Principles of Microeconomics (Econ 002) Signature:
Drake University, Spring 2007
William M. Boal Printed name:
MIDTERM EXAMINATION #2 VERSION C
“Applications of Supply and Demand”
March 6, 2007
INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted, but graphing calculators or
calculators with alphabetical keyboards are NOT permitted. Numerical answers, if rounded, must be correct to at least 3
significant digits, but fractions are always acceptable answers. Point values for each question are noted in brackets.
Maximum total points are 100.
I. MULTIPLE CHOICE: Circle the one best answer to each question. [1 pt each, 20 pts total]
(1) The word "benevolent" means
a. "all-powerful."
b. "doing good."
c. "all-knowing."
d. "benefiting only oneself."
(2) If the government wants to raise the price of oranges
it should try to shift
a. the demand for oranges to the left.
b. the supply of oranges to the right.
c. both (a) and (b).
d. neither (a) nor (b) will raise the price of oranges.
(3) Suppose the government buys milk in an effort to
raise its price. Which disposal method will not cause
the price of milk to fall again?
a. Give away surplus milk to consumers.
b. Destroy surplus milk.
c. Sell surplus milk on the open market.
d. None of the above will cause the price of milk to
fall.
(4) Suppose the government institutes a new, more
efficient security system in airports that decreases the
time that passengers must spend in the terminal. By
itself, this would shift
a. the demand for air travel down.
b. the demand for air travel up.
c. the supply of air travel down.
d. the supply of air travel up.
(5) Recently, the supply of soybeans in Brasil has
shifted right. Since soybeans are traded internationally,
this should cause the price of soybeans in the U.S. to
a. fall.
b. remain constant.
c. rise.
d. Cannot be determined from information given.
(6) Currently, the price of sugar in the U.S. is higher
than in other countries, but U.S. restricts international
trade in sugar. If free international trade were
permitted, the U.S. would
a. export sugar.
b. import sugar.
c. be self-sufficient in sugar.
d. Cannot be determined from information given.
(7) The prices of many kinds of food are higher in
Europe than in the United States. Restrictions on trade
in food may be phased out. This change would benefit
a. U.S. food producers and U.S. food consumers.
b. European food producers and European food
consumers.
c. European food producers and U.S. food consumers.
d. U.S. food producers and European food consumers.
(8) Arbitrage causes the prices of the same good at
different locations to
a. both rise.
b. both fall.
c. grow closer together, reducing arbitrageurs' profit.
d. grow farther apart so arbitrageurs can enjoy higher
profit.
