. There is no relationship between price and elasticity;

4. Which of the following is true for Consumer Surplus on the market of Russian pancakes:

A. There is not enough information given to answer this question;

B. Consumer Surplus is always greater than Producer Surplus;

C. Consumer Surplus is equal to ½ (height* hypotenuse);

D. Consumer Surplus is equal to 300 RUB;

E. Consumer Surplus could be bigger in this market if it was not for the deadweight loss;

5. Along a constant-slope demand curve

A. Elasticity is the same everywhere along the curve

B. Elasticity decreases as quantity increases

C. Elasticity increases as quantity decreases

D. Elasticity initially increases then decreases as quantity increases

E. There is no relationship between quantity and elasticity;

6. Health authorities has just issued a report warning consumers about the negative health effects of pork. Which of the following changes in the pork market is most likely to occur as a result?

A. The supply curve will shift to the left, increasing the price of beef.

B. The demand curve will shift to the left, decreasing the price of pork.

C. The demand curve for beef will shift to the right, increasing the price of beef, if we assume that beef and pork are complements;

D. Neither the supply nor demand curve will shift; only quantity will increase as price decreases.

E. More than one answer is correct.

Questions 7-8 refer to the following:

The graph below shows the market for good Z. The government imposes an excise tax of t RUB on each unit of good Z.

7. Which of the following represents the initial equilibrium before tax and equilibrium after tax:

Initial equilibriumEquilibrium after tax

A. P3;Q1 P1;Q1

B. P2;Q2 P3;Q1

C. P1;Q1 P2;Q2

D. P3;Q1 P2;Q2

E. No true answer;

8. Define the price of producer and price paid by consumer of good Z after tax imposition:

Price of producerPrice of consumer

A. P3 P1

B. P1 P3

C. P3 P3

D. P2 P2

E. No true answer;

9. Assume the market is characterized by downward sloping demand and upward sloping supply. If a tax is imposed, who would bear the total tax burden?

A. The consumers bear it.

B. The producers bear it.

Date: 2015-12-17; view: 679