PPSC Economics Topic 6 Economics Models

Question # 1

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

There will be excess demand A
There will be excess supply B
The curves will shift to make a new equilibrium at the regulated price C
None of the above D

Question # 2

Consumers and firms are known as price takers only it

No market exists to determine the equilibrium price A
they can set the market price B
They cannot effect the market price C
Excess demand exists D

Question # 3

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

Shift leftward A
Shift rightward B
Remain unchanged C
Disappear D

Question # 4

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

Since this good is bad for you, you should not consume it. A
this good is bad for you B
If you consume this good you will get sick C
People usually get sick after consuming this good D

Question # 5

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

Workers who wish to work at the minimum wage will have a difficult time finding jobs. A
Firms will hire fewer workers than without the minimum wage law. B
Some workers may lose their jobs as a result C
Nothing will happen to the wage rate or employment D

Question # 6

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

a price of zero A
An increase in price B
A decrease in price C
No change in price D

Question # 7

It is appropriate to use the supply and demand model if in a market.

Everyone is a price taker with full information about the price and quantity of the good. A
Firms sell identical products B
Costs of trading are low C
All of the above D

Question # 8

A competitive equilibrium is described by

A price only A
A quantity only B
The excess supply minus the exceess demand. C
A price and a quantity D

Question # 9

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

Force the model to yield the correct answer A
Minimize the amount of work an economist must do B
simplify the model while keeping important details. C
Express the relationship mathematically. D

Question # 10

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

Are irrational A
Are not sensitive to price changes B
View this good as identical to another good C
Have no equivalent substitutes for this good D

Question # 11

If the price of orange juice rises 10% and as a result the quantity demanded falls by 8% the price elastic of demand for orange juice is.

-1.25 A
Inelastic B
Both a and b C
Neither A nor B above D

Question # 12

Economists tend to judge a model based upon

the realty of its assumptions A
The accuracy of its predications B
Its simplicity C
Its complexity D

Question # 13

As the price of a good increases, the change in the quantity demanded can be shown by

Shifting the demand curve leftward A
Shifting the demand curve rightward B
Moving down along the same demand curve C
Moving up long the same demand curve D

Question # 14

If price is initially above the equilibrium level.

the supply curve will shift rightward A
The supply curve will shift letward B
Excess supply exists C
All firms can sell as much as they want D

Question # 15

Most Microeconomic models assume that decision makers wish to.

Make themselves as well off as possible A
Act selfishly B
Not cooperate with others C
None of the above D

Question # 16

Equilibrium is defined as a situation in which.

Neither buyers nor sellers want to change their behavior A
No government regulations exist B
Demand curves are perfectly horizontal C
suppliers will supply and amount that buyers wish to buy D

Question # 17

The percentage change in the quantity demanded in response to a percentage change in the price is known as the.

slope of the demand curve A
Excess demand B
Price elasticity of demand C
All of the above D

Question # 18

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

Sensitive to changes in the price of that good A
Not sensitive to changes in the price of that good. B
Irrational C
Not interested in that good D

Question # 19

A vertical demand curve results in.

No change in quantity when the supply curve shifts. A
No change in price when the supply curve shifts B
No change in the supply curve being possible C
No change in quantity when the demand curve shifts. D

Question # 20

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

shift rightward A
Shift left eard B
Remain unchanged C
Become steeper D

Sr.#	Question	Answer
1	Consumers and firms are known as price takers only it	A. No market exists to determine the equilibrium price B. they can set the market price C. They cannot effect the market price D. Excess demand exists
2	To determine the total demand for all consumers sum the quantity each consumer demands.	A. At a given price B. At all prices and then sum this amount across all consumers C. Both a and b will generate the same total demand D. None of the above
3	As the price of a good increases, the change in the quantity demanded can be shown by	A. Shifting the demand curve leftward B. Shifting the demand curve rightward C. Moving down along the same demand curve D. Moving up long the same demand curve
4	If a government imposed price celling causes the observed price in a market to be below the equilibrium price.	A. There will be excess demand B. There will be excess supply C. The curves will shift to make a new equilibrium at the regulated price D. None of the above
5	In the labor market if the government imposes a minimum wage that is below the equilibrium wage then.	A. Workers who wish to work at the minimum wage will have a difficult time finding jobs. B. Firms will hire fewer workers than without the minimum wage law. C. Some workers may lose their jobs as a result D. Nothing will happen to the wage rate or employment
6	A vertical demand curve for a particular good implies that consumers are.	A. Sensitive to changes in the price of that good B. Not sensitive to changes in the price of that good. C. Irrational D. Not interested in that good
7	If the price of automobiles were to increase substantially the demand curve for gasoline would most likely	A. Shift leftward B. Shift right ward C. Become flatter D. Become steeper
8	For a given positively sloped supply curve the price increase to consumers resulting from a specific tax imposed on sellers will be.	A. Greater the more price elastic demand is B. Greater the less price elastic demand is C. Equal to the entire tax when demand is perfectly elastic D. Equal to half of the tax whenever demand is unit elastic
9	A vertical demand curve results in.	A. No change in quantity when the supply curve shifts. B. No change in price when the supply curve shifts C. No change in the supply curve being possible D. No change in quantity when the demand curve shifts.
10	The percentage change in the quantity demanded in response to a percentage change in the price is known as the.	A. slope of the demand curve B. Excess demand C. Price elasticity of demand D. All of the above

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