Good Guy Beket
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Hell on Earth Economics [Teacher: Abdinova Makpal ; Final Exam + Quizzes] ▼ (Quizzes #2 & #3 [Chapters 1-3, 4-6, 13-17-18, 23-24]) Quiz on Quiz #2/3 [MCQ | Chapter 4-6], created by Good Guy Beket on 02/12/2018.

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Good Guy Beket
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Quiz #2/3 [MCQ | Chapter 4-6]

Question 1 of 60

1

A perfectly competitive market has

Select one of the following:

  • firms that set their own prices.

  • only one seller.

  • at least a few sellers.

  • many buyers and sellers.

  • none of these answers.

Explanation

Question 2 of 60

1

If an increase in the price of blue jeans leads to an increase in the demand for
tennis shoes, then blue jeans and tennis shoes are:

Select one of the following:

  • complements.

  • inferior goods.

  • normal goods.

  • none of these answers.

  • substitutes.

Explanation

Question 3 of 60

1

The law of demand states that an increase in the price of a good

Select one of the following:

  • increases the supply of that good.

  • decreases the quantity demanded for that good.

  • decreases the demand for that good.

  • increases the quantity supplied of that good.

  • none of these answers.

Explanation

Question 4 of 60

1

The law of supply states that an increase in the price of a good

Select one of the following:

  • none of these answers.

  • increases the quantity supplied of that good.

  • increases the supply of that good.

  • decreases the demand for that good.

  • decreases the quantity demanded for that good.

Explanation

Question 5 of 60

1

If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is

Select one of the following:

  • a normal good.

  • none of these answers.

  • an inferior good.

  • a substitute good.

  • a complementary good.

Explanation

Question 6 of 60

1

A monopolistic market has

Select one of the following:

  • many buyers and sellers.

  • none of these answers.

  • firms that are price takers.

  • only one seller.

  • at least a few sellers.

Explanation

Question 7 of 60

1

Which of the following shifts the demand for watches to the right?

Select one of the following:

  • an increase in the price of watches

  • none of these answers

  • a decrease in the price of watch batteries if watch batteries and watches are complements

  • a decrease in consumer incomes if watches are a normal good

  • a decrease in the price of watches

Explanation

Question 8 of 60

1

All of the following shift the supply of watches to the right except

Select one of the following:

  • an advance in the technology used to manufacture watches.

  • an increase in the price of watches.

  • All of these answers cause an increase in the supply of watches.

  • a decrease in the wage of workers employed to manufacture watches.

  • manufacturers' expectation of lower watch prices in the future.

Explanation

Question 9 of 60

1

If the price of a good is above the equilibrium price,

Select one of the following:

  • there is a surplus and the price will rise.

  • there is a shortage and the price will fall.

  • there is a shortage and the price will rise.

  • the quantity demanded is equal to the quantity supplied and the price remains unchanged.

  • there is a surplus and the price will fall.

Explanation

Question 10 of 60

1

If the price of a good is below the equilibrium price,

Select one of the following:

  • there is a shortage and the price will rise.

  • the quantity demanded is equal to the quantity supplied and the price remains unchanged.

  • there is a shortage and the price will fall.

  • there is a surplus and the price will rise.

  • there is a surplus and the price will fall.

Explanation

Question 11 of 60

1

If the price of a good is equal to the equilibrium price,

Select one of the following:

  • there is a shortage and the price will fall.

  • the quantity demanded is equal to the quantity supplied and the price remains unchanged.

  • there is a surplus and the price will rise.

  • there is a shortage and the price will rise.

  • there is a surplus and the price will fall.

Explanation

Question 12 of 60

1

An increase (rightward shift) in the demand for a good will tend to cause

Select one of the following:

  • an increase in the equilibrium price and quantity.

  • none of these answers.

  • an increase in the equilibrium price and a decrease in the equilibrium quantity.

  • a decrease in the equilibrium price and an increase in the equilibrium quantity.

  • a decrease in the equilibrium price and quantity.

Explanation

Question 13 of 60

1

A decrease (leftward shift) in the supply for a good will tend to cause

Select one of the following:

  • an increase in the equilibrium price and quantity.

  • a decrease in the equilibrium price and an increase in the equilibrium quantity.

  • none of these answers.

  • a decrease in the equilibrium price and quantity.

  • an increase in the equilibrium price and a decrease in the equilibrium quantity.

Explanation

Question 14 of 60

1

Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect

Select one of the following:

  • the equilibrium quantity to rise and the equilibrium price to rise.

  • the equilibrium quantity to rise and the equilibrium price to fall.

  • the equilibrium quantity to rise and the equilibrium price to remain constant.

  • the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise.

  • the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

Explanation

Question 15 of 60

1

Suppose there is an increase in both the supply and demand for personal computers. Further, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect

Select one of the following:

  • the change in the equilibrium quantity to be ambiguous and the equilibrium price to fall.

  • the equilibrium quantity to rise and the equilibrium price to rise.

  • the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

  • the equilibrium quantity to rise and the equilibrium price to fall.

  • the equilibrium quantity to rise and the equilibrium price to remain constant.

Explanation

Question 16 of 60

1

Which of the following statements is true about the impact of an increase in the price of lettuce?

Select one of the following:

  • Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall.

  • The supply of lettuce will decrease.

  • The demand for lettuce will decrease.

  • The equilibrium price and quantity of salad dressing will fall.

  • The equilibrium price and quantity of salad dressing will rise.

Explanation

Question 17 of 60

1

Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice?

Select one of the following:

  • Price will decrease; quantity is ambiguous.

  • The impact on both price and quantity is ambiguous.

  • Price will increase; quantity will increase.

  • Price will increase; quantity will decrease.

  • Price will increase; quantity is ambiguous.

Explanation

Question 18 of 60

1

Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples?

Select one of the following:

  • There is an increase in the quantity demanded of apples and in the supply for apples.

  • There is an increase in the demand and supply of apples.

  • There is an increase in the demand for apples and a decrease in the supply of apples.

  • There is a decrease in the quantity demanded of apples and an increase in the supply for apples.

  • There is an increase in the demand for apples and an increase in the quantity supplied of apples.

Explanation

Question 19 of 60

1

Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?

Select one of the following:

  • The impact on both price and quantity is ambiguous.

  • Price will decrease; quantity is ambiguous.

  • Price will increase; quantity will decrease.

  • Price will increase; quantity is ambiguous.

  • Price will increase; quantity will increase.

Explanation

Question 20 of 60

1

An inferior good is one for which an increase in income causes a(n)

Select one of the following:

  • decrease in supply.

  • increase in demand.

  • increase in supply.

  • decrease in demand.

Explanation

Question 21 of 60

1

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is

Select one of the following:

  • income inelastic.

  • price inelastic.

  • price elastic.

  • unit price elastic.

  • income elastic.

Explanation

Question 22 of 60

1

The price elasticity of demand is defined as

Select one of the following:

  • the percentage change in the quantity demanded divided by the percentage change in income.

  • the percentage change in income divided by the percentage change in the quantity demanded.

  • the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good.

  • none of these answers.

  • the percentage change in price of a good divided by the percentage change in the quantity demanded of that good.

Explanation

Question 23 of 60

1

In general, a flatter demand curve is more likely to be

Select one of the following:

  • price elastic.

  • unit price elastic.

  • none of these answers.

  • price inelastic.

Explanation

Question 24 of 60

1

In general, a steeper supply curve is more likely to be

Select one of the following:

  • price elastic.

  • none of these answers.

  • unit price elastic.

  • price inelastic.

Explanation

Question 25 of 60

1

Which of the following would cause a demand curve for a good to be price inelastic?

Select one of the following:

  • The good is a luxury.

  • There are a great number of substitutes for the good.

  • The good is a necessity.

  • The good is an inferior good.

Explanation

Question 26 of 60

1

The demand for which of the following is likely to be the most price inelastic?

Select one of the following:

  • transportation

  • taxi rides

  • bus tickets

  • airline tickets

Explanation

Question 27 of 60

1

If the cross-price elasticity between two goods is negative, the two goods are likely to be

Select one of the following:

  • substitutes.

  • complements.

  • necessities.

  • luxuries.

Explanation

Question 28 of 60

1

If a supply curve for a good is price elastic, then

Select one of the following:

  • the quantity supplied is sensitive to changes in the price of that good.

  • the quantity demanded is insensitive to changes in the price of that good.

  • the quantity demanded is sensitive to changes in the price of that good.

  • the quantity supplied is insensitive to changes in the price of that good.

  • none of these answers.

Explanation

Question 29 of 60

1

If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught the fisherman's price elasticity of supply for fresh fish is

Select one of the following:

  • zero.

  • infinite.

  • one.

  • unable to be determined from this information.

Explanation

Question 30 of 60

1

A decrease in supply (shift to the left) will increase total revenue in that market if

Select one of the following:

  • demand is price inelastic.

  • supply is price elastic.

  • supply is price inelastic.

  • demand is price elastic.

Explanation

Question 31 of 60

1

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Select one of the following:

  • all of these answers.

  • price inelastic.

  • unit price elastic.

  • price elastic.

Explanation

Question 32 of 60

1

If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is

Select one of the following:

  • 1.50.

  • 1.15.

  • none of these answers.

  • 0.15.

  • 1.00.

Explanation

Question 33 of 60

1

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to

Select one of the following:

  • increase total revenue to farmers as a whole because the demand for food is elastic.

  • increase total revenue to farmers as a whole because the demand for food is inelastic.

  • reduce total revenue to farmers as a whole because the demand for food is elastic.

  • reduce total revenue to farmers as a whole because the demand for food is inelastic.

Explanation

Question 34 of 60

1

If supply is price inelastic, the value of the price elasticity of supply must be

Select one of the following:

  • infinite.

  • zero.

  • less than 1.

  • none of these answers.

  • greater than 1.

Explanation

Question 35 of 60

1

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

Select one of the following:

  • price inelastic.

  • none of these answers.

  • unit price elastic.

  • price elastic.

Explanation

Question 36 of 60

1

Suppose that at a price of €30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to €40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable TV in Small Town?

Select one of the following:

  • 1.4

  • 0.66

  • 0.75

  • 2.0

  • 1.0

Explanation

Question 37 of 60

1

Suppose that at a price of €30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to €40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue?

Select one of the following:

  • €0 per month

  • €30 per month

  • €40 per month

  • Either €30 or €40 per month because the price elasticity of demand is 1.0.

Explanation

Question 38 of 60

1

If demand is linear (a straight line), then price elasticity of demand is

Select one of the following:

  • elastic in the upper portion and inelastic in the lower portion.

  • inelastic in the upper portion and elastic in the lower portion.

  • inelastic throughout.

  • constant along the demand curve.

  • elastic throughout.

Explanation

Question 39 of 60

1

If the income elasticity of demand for a good is negative, it must be

Select one of the following:

  • an elastic good.

  • an inferior good.

  • a normal good.

  • a luxury good.

Explanation

Question 40 of 60

1

If consumers think that there are very few substitutes for a good, then

Select one of the following:

  • supply would tend to be price elastic.

  • none of these answers.

  • demand would tend to be price inelastic.

  • demand would tend to be price elastic.

  • supply would tend to be price inelastic.

Explanation

Question 41 of 60

1

For a price ceiling to be a binding constraint on the market, the government must set it

Select one of the following:

  • above the equilibrium price.

  • below the equilibrium price.

  • precisely at the equilibrium price.

  • at any price because all price ceilings are binding constraints.

Explanation

Question 42 of 60

1

A binding price ceiling creates

Select one of the following:

  • a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price.

  • a surplus.

  • a shortage.

  • an equilibrium.

Explanation

Question 43 of 60

1

Suppose the equilibrium price for apartments is €500 per month and the government imposes rent controls of €250. Which of the following is unlikely to occur as a result of the rent controls?

Select one of the following:

  • There may be long lines of buyers waiting for apartments.

  • Landlords may discriminate among apartment renters.

  • Landlords may be offered bribes to rent apartments.

  • There will be a shortage of housing.

  • The quality of apartments will improve.

Explanation

Question 44 of 60

1

A price floor

Select one of the following:

  • always determines the price at which a good must be sold.

  • sets a legal maximum on the price at which a good can be sold.

  • is not a binding constraint if it is set above the equilibrium price.

  • sets a legal minimum on the price at which a good can be sold.

Explanation

Question 45 of 60

1

Which of the following statements about a binding price ceiling is true?

Select one of the following:

  • The shortage created by the price ceiling is greater in the short run than in the long run.

  • The surplus created by the price ceiling is greater in the short run than in the long run.

  • The surplus created by the price ceiling is greater in the long run than in the short run.

  • The shortage created by the price ceiling is greater in the long run than in the short run.

Explanation

Question 46 of 60

1

Which side of the market is more likely to lobby government for a price floor?

Select one of the following:

  • the buyers

  • Neither buyers nor sellers desire a price floor.

  • the sellers

  • Both buyers and sellers desire a price floor.

Explanation

Question 47 of 60

1

The surplus caused by a binding price floor will be greatest if

Select one of the following:

  • demand is inelastic and supply is elastic.

  • supply is inelastic and demand is elastic.

  • both supply and demand are elastic.

  • both supply and demand are inelastic.

Explanation

Question 48 of 60

1

Which of the following is an example of a price floor?

Select one of the following:

  • the minimum wage

  • rent controls

  • restricting petrol prices to €1.00 per litre when the equilibrium price is €1.50 per litre

  • All of these answers are price floors.

Explanation

Question 49 of 60

1

Which of the following statements is true if the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre?

Select one of the following:

  • A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint.

  • A significant increase in the supply of petrol could cause the price ceiling to become a binding constraint.

  • There will be a shortage of petrol.

  • There will be a surplus of petrol.

Explanation

Question 50 of 60

1

Which of the following workers would be most likely to find it more difficult to get a job after a rise in the minimum wage rate?

Select one of the following:

  • A teenage worker with few qualifications.

  • A manual worker with fifteen years of work experience.

  • A professional worker with a university degree.

  • All three are equally likely to find it difficult to get a job.

Explanation

Question 51 of 60

1

Within the supply and demand model, a tax collected from the buyers of a good shifts the

Select one of the following:

  • supply curve downward by the size of the tax per unit.

  • supply curve upward by the size of the tax per unit.

  • demand curve upward by the size of the tax per unit.

  • demand curve downward by the size of the tax per unit.

Explanation

Question 52 of 60

1

Within the supply and demand model, a tax collected from the sellers of a good shifts the

Select one of the following:

  • demand curve downward by the size of the tax per unit.

  • supply curve downward by the size of the tax per unit.

  • demand curve upward by the size of the tax per unit.

  • supply curve upward by the size of the tax per unit.

Explanation

Question 53 of 60

1

Which of the following takes place when a tax is placed a good?

Select one of the following:

  • a decrease in the price buyers pay, an increase in the price sellers receive, and a decrease in the quantity sold

  • an increase in the price buyers pay, a decrease in the price sellers receive, and an increase in the quantity sold

  • a decrease in the price buyers pay, an increase in the price sellers receive, and an increase in the quantity sold

  • an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

Explanation

Question 54 of 60

1

When a tax is collected from the buyers in a market,

Select one of the following:

  • the tax burden falls most heavily on the buyers.

  • the buyers bear the burden of the tax.

  • the sellers bear the burden of the tax.

  • the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers.

Explanation

Question 55 of 60

1

A tax of €1.00 per litre on petrol

Select one of the following:

  • places a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive.

  • decreases the price the sellers receive by €1.00 per litre.

  • increases the price the buyers pay by €1.00 per litre.

  • increases the price the buyers pay by precisely €0.50 and reduces the price received by sellers by precisely €0.50.

Explanation

Question 56 of 60

1

The burden of a tax falls more heavily on the sellers in a market when

Select one of the following:

  • both supply and demand are elastic.

  • both supply and demand are inelastic.

  • demand is inelastic and supply is elastic.

  • demand is elastic and supply is inelastic.

Explanation

Question 57 of 60

1

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that

Select one of the following:

  • falls more heavily on sellers.

  • falls entirely on sellers.

  • falls more heavily on buyers.

  • is evenly distributed between buyers and sellers.

Explanation

Question 58 of 60

1

The burden of a tax falls more heavily on the buyers in a market when

Select one of the following:

  • both supply and demand are inelastic.

  • demand is elastic and supply is inelastic.

  • both supply and demand are elastic.

  • demand is inelastic and supply is elastic.

Explanation

Question 59 of 60

1

Which of the following statements about the burden of a tax is correct?

Select one of the following:

  • The tax burden generated from a tax placed on a good consumers perceive to be a necessity will fall most heavily on the sellers of the good.

  • The burden of a tax falls on the side of the market (buyers or sellers) from which it is collected.

  • The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation.

  • The tax burden falls most heavily on the side of the market (buyers or sellers) that is most willing to leave the market when price movements are unfavourable to them.

Explanation

Question 60 of 60

1

For which of the following products would the burden of a tax likely fall more heavily on the sellers?

Select one of the following:

  • clothing

  • food

  • housing

  • entertainment

Explanation

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