Bank Soal Intro Economy

1. Economists use the phrase “there is no such thing as a free lunch,” to illustrate the
principle that
a. Inflation almost always results in higher prices over time
b. Nothing is free in a market economy
c. Making decisions requires trading off one goal against another
d. If something looks too good to be true, it probably is not worth pursuing

2. Mallory decides to spend three hours working overtime rather than watching a video with
her friends. She earns $8 an hour. Her opportunity cost of working is
a. The $24 she earns working
b. The $24 minus the enjoyment she would have received from watching
the video
c. The enjoyment she would have received had she watched the video
d. Nothing, since she would have received less than $24 of enjoyment
from the video

3. A furniture maker currently produces 100 tables per week and sells them for a profit. She
is considering expanding her operation in order to make more tables. Should she
expand?
a. Yes, because making tables is profitable
b. No, because she may not be able to sell the additional tables
c. It depends on the marginal cost of producing more tables and the
marginal revenue she will earn from selling more tables
d. It depends on the average cost of producing more tables and the
average revenue she will earn from selling more tables

4. The invisible hand works to promote general well-being in the economy primarily through
a. Government intervention
b. The political process
c. People’s pursuit of self-interest
d. Altruism

5. Which of the following changes 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 future price of the good or service
d. A change in the price of a related good or service

6. Which of the following would not affect an individual’s demand curve?

a. Expectations
b. Income
c. Prices of related goods
d. The number of buyers
7. Suppose Spencer and Kate are the only two demanders of lemonade. Each month,
Spencer buys six glasses of lemonade when the price is $1.00 per glass, and he buys
four glasses when the price is $1.50 per glass. Each month, Kate buys four glasses of
lemonade when the price $1.00 per glass, and she buys two glasses when the price is
$1.50 per glass. Which of the following points is on the market demand curve?
a. (quantity demanded = 4, price = $2.50)
b. (quantity demanded = 16, price = $2.50)
c. (quantity demanded = 3, price = $1.50)
d. (quantity demanded = 10, price = $1.00)

8. Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If
the federal government increases the minimum wage by $1.00 an hour it is likely that the
a. Demand for bicycle assembly workers will increase
b. Supply of bicycles will shift to the right
c. Supply of bicycles will shift to the left
d. Firm must increase output to maintain profit levels

Table 1
Price of the Jenn Angel Lily Allison
Good ie a

$0.00 20 16 4 8

0.50 18 12 6 6

1.00 14 10 2 5

1.50 12 8 0 4

2.00 6 6 0 2

2.50 0 4 0 0

9. ​Refer to Table 1. ​If the price increases from $1.00 to $1.50,

a. The market demand decreases by 20 units
b. Individual demand curves, when drawn, will shift to the left
c. The quantity demanded in the market decreases by 2 units
d. The quantity demanded in the market decreases by 7 units

10. ​Refer to Table 1. ​For whom is the good a normal good?

a. For Jennie
b. For Lily
c. For all of the four demanders
d. This cannot be determined from the table
11. Suppose the price of Twinkies decreases from $1.45 to $1.25 and, as a result, the
quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint
method, the price elasticity of demanded for Twinkies in the given price range is
a. 2.00
b. 1.55
c. 1.00
d. 0.65

12. If the price elasticity of demand for a good is 1.65, then a 3 percent decrease in price
results in a
a. 0.55 percent increase in the quantity demanded
b. 1.82 percent increase in the quantity demanded
c. 4.95 percent increase in the quantity demanded
d. percent increase in the quantity demanded

13. Demand is said to be inelastic if the

a. Quantity demanded changes proportionately more than price
b. Price changes proportionately more than income
c. Quantity demanded changes proportionately less than price
d. Quantity demanded changes proportionately the same as price

14. Eric produces jewelry boxes. If the demand for jewelry boxes is elastic and Eric wants
to increase his total revenue, he should
a. Increase the price of his jewelry boxes
b. Decrease the price of his jewelry boxes
c. Not change the price of his jewelry boxes
d. None of the above answers is correct

15. Last year, Joan bought 50 pounds of hamburger when her household’s income was
$40,000. This year, her household income was only $30,000 and Joan bought 60 pounds
of hamburger. All else constant, Joan’s income elasticity of demand for a hamburger is
a. Positive, so Joan considers hamburger to be an inferior good
b. Positive, so Joan considers hamburger to be a normal good and a
necessity
c. Negative, so Joan considers hamburger to be an inferior good
d. Negative, so Joan considers hamburger to be a normal good

Figure 1

1 2
 3 4

​ efer to Figure 1.​​ Which of the four graphs represents the market for peanut butter
16. R
after a major hurricane hits the peanut-growing south?
a. A
b. B
c. C
d. D

​ efer to Figure 1.​​ Which of the four graphs represents the market for winter coats as
17. R
we progress from winter to spring?
a. A
b. B
c. C
d. D

​ efer to Table 2. ​Using the midpoint method, the income elasticity of demand for good
18. R
Y is
a. 2.33 and good Y is a normal good
b. -2.33 and Y is an inferior good
c. -0.43 and Y is an inferior good
d. -0.43 and Y is a law of demand good
19. Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.
This implies that a 20 percent increase in the price of hot dogs will cause the quantity of
mustard purchased to
a. Fall by 200 percent
b. Fall by 40 percent
c. Rise by 200 percent
d. Rise by 40 percent

20. If the quantity supplied responds only slightly to changes in price, then
a. Supply is said to be elastic
b. Supply is said to be inelastic
c. An increase in price will not shift the supply curve very much
d. Even a large decrease in demand will change the equilibrium price only
slightly

21. Which of the following is the determinant of Supply ?

a. Technology
b. Tastes of Consumers
c. Consumer Income
d. Number of Consumers

22. Firm could lower price and still increase revenue if

a. demand is elastic
b. elasticity of demand is equal to zero
c. demand is inelastic
d. elasticity of demand is equal to one

ANSWER KEY
1. C
2. C
3. C
4. C
5. B
6. D
7. D
8. C
9. D
10. D
11. D
12. C
13. C
14. B
15. C
16. D
17. B
18. B
19. B
20. B
21. A
22. A