1.A model without any simplifying assumptions

Chapter 1 1.A model without any simplifying assumptions a.is highly complex and likely unworkable.b.excludes important predictive variables.c.is very helpful for solving tough, real-world problems.d.does not look like the real-world problem it is meant to address.e.provides simplified solutions to complex problems.

2.In the context of economic model building, an exogenous variable is a variable a.whose value is unknown or not measured.b.whose value must be determined or explained.c.governed by factors not included in a model.d.that is qualitative rather than quantitative.e.that determines the values of other variables.

3.In an economic model that seeks to explain how the price of gasoline is established, which variable would be most likely to be endogenous?a.the current inflation rate b.the unemployment rate c.national gross domestic product d.the average cost of a new car e.the price of crude oil 4.Which sentence best expresses the optimization principle?a.An economy naturally tends toward maximum output.b.People arrange their consumption to maximize their satisfaction.c.Supply and demand curves both tend to become vertical in the long run.d.Economic models should be simple while including all important variables.e.For a firm to remain in business, it must maximize its revenue.Test Bank for Intermediate Microeconomics with Calculus A Modern Approach 2nd Edition By Hal Varian, Marc Melitz (All Chapters 1-38, 100% Complete and Original Test Bank with Answers) This is the Only Original Test Bank for 2nd Edition, All Other files in the Market are Fake/Old/Wrong Edition.

Note: No Test Questions for Chapter 17.

Answers At the End of Each Chapter. 1 / 4

• Which sentence best expresses the equilibrium principle?
• The price of a good may fluctuate up and down but has a natural level.
• In a good economic model, variables approach constant values in the long

run.

• Supply and demand curves both tend to become vertical in the long run.
• The quantity demanded by people tends to equal the quantity supplied.
• The number of firms in a market tends to remain stable over time.

• In an online auction of a baseball signed by Roberto Clemente, Milo initially bid

$350. His highest and final bid was $550. The winning bid was $680, but because of the way the auction was structured, this bidder ended up paying only $630.Milo had figured that the ball would probably sell for $650. Which price represents Milo’s reservation price?

• $350
• $550
• $630
• $650
• $680

• What naturally happens in a competitive market?
• The number of sellers eventually shrinks to one.
• The number of buyers eventually shrinks to zero.
• The number of buyers eventually equals the number of sellers.
• There is one price for everyone.
• Every buyer pays their reservation price.

• Under what conditions does it make the most sense that the short-run supply

curve would be vertical?

• The quantity to be traded is fixed.
• The price is fixed by government decree.
• The demand curve is horizontal.
• There is just one consumer. 2 / 4

• There is just one supplier.

• Consider a farmer’s market where fresh watermelons are being sold. The sellers

come to the market with a fixed number of melons, all of which they want to sell that day. If the sellers all post a starting price of $9 per watermelon but most buyers have a reservation price of $7, what will happen?

• The supply curve will gradually rotate from vertical to horizontal.
• The supply curve will shift right to achieve equilibrium.
• The demand curve will shift left as buyers refuse to pay $9 per watermelon.
• The demand curve will shift right as buyers’ reservation prices rise.
• The sellers’ posted price will quickly drop to $7 or less.

• Every morning, a farmer offers 20 dozen fresh eggs for sale. The farmer’s

customers have a range of reservation prices: one is willing to pay up to $10 per dozen, one is willing to pay $9.75, one is willing to pay $9.50, and so on down in 25-cent increments.Under ideal market conditions, at what price will the farmer offer the eggs for sale in order to sell all of them? Assume that the farmer has no nearby competitors.

• $5.25 per dozen
• $5.00 per dozen
• $4.75 per dozen
• $4.50 per dozen
• $4.25 per dozen

• According to a supply and demand model for houses, if the average household

income decreases at the same time that 1,000 new houses are completed, one would expect the short-run equilibrium

• quantity of houses in the market to increase. The price might go either up

or down.

• price of houses in the market to increase and the equilibrium quantity of

houses to decrease.

• price of houses in the market to decrease and the equilibrium quantity of

houses to increase.

• price of houses in the market to increase, and the equilibrium quantity of

houses to increase, as well. 3 / 4

e.price of houses in the market to decrease. The quantity might go either up or down.

• If bad weather results in a poor wheat crop at the same time as more people

become allergic to wheat, what does a supply and demand model predict will happen to the equilibrium price of wheat in the short run, and to the quantity of wheat traded?a.The price of wheat will decrease. The quantity traded could go up or down.b.The price of wheat will increase and the quantity traded will decrease.c.The price of wheat will increase, and so will the quantity traded.d.The price of wheat will decrease and the quantity traded will increase.e.The quantity of wheat traded will decrease. The price could go up or down.

• In a certain large city, the going rate for parking in one of the privately-owned lots

is $3 per hour. There are many small firms on the supply side, each of which owns and operates just two or three lots. Now suppose that one of these firms buys out all the others, so that the market in downtown parking spaces becomes a monopoly. What will happen to the hourly price of parking?a.It will remain unchanged at $3.b.It could remain unchanged at $3 but will likely go up.c.It will definitely go above $3.d.It could remain unchanged at $3 but will likely go down.e.It will definitely go below $3.

• Every morning, a farmer offers 50 pint-sized baskets of fresh strawberries for

sale. The farmer’s customers have a range of reservation prices: one is willing to pay up to $10 per pint, one is willing to pay $9.75, one is willing to pay $9.50, and so on down in 25-cent increments.Under ideal market conditions, at what price will the farmer offer the strawberries for sale in order to maximize the total revenue earned? Assume that unsold strawberries are discarded at the end of the day. Assume also that the farmer has no nearby competitors.a.$8.00 per pint b.$7.00 per pint c.$6.00 per pint

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