Graded Homework

STUDENT NAME

ID NUMBER S0000001731

DATE 8/7/2016

Assignment Cover Sheet

COURSE NAME	ECON 260
COURSE NUMBER	Fundamentals of Microeconomics
INSTRUCTOR NAME
Assignment NAME	Assignment, Summer I, 2015-2016

Course Learning Outcomes:

K2.	Evaluate and apply Microeconomic theory to solving problems of price and output.
S1.	Explain the impact of various types of government policy on rent control and price regulation, and forecast how exogenous events may affect market price and output.
S2.	Calculate producer and consumer surplus.
S3.	Discuss how differences in market structure affect price and output, and explain how consumer make purchasing choices.
S4.	Demonstrate the preparation of various budgets and use the budget as a tool for planning and control.

Question	1	2	3	4	TOTAL
CLOs	( K2, S1,S3 )	( K2, S2, S3,S4 )
Value	6	9			15
Result

Answer each question of the following
parts (15 Marks)

Part 1.Choose the correct answer of the
following: (6 Marks)

1- The
law of demand states that an increase in the price of a good

A- Decreases
the demand for the good

B- Increases
the supply of the good

C- Decreases
the quantity demanded for that good

D- Increases
the quantity supplied of that good

2- The
price elasticity of demand is defined as

A- The
percentage change in price of a good divided by the percentage change in the
quantity demanded of that good

B- The
percentage change in the quantity demanded of a good divided by the percentage
change in the price of that good

C- The
percentage change in income divided by the percentage change in the quantity
demanded

D- The
percentage change in the quantity demanded divided by the percentage change in
income

3- The
law of supply states that an increase in the price of a good

A- Increases
the quantity supplied of the good

B- Decreases
the demand for the good

C- Decreases
the quantity demanded for that good

D- Increases
the supply of the good

4- If
an increase in consumer incomes leads to a decrease in the demand for camping
equipment, then camping equipment is:

A- A
complementary good

B- A
substitute good

C- An
inferior good

D- A
normal good

5- All
of the following shift the supply of watches to the right except

A- An
increase in the price of watches

B- An
advance in the technology used to manufacture watches

C- A
decrease in the wage of workers employed to manufacture watches

D- Manufactures’
expectations of lower watch prices in the future

6- If
the price of a good is above the equilibrium price,

A. There
is a surplus and the price will rise

B. There
is a surplus and the price will fall

C. There
is a shortage and the price will rise

D. There
is a shortage and the price will fall

7- Perfectly
competitive market has

A.
Only one seller

B.
Many buyers and sellers

C.
At least a few sellers

D.
Firms that set their own prices

8- If
the price of a good is below the equilibrium price,

A- There
is a shortage and the price will rise

B- There
is a surplus and the price will rise

C- There
is a surplus and the price will fall

D- There
is a shortage and the price will fall

9- If
the price of a good is equal to the equilibrium price,

A- There
is a surplus and the price will rise

B- There
is a surplus and the price will fall

C- There
is a shortage and the price will rise

D- The
quantity demanded is equal to the quantity supplied and the price remains
unchanged

10- An
increase (rightward shift) in the demand for a good will tend to cause

A- A
decrease in the equilibrium price and quantity

B- An
increase in the equilibrium price and quantity

C- An
increase in the equilibrium price and a decrease in the equilibrium quantity

D- A
decrease in the equilibrium price and an increase in the equilibrium quantity

11- An
inferior good is one for which an increase in income causes a(n)

A- Decrease
in demand

B- Increase
in supply

C- Decrease
in supply

D- Increase
in demand

12- If
a small percentage increase in the price of a good greatly reduces the quantity
demanded for that good, the demand for the good is

A- Price
inelastic

B- Unit
price elastic

C- Income
inelastic

D- Price
elastic

13- If
an increase in the price of blue jeans leads to an increase in the demand for tennis
shoes, then blue jeans and tennis shoes are:

A- Complements

B- Substitutes

C- Normal
goods

D- Inferior
goods

14- If
the income elasticity of demand for a good is negative, it must be

A- A
luxury good

B- An
inferior good

C- A
normal good

D- An
elastic good

15- If
consumers think that there are very few substitutes for a good, then

A- Supply
would tend to be price elastic

B- Supply
would tend to be price inelastic

C- Demand
would tend to be price elastic

D- Demand
would tend to be price inelastic

16- If
the demand for a given product is inelastic, a 3 percent increase in the price
will

A- Decrease
the quantity demanded by more than 3 percent

B- Increase
the quantity demanded by more than 3 percent

C- Decrease
the quantity demanded by less than 3 percent

D- Increase
the quantity demanded by less
than 3 percent

17- A
decrease (leftward shift) in the supply for a good will tend to cause

A- An
increase in the equilibrium price and quantity

B- A
decrease in the equilibrium price and quantity

C- A
decrease in the equilibrium price and an increase in the equilibrium quantity

D- An
increase in the equilibrium price and a decrease in the equilibrium quantity

18- Which
of the following shifts the demand for watches to the right?

A. A
decrease in the price of watches

B. A
decrease in consumer incomes if watches are a normal good

C. A
decrease in the price of watch batteries if watch batteries and watches are
complements

D. An
increase in the price of watches

19- Which
of the following would cause a demand curve for a good to be price inelastic?

A- There
are a great number of substitutes for the good

B- The
good is necessity

C- The
good is inferior

D- The
good is a luxury

20-Suppose
there is an increase in both the supply and demand for personal computers. In
the market for personal computers, we would expect the

A- Equilibrium
quantity to rise and the equilibrium price to rise

B- Equilibrium
quantity to rise and the equilibrium price to fall

C- Equilibrium
quantity to rise and the equilibrium price to remain constant

D- Equilibrium
quantity to rise and the change in the equilibrium price to be ambiguous

Part 2.Suppose that you have been hired as an economic consultant
by OPEC and given the following schedule showing the world demand and supply
for oil: (9 Marks)

Price ($/barrel)	Quantity Demanded (millions of barrels/day)	Quantity Supplied (millions of barrels/day)
10	60	20
20	50	30
30	40	40
40	30	50
50	20	60

Your advice is needed
on the following questions:

1- What
is the price, quantity demandedandquantity supplied in equilibrium situation?
(use the diagram)

2- What
are the values of the price elasticity of booth demand and supply for price
changes from $20 to $30 a barrel? What are the kind of demand and supply?

3- If
the price raises from $20 to $30 a barrel, will the total revenue from oil sales
increase or decrease? Why?

4-If the price of oil decrease fromequilibrium price $30 to
new price $20 then:

–
What do we call the gap between the quantity
demanded and quantity supplied? (use the diagram)

–
What is its value?

–
What is your advice to return to the equilibrium
situation?