2024-2025 Fall Semester

ECON 211
Instructor: Seven Ağır
Student Assistants: Rüveyda Yıldız, Esra Altın

PROBLEM SET 1

PROBLEMS
Q1. Define the terms “economics” and “scarcity”.

Q2. Please explain briefly following questions

a) What is the opportunity cost?

b) What do you understand by "rational decision-making"?

Q3. According to the Marginal Benefit (MB) and the Marginal Cost (MC) concept,
would you advise producing more, less or the current level of production?
a) 45,000 units at which MC=15 TL and MB=18

b) 6 units at which MC= 10 TL and MB=10 TL

c) 310 units at which MB= 82 TL and MC= 91 TL

d) 812 units where MB< MC

Q4. The market for cinema tickets is affected by each event listed below. Consider each event
separately and determine whether demand or supply is affected, the effect on the supply/demand
curve (shift/movement along) and its direction and the final impact on the equilibrium price and
quantity.
a) There is an increase in the real income.

b)The commission paid to film distributors by the cinemas falls.

c) The price of internet film services rises.

d)The price of electricity rises.

e) Nationwide marketing campaign on internet film services shifts preferences towards the
internet film services.

f) The price of popcorn (regarding it as a complementary good) rises.

Q5. Explain why the supply curve has a positive intercept with price axis.

Q6. The data in the table below shows the demand and supply for digital cameras at various prices.

Price (£) Quantity demanded Quantity supplied

(millions per year) (millions per year)

16 140 20

32 120 60

48 100 100

64 80 140

80 60 180

a) Plot the demand and supply curves on a diagram.

b) Write supply and demand equations.
c) Indicate excess demand and supply for each price level.
d) What would be the excess demand or supply if the price was set at £32?
e) What would be the excess demand or supply if the price was set at £80?
f) What is the equilibrium price and quantity?
g) If income rises and demand, as a result, rises by 20 million units at each level, what will be
the new equilibrium price?
Q7. Explain the methods used to solve rationing problem in economics.

Q8. What is one reason, besides individual consumer behavior (as existing buyers demand more/less), that
explains why the market demand curve slopes downward?

MULTIPLE CHOICE QUESTIONS

Q1. Which of the following problems cannot be classified as a microeconomic issue?

a) The effect of higher cigarette taxes on the quantity of cigarettes sold.
b) The effect of higher income taxes on the total amount of consumer spending.
c) The reasons for low rates of the profit in the airline industry.
d) The problem of reducing pollution from steel production.

Q2. Which of the following concepts could be classified under positive economics?
a) The government should decrease taxation in order to increase the disposable income
level.
b) Women should be provided higher school loans than men.
c) Locals have started a nationwide movement to push for a 15 $ minimum wage
d) The government should make available fundamental healthcare to every citizen.

Q3. During the time Mehmet can solve this problem set, he could instead have practiced
soccer or done his math homework. What is the opportunity cost of solving this problem set?
a) Practicing soccer
b) Doing his math homework
c) Practicing soccer and doing his math homework
d) The time taken to solve the problem set
Q4. Which of the following is not one of the key ideas of economics?
a) people are rational

b)economic agents expect the highest payoff without considering the

conditions

c) people respond to economic incentives

d) optimal decisions are made at the margin

Q5. Which of the following is not one of the steps of creating economic models?
a) Formulating a testable hypothesis
b) Deciding on the assumptions to use in developing the model
c) Using data on random fields to test the hypothesis
d) Revising the model if it fails to explain the data

Q6. Which of the following is not considered as factors of production?

a) Capital
b) Labor
c) Technical skills
d) Entrepreneurial ability

Q7.
I- most economic decisions result from the interaction of buyers and sellers in markets
II- government does not protect the private property
III- governments perform a crucial role on the allocation of resources
Which of the above statement(s) could be regarded as true for the mixed economy?
a) only I
b) only II
c)I, II and III
d) 1 and III

Q8. If the price of cheeseburgers rises, then in the market for pizza:
a) supply increases and quantity demanded increases.
b) demand increases and quantity supplied increases.
c) supply decreases and quantity demanded decreases.
d) demand decreases and quantity supplied decreases.
 Q9. In the figure above, which movement reflects an increase in demand?

a) From point a to point e.

b) From point a to point b.
c) From point a to point c.
d) From point a to point

Q10. Which of the following statements about economic resources is true?

A) Economic resources include financial capital and money.

B) Economic resources are also called factors of production.
C) Economic resources are used only by businesses.
D) All economic resources are man-made.

Q11. Which of the following best defines rational behavior?

A) Analyzing the total gains from a decision

B) Improving net gain by pursuing decisions as long as the marginal benefits exceed the
marginal costs
C) Seeking to gain by choosing to undertake actions as long as the marginal costs exceed
the associated marginal benefits
D) Seeking to maximize total gain regardless of cost

Q12. When a market experiences a shortage, how is the equilibrium restored?

A) Producers decrease the price to reduce demand.

B) Consumers reduce their purchases, bringing down demand.
C) Prices rise, encouraging producers to supply more and consumers to demand less.
D) Government intervention fixes the price to reduce demand.
Q13. If the price of a good is set below the equilibrium price, what is the most likely result?

A) Excess supply will occur, as producers supply too much.

B) A shortage will occur, as quantity demanded exceeds quantity supplied.
C) The market will remain at equilibrium because of government control.
D) Demand will decrease, and supply will increase, keeping the market stable.

Q14. How does a market typically respond to a price above the equilibrium level?

A) Producers will decrease supply to match the lower demand.

B) Consumers will purchase more, bringing the market back to equilibrium.
C) Prices will naturally fall as producers compete to sell their excess inventory.
D) The government will increase taxes to reduce supply.

Q15. As a member of the “Hungry for Apples?” national advertising campaign you are charged with
analyzing future trends in Apple prices. The estimated demand and supply curve for apples is displayed
below. If the current price is $100/ton, by how much must prices change before the market is in
equilibrium? Is there currently a surplus or shortage in the current market for apples?

A) There is a shortage. The price must drop by $10/ton.

B) There is a shortage. The price must increase by $10/ton.
C) There is a surplus. The price must drop by $10/ton.

Q16. What best describes the concept of diminishing marginal utility?

A. The total utility derived from consuming a good increases at a decreasing rate as more of the good
is consumed.
B. The satisfaction from each additional unit of a good increases as more of the good is consumed.
C. Consumers receive the same level of utility from every unit of a good they consume.
D. The utility from consuming a good decreases only after consuming a very large quantity.

Q17. Which of the following does NOT cause a shift in the demand curve?"
A. Income
B. Wealth
C. Tastes
D. Expectations
E. Price of the good
TRUE/FALSE
1. Free market occurs when prices are determined by supply and demand interactions, with
government controlling the quantity produced.

2. Economic agents are households, firms, and the government.

3. With specialization in trade, both parties are able to consume more.

4. Productive efficiency could be defined as production accordance with the consumer

preferences whereas allocative efficiency could be defined as production in the lowest
possible cost.

5. Illusionary(sunk) costs are associated with a decision that often are not included in normal
accounting costs.

6. Economic cost includes only explicit costs.

7. A change in factors other than the price of a good leads to a shift in the demand curve

8. Rational decision-making does not consider sunk costs, but in reality, people often fall into
the sunk cost fallacy.

9. The determinants of a shift in the supply curve are the price of the good and the cost of production.