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111T2answers - E C l4 0 W IAN/VJ“ 111: Testl 125' ,%...

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Unformatted text preview: E C l4 0 W IAN/VJ“ 111: Testl 125' ,% Name: 1) The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the A) price of furniture will increase the quantity of furniture demanded by 1.3 percent. B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent. C) quantity of furniture demanded will decrease the price of furniture by 1.3 percent. D) quantity of furniture demanded will increase the price of furniture by 1.3 percent. 2) Demand is perfectly inelastic when A) shifts in the supply curve results in no change in price. B) the good in question has perfect substitutes. C) shifts of the supply curve results in no change in quantity demanded. D) shifts of the supply curve results in no change in the total revenue from sales. 3) The demand for movies is unit elastic if A) a 5 percent decrease in the price leads to an infinite increase in the quantity demanded. B) a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded. C) any increase in the price leads to a 1 percent decrease in the quantity demanded. -D) a 5 percent increase in the price leads to a 5 percent increase in total revenue. 4) Price O l 2 3- .4 Quantity 'wmamezmmvmmmfimmyxmmmmmuWhmcmmuxmmmmsmmfim * In the above figure, which demand curve illustrates perfectly elastic demand? A) G B) H C) | ‘D) J Q on Price [dollars per unit} 0 0‘ 10' 20 30 4'0 50 " 60 ' Quantity {units} 5) The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is A) greater in the $8 to $10 range. B) greater in the $2 to $4 range. C) the same in both price ranges. D) greater in the $8 to $10 range when the price rises but greater in the $2 to $4 range when the price falls. 6) The figure above illustrates a linear demand curve. It the price falls from $8 to $6, A) total revenue increases. B) total revenue decreases. C) total revenue remains unchanged. D) the quantity demanded increases by less than 20 percent. 7) Producers total revenue will increase if A) income increases and the good is an inferior good. B) the price rises and demand is elastic. C) the price rises and demand is inelastic. D) income falls and the good is a normal good. 8) The demand for a good is more price elastic A) if closer substitutes are available. B) if the good is a necessity rather than a luxury. C) if the share of the good in the average consumer’s budget is smaller. D) in the short run than in the long run. 9) Of the following, demand is likely to be the least elastic for A) Ford automobiles. B) Toyota automobiles. C) compact disc players. D) tooth picks. 10) An increase in subway fares in New York City will boost your expenditures on subway rides if A) the supply of subway rides is elastic. B) the supply of subway rides is inelastic. C) your demand for subway rides is elastic. D) your demand for subway rides is inelastic. 11) Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand? A) "A price cut won’t help me. It won’t increase my sales, and I’ll just get less money for each unit.” ' B) “I don’t think a price cut will help my bottom line any. Sure, I’ll sell a bit more, but I’ll more than lose because the price will be lower." C) “My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming.” D) “The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!" 12) The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of A) its substitutes and its complements. B) its substitutes but not its complements. C) its complements but not its substitutes. D) neither its substitutes nor its complements. i 13) If a fall in the price of good A increases the quantity demanded of good B, A) A and B are substitutes. B) A and B are complements. C) A is a substitute for B, but B is a complement to A. D) B is a substitute for A, but A is a complement to B. 14)\Bus rides and canned soup are inferior goods, so the elasticity of demand is A) cross; positive B) income; positive C) income; negative D) cross; negative 15) The elasticity of supply measures the responsiveness of the A) quantity demanded to changes in supply. _ B)-quantity supplied to changes in demand. C) quantity supplied to changes in price. D) quantity supplied to changes in income. 16) The willingness to pay curve is the same as A) the demand curve, but not the marginal benefit 'curve. B) the demand curve and the marginal benefit curve. C) the marginal benefit curve, but not the demand curve. D) neither the marginal benefit curve nor the demand curve. 17) Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus? A) $2 B) $9 0) $3 D) $10 18) If the market price of a pizza increases and the demand curve for pizza does not shift, then the consumer surplus from pizza will A) increase B) decrease C) equal the producer surplus if the market produces the efficient quantity of pizza D) remain the same 19) The market demand curve for CBS is the of all the individual demand curves for CDs. A) horizontal product B) horizontal sum C) vertical sum D) vertical product 20) The marginal cost curve A) shows the maximum price that a producer must receive to induce it to produce a unit of a good or service. B) shows the minimum price sellers must receive to produce a unit of a good or service. C) is the same as the demand curve. D) shows what buyers are willing to give up to get one more unit of a good or service. 21) To cover all her costs of production, Sarah knows that she must Sell her first bushel of sunflower seeds for $5.00. She simply cannot accept any lower price and remain in business. When she sells this bushel for $5.50, she earns a producer surplus on this bushel of A) $5.50. B) $5.00. C) $0.50. D) zero. N N V S'mMSC Price {dollars per snowboard) :3. <5 D=MSB C 1 {JD 203 300 #00 500 6042! Glmn‘lily [snowboards per dcrfi What area in the above figure is the consumer surplus at the efficient quantity? A)A. mA+B+c C)F. 'D)D+E+F. 23) Which area in the above figure is the deadweight loss if 100 snowboards are produced? A) A + B + C B) D + E + F C) C + E . D) There is no deadweight loss when 100 snowboards are produced. _ 24) Overproduction compared to the efficient amount implies that for the last unit produced A) marginal social benefit exceeds marginal social cost. B) marginal social benefit equals marginal social cost. C) marginal social cost exceeds marginal social benefit. D) the deadweight loss is zero. N (J1 V R'ent [dollars per month) 012345678910“ Quanlily [thousands 0F unils per month] In the above figure, a rent ceiling of $300 per month would A) not affect the equilibrium quantity. B) result in a surplus of 7000 units. C) result in a shortage of 7000 units. D) result in a shortage of 2000 units. 26) Fflca ; _. v5 ah tax on seller‘s 9:: 511 Quantity To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Referring to the above figure, how much tax per unit has the government imposed? A) cb B) db C) ab D) ca ' 27) To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. The sport equipment producers share of this tax would be greater than shown in the above figure if A) the demand was more elastic. B) the demand was more inelastic. C) the supply was more elastic. D) Both answers A and C are correct. 28) Suppose the government wants to discourage the use of cigarettes. If it imposes a tax on cigarettes, the equilibrium quantity falls the most when the elasticity of demand equals A) 2.00. B) 1.00. C) 0.50. D) 0. 29) On Green island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly inelastic. If a sales tax on pencils is introduced, ‘ A) the tax is split evenly between the buyers and sellers B) the buyers pay the entire tax C) no one pays the tax D) the sellers pay the entire tax 30) If demand is elastic, a leftward shift of the supply curve will A) decrease total revenue. B) increase total revenue. C) have no effect on total revenue. D) decrease the demand for the good. 31) If the demand for an agricultural good is inelastic, then a crop failure results in a higher price and farm revenue will - A) decrease B) increase C) either remain constant or increase D) remain constant 32) Making the buying and selling of a good illegal shifts the demand curve and shifts the supply curve . A) rightward; rightward B) rightward; leftward C) leftward; rightward D) leftward; leftward 33) After the initial decrease in supply, as part of the long-run adjustment of the housing market following the San Francisco earthquake, the A) long-run supply curve shifted leftward. B) long—run supply curve shifted rightward. C) short-run supply curve shifted rightward. D) short-run supply curve shifted even more leftward. 2x: 34) Suppose the government imposes a price ceiling on gasoline that is less than the equilibrium price. As a result, _ V A) the price of gasoline rises to the equilibrium price. B) there is incentive for buyers to undertake search activity. C) the supply of gasoline will increase and the supply curve will shift rightward. ,r D) the demand for gasoline will decrease and the demand curve will shift leftward. 35) In the absence of a minimum wage, a decrease in the demand for low -skilled labor will the wage rate when the supply of low—skilled labor is A) lower; inelastic B) lower; perfectly elastic C) raise; inelastic D) raise; perfectly elastic 36) Wage: rate [dollars 1: er hour) Labor supplied Labor demanded (millions of (millions: of workers) worker’s In the table above, what is the equilibrium wage rate in an unregulated market? A) $4.00 per hour B) $5.00 per hour C) $6.00 per hour D) $7.00 per hour 37) In the table above, what is the level of unemployment (in millions of workers) if the minimum wage is set at $4 per hour? A) 0. B) 1. C) 3. D) 4. 38) A sales tax is imposed on the sellers of gasoline. This tax shifts A) the supply of gasoline curve leftward. B) the supply of gasoline curve rightward. C) the demand for gasoline curve leftward. D) both the supply curve of gasoline and demand curve for gasoline leftward. 39) In general, how a sales tax is divided between buyers and sellers is determined by A) the government’s choice of whom to tax. B) who the law says must pay the tax. C) the elasticities of supply and demand. D) the revenue needs of government. 40) The more elastic the demand for a good, the A) less a sales tax lowers the price paid by buyers. B) more a sales taxilowers therprice paid by buyers. C) less a sales tax raises the price paid by buyers. D) more a sales tax raises the price paid by buyers. ...
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This note was uploaded on 04/06/2008 for the course ECON 111 taught by Professor Farrant during the Spring '08 term at Dickinson.

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111T2answers - E C l4 0 W IAN/VJ“ 111: Testl 125' ,%...

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