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Microeconomics questions - supply & demand curves and shifts

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1. According to the text, the price elasticity of demand for oranges has been estimated to be-0.62. This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to decrease or increase by 62 percent?

2. Assume the supply function for good X can be written as Qs = -100 + 27Px - 5Py - 1.8W, where Px = the price of X, Py = the price of good Y, and W = Wage index for workers in industry X. According to this equation:
A) Each one unit increase in price causes quantity supplied to increase by 73 units.
B) A decrease in wages would cause a decrease in the quantity supplied at each price.
C) X and Y are complements
D) X and Y are substitutes

3. Assume the demand function for good X can be written as Qd = 80 - 3Px +2py +IOI, where Px = the price of X, Py = the price of good Y, and I = Consumer income. According to this equation:
A) X and Y are complements
B) because the coefficient on Px is negative, Xis an inferior good
C) because the coefficient on income is positive, X is a giffen good
D) X and Y are substitutes

4. Use this figure, which represents the situation faced by a monopolist, to answer the following question:

For the firm in this figure, the profit-maximizing (loss-minimizing) price and level of output are:
A) P4 and Q1
B) P3 and Q1
C) P1 and Q1
D) P2 and Q2

(See attached for graph)

(See attached for rest of questions)

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Seven questions related to microeconomics: supply and demand curves, and how shifts in them will affect prices and quantities.

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Answers and explanations for common multiple-choice Macroeconomics test questions.

Question #1
What is the short term economic outcome if price levels in the US increase and consumers buy less output as a result?
1. Aggregate demand shifts to the right.
2. Aggregate demand shifts to the left.
3. Aggregate demand does not shift, movement along this curve.

2. Question #2
Suppose that the real wealth of households increases significantly. As a result, the short term impact is that
1. Aggregate demand shifts to the right.
2. Aggregate demand shifts to the left
3. Aggregate demand does not shift, instead there is a movement along this curve.

3. Question #3
When expectations for corporate profits are diminished, economists expect that in the short term
1. Aggregate demand shifts to the right.
2. Aggregate demand shifts to the left.
3. Aggregate demand does not shift, instead there is a movement along this curve.

4. Question #4
If a series of tornados damages factories and infrastructure in the industrial regions of the US, a short term consequence is that
1. Aggregate supply shifts to the right.
2. Aggregate supply shifts to the left.
3. Aggregate supply does not shift, instead there is a movement along this curve.

5. Question #5
If companies invest in more efficient machinery and equipment, then
1. Aggregate supply shifts to the right for the short term.
2. Aggregate supply shifts to the left for the short term.
3. Aggregate supply does not shift, instead there is movement along this curve in the short term.

6. Question #6
If the Environmental Protection Agency significantly relaxes (reduces) environmental regulations, then one short term outcome is that
1. Aggregate supply shifts to the right.
2. Aggregate supply shifts to the left
3. Aggregate supply does not shift, instead there is a movement along this curve.

7. Question #7
In an effort to reduce budget deficits, the federal government decides to reduce its spending. The reduction is likely to impact both real GDP and the aggregate price level in the THE SHORT TERM. In fact:
1. Real GDP increases and the price level decreases.
2. Real GDP decreases and the price level decreases.
3. Real GDP increases and the price level increases
4. Real GDP decreases and the price level increases.

8. Question #8
Suppose that potential shareholders anticipate an increase in profitability so that there is a sharp increase in stock prices. In the short term,
1. Real GDP increases and the price level decreases.
2. Real GDP decreases and the price level decreases.
3. Real GDP increases and the price level increases.
4. Real GDP decreases and the price level increases.

9. Question #9
A widespread technological advance occurs so that the industrial sector of the economy becomes more efficient. In the short run:
1. Real GDP increases and the price level decreases.
2. Real GDP decreases and the price level decreases.
3. Real GDP increases and the price level increases.
4. Real GDP decreases and the price level increases.

10. Question #10
Remarkably, the price of an important raw material decreases. The price change leads to a short term
1. Increases in real GDP and the price level decreases.
2. Decreases in real GDP and the price level decreases.
3. Increases in real GDP and the price level increases.
4. Decreases in real GDP and the price level increases.

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