Question 1

If we were to build a model measuring the supply of corn, which of the following could be an example of an exogenous variable in the model?

Accepted Answer

Exogenous variables are variables that have an impact on the model, but are not directly influenced by the model itself. In this case, the quantity of rain would impact the supply of corn, but the corn supply would not directly impact the amount of rain. The other options (A, B, and D) are endogenous variables, meaning they are directly influenced by the model itself.

Question 2

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Accepted Answer

In this representation, price and quantity are endogenous variables, not exogenous variables. Exogenous variables are external factors that affect demand or supply, such as changes in consumer preferences or taxes. Endogenous variables are internal factors, such as changes in the price or quantity supplied or demanded.

Question 3

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Q^d (P, I). Which of the following statements is true?

Accepted Answer

Income is not represented on one of the axes, and so is treated as an exogenous variable in the graphical analysis.

Question 4

Currently, 100,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will:

Accepted Answer

The answer of Currently, 100,000 units of a good are...

Question 5

What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable

Accepted Answer

The term in microeconomics that tells us how a dependent variable changes as a result of adding one unit of an independent variable is called the marginal impact. The other options are not relevant to this concept.

Question 6

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Accepted Answer

A change in price does not cause a shift in the demand curve. It only causes a movement along the demand curve. The demand curve itself can only shift due to changes in factors such as consumer preferences, income, or population.

Question 7

Identify the truthfulness of the following statements: I. Equilibrium analysis helps economists determine the market-clearing price.
II) Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.

Accepted Answer

Both statements are true. Equilibrium analysis is a fundamental tool used by economists to determine the market-clearing price, where the quantity demanded equals the quantity supplied. Comparative statics, on the other hand, help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.

Question 8

Suppose the equilibrium rent for apartments in New York City is $2000 per month. If the city authorities declared effective tomorrow that rents would not be allowed to exceed $1800 per month, what do you think would happen to the relationship between supply and demand for rental apartments in New York City?

Accepted Answer

When the government imposes rent control, landlords have less incentive to maintain and/or build new rental properties, which can lead to a decrease in the supply of apartments. Additionally, tenants may have less incentive to move out of their current apartments because the prices are lower, which can lead to a decrease in the turnover rate of apartments. These two factors combined can result in shortages of available apartments. Therefore, B is the best choice because it accurately reflects the potential consequences of rent control.

Question 9

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price floor on the market. This will

Accepted Answer

The answer of Suppose the equilibrium price in a market...

Question 10

Movements along a demand curve caused by a change in price probably means that:

Accepted Answer

The answer of Movements along a demand curve caused by...

Question 11

Currently, 100,000 units of a good are traded on the market. The government imposes a tax on producers that raises the unit cost of production of the good. This will:

Accepted Answer

The tax on producers will increase their costs, causing them to produce less of the good at every given price level. This will shift the supply curve to the left, decreasing the quantity traded and potentially increasing the price of the good for consumers.

Question 12

Suppose the price of X is $15 per unit, the price of Y is $12 per unit, the consumer's income is $100, and the consumer's level of satisfaction is measured by XY + Y. The consumer's constraint is

Accepted Answer

The consumer's budget constraint is determined by the prices of goods X and Y and the consumer's income. The constraint is 15X + 12Y ≤ 100, where 15 and 12 are the prices of X and Y, respectively, and 100 is the consumer's income.

Question 13

A good example of marginal reasoning would be

Accepted Answer

Marginal reasoning involves analyzing the benefits and costs of a small incremental change. In this case, the additional dollar spent on advertising will likely result in an increase in total sales, and calculating the marginal benefit of this additional dollar can help businesses make informed decisions about their advertising budget.

Question 14

Comparative statics

Accepted Answer

Comparative statics examines how endogenous variables change as exogenous factors change, meaning it analyzes the relationship between changes in independent variables (exogenous factors) and their effect on dependent variables (endogenous factors). This type of analysis is important for understanding how various economic factors influence outcomes in a particular market. Option A is incorrect because it considers the changes in exogenous factors, which are determined outside the model, rather than endogenous factors, which are determined within the model. Option C is incorrect because comparative statics does not compare two separate markets but rather looks at the impact of changes in variables within a single market. Option D is incorrect because comparative statics can still provide useful insights even if exogenous variables do not remain constant over time, as long as the analysis is conducted over a short enough period to limit the impact of changes in exogenous variables.

Question 15

Identify the truthfulness of the following statements: I. Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza.
II) Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

Accepted Answer

Marginal analysis does not determine absolute preferences (like always choosing Chinese food over pizza) but rather examines the benefits of incremental changes, making statement I false. Statement II is true as marginal analysis is indeed used to assess the impact of producing one additional unit of output, including changes in total cost.

Question 16

Another term for equilibrium would be

Accepted Answer

Equilibrium refers to a state of balance or stability in which there is a match or balance between the supply and demand of a good or service. Therefore, the best choice is C, a point of stability. The other options, A, B, and D, do not accurately describe equilibrium.

Question 17

An equilibrium

Accepted Answer

An equilibrium is a state where the demand for a product or service is equal to the supply of that product or service. In a competitive market, this state will continue indefinitely as long as exogenous factors remain unchanged. However, in reality, markets are often subject to various exogenous factors that can cause shifts in demand and supply or changes in other conditions, leading to a new equilibrium point. So, option B is the correct answer. An equilibrium is a state where demand and supply are perfectly balanced and there is no excess demand or supply. In this state, market forces will continue to operate and there will be no tendency for the price and quantity to change as long as exogenous factors (such as changes in technology or consumer preferences) remain unchanged. Therefore, option B is the correct answer. Option A is incorrect because not all markets necessarily reach equilibrium. Option C is incorrect because equilibrium is a meaningful concept in economics. Option D is incorrect because equilibrium is a lasting state.

Question 18

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price ceiling. This will

Accepted Answer

When a price ceiling is set below the equilibrium price, it creates excess demand as consumers want to purchase more goods at the lower price, while at the same time, suppliers are less willing to supply the goods at the lower price. This creates a shortage in the market.

Question 19

Suppose that market demand for a good slopes downward and market supply slopes upward. Equilibrium price is now $10 and 500,000 units of the good are traded at this price. Suppose now that the cost at which each unit of the good is produced falls. What is the likely effect of this change on the market equilibrium?

Accepted Answer

A decrease in production costs shifts the supply curve to the right, leading to a lower equilibrium price if demand remains constant.

Question 20

Which of the following statements is true?

Accepted Answer

Exogenous changes refer to external factors that can affect demand and/or supply. While they may primarily affect one curve, they can also indirectly affect the other curve. For example, a sudden shortage in a resource needed to produce a good (an exogenous supply shock) would cause the supply curve to shift left. This can cause an increase in price, which may decrease demand (an endogenous change to the demand curve). Therefore, exogenous changes can sometimes affect both the demand and supply curves.

Quiz 1: Analyzing Economic Problems

If we were to build a model measuring the supply of corn, which of the following could be an example of an exogenous variable in the model?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Q^d (P, I) . Which of the following statements is true?

Currently, 100,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will:

What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Identify the truthfulness of the following statements: I. Equilibrium analysis helps economists determine the market-clearing price. II) Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price floor on the market. This will

Movements along a demand curve caused by a change in price probably means that:

Currently, 100,000 units of a good are traded on the market. The government imposes a tax on producers that raises the unit cost of production of the good. This will:

Suppose the price of X is $15 per unit, the price of Y is $12 per unit, the consumer's income is $100, and the consumer's level of satisfaction is measured by XY + Y. The consumer's constraint is

A good example of marginal reasoning would be

Comparative statics

Identify the truthfulness of the following statements: I. Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza. II) Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

Another term for equilibrium would be

An equilibrium

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price ceiling. This will

Which of the following statements is true?

Quiz 1: Analyzing Economic Problems

If we were to build a model measuring the supply of corn, which of the following could be an example of an exogenous variable in the model?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I) . Which of the following statements is true?

Currently, 100,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will:

What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Identify the truthfulness of the following statements: I. Equilibrium analysis helps economists determine the market-clearing price. II) Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model.

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price floor on the market. This will

Movements along a demand curve caused by a change in price probably means that:

Currently, 100,000 units of a good are traded on the market. The government imposes a tax on producers that raises the unit cost of production of the good. This will:

Suppose the price of X is $15 per unit, the price of Y is $12 per unit, the consumer's income is $100, and the consumer's level of satisfaction is measured by XY + Y. The consumer's constraint is

A good example of marginal reasoning would be

Comparative statics

Identify the truthfulness of the following statements: I. Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza. II) Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

Another term for equilibrium would be

An equilibrium

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price ceiling. This will

Which of the following statements is true?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Q^d (P, I) . Which of the following statements is true?