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

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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.
Good Guy Beket
Quiz by Good Guy Beket, updated more than 1 year ago
Good Guy Beket
Created by Good Guy Beket almost 6 years ago
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Question 1

Question
A perfectly competitive market has
Answer
  • firms that set their own prices.
  • only one seller.
  • at least a few sellers.
  • many buyers and sellers.
  • none of these answers.

Question 2

Question
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:
Answer
  • complements.
  • inferior goods.
  • normal goods.
  • none of these answers.
  • substitutes.

Question 3

Question
The law of demand states that an increase in the price of a good
Answer
  • 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.

Question 4

Question
The law of supply states that an increase in the price of a good
Answer
  • 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.

Question 5

Question
If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is
Answer
  • a normal good.
  • none of these answers.
  • an inferior good.
  • a substitute good.
  • a complementary good.

Question 6

Question
A monopolistic market has
Answer
  • many buyers and sellers.
  • none of these answers.
  • firms that are price takers.
  • only one seller.
  • at least a few sellers.

Question 7

Question
Which of the following shifts the demand for watches to the right?
Answer
  • 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

Question 8

Question
All of the following shift the supply of watches to the right except
Answer
  • 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.

Question 9

Question
If the price of a good is above the equilibrium price,
Answer
  • 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.

Question 10

Question
If the price of a good is below the equilibrium price,
Answer
  • 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.

Question 11

Question
If the price of a good is equal to the equilibrium price,
Answer
  • 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.

Question 12

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

Question 13

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

Question 14

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

Question 15

Question
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
Answer
  • 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.

Question 16

Question
Which of the following statements is true about the impact of an increase in the price of lettuce?
Answer
  • 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.

Question 17

Question
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?
Answer
  • 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.

Question 18

Question
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?
Answer
  • 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.

Question 19

Question
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?
Answer
  • 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.

Question 20

Question
An inferior good is one for which an increase in income causes a(n)
Answer
  • decrease in supply.
  • increase in demand.
  • increase in supply.
  • decrease in demand.

Question 21

Question
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
Answer
  • income inelastic.
  • price inelastic.
  • price elastic.
  • unit price elastic.
  • income elastic.

Question 22

Question
The price elasticity of demand is defined as
Answer
  • 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.

Question 23

Question
In general, a flatter demand curve is more likely to be
Answer
  • price elastic.
  • unit price elastic.
  • none of these answers.
  • price inelastic.

Question 24

Question
In general, a steeper supply curve is more likely to be
Answer
  • price elastic.
  • none of these answers.
  • unit price elastic.
  • price inelastic.

Question 25

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

Question 26

Question
The demand for which of the following is likely to be the most price inelastic?
Answer
  • transportation
  • taxi rides
  • bus tickets
  • airline tickets

Question 27

Question
If the cross-price elasticity between two goods is negative, the two goods are likely to be
Answer
  • substitutes.
  • complements.
  • necessities.
  • luxuries.

Question 28

Question
If a supply curve for a good is price elastic, then
Answer
  • 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.

Question 29

Question
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
Answer
  • zero.
  • infinite.
  • one.
  • unable to be determined from this information.

Question 30

Question
A decrease in supply (shift to the left) will increase total revenue in that market if
Answer
  • demand is price inelastic.
  • supply is price elastic.
  • supply is price inelastic.
  • demand is price elastic.

Question 31

Question
If an increase in the price of a good has no impact on the total revenue in that market, demand must be
Answer
  • all of these answers.
  • price inelastic.
  • unit price elastic.
  • price elastic.

Question 32

Question
If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is
Answer
  • 1.50.
  • 1.15.
  • none of these answers.
  • 0.15.
  • 1.00.

Question 33

Question
Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to
Answer
  • 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.

Question 34

Question
If supply is price inelastic, the value of the price elasticity of supply must be
Answer
  • infinite.
  • zero.
  • less than 1.
  • none of these answers.
  • greater than 1.

Question 35

Question
If there is excess capacity in a production facility, it is likely that the firm's supply curve is
Answer
  • price inelastic.
  • none of these answers.
  • unit price elastic.
  • price elastic.

Question 36

Question
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?
Answer
  • 1.4
  • 0.66
  • 0.75
  • 2.0
  • 1.0

Question 37

Question
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?
Answer
  • €0 per month
  • €30 per month
  • €40 per month
  • Either €30 or €40 per month because the price elasticity of demand is 1.0.

Question 38

Question
If demand is linear (a straight line), then price elasticity of demand is
Answer
  • 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.

Question 39

Question
If the income elasticity of demand for a good is negative, it must be
Answer
  • an elastic good.
  • an inferior good.
  • a normal good.
  • a luxury good.

Question 40

Question
If consumers think that there are very few substitutes for a good, then
Answer
  • 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.

Question 41

Question
For a price ceiling to be a binding constraint on the market, the government must set it
Answer
  • above the equilibrium price.
  • below the equilibrium price.
  • precisely at the equilibrium price.
  • at any price because all price ceilings are binding constraints.

Question 42

Question
A binding price ceiling creates
Answer
  • 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.

Question 43

Question
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?
Answer
  • 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.

Question 44

Question
A price floor
Answer
  • 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.

Question 45

Question
Which of the following statements about a binding price ceiling is true?
Answer
  • 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.

Question 46

Question
Which side of the market is more likely to lobby government for a price floor?
Answer
  • the buyers
  • Neither buyers nor sellers desire a price floor.
  • the sellers
  • Both buyers and sellers desire a price floor.

Question 47

Question
The surplus caused by a binding price floor will be greatest if
Answer
  • 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.

Question 48

Question
Which of the following is an example of a price floor?
Answer
  • 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.

Question 49

Question
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?
Answer
  • 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.

Question 50

Question
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?
Answer
  • 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.

Question 51

Question
Within the supply and demand model, a tax collected from the buyers of a good shifts the
Answer
  • 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.

Question 52

Question
Within the supply and demand model, a tax collected from the sellers of a good shifts the
Answer
  • 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.

Question 53

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

Question 54

Question
When a tax is collected from the buyers in a market,
Answer
  • 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.

Question 55

Question
A tax of €1.00 per litre on petrol
Answer
  • 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.

Question 56

Question
The burden of a tax falls more heavily on the sellers in a market when
Answer
  • 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.

Question 57

Question
A tax placed on a good that is a necessity for consumers will likely generate a tax burden that
Answer
  • falls more heavily on sellers.
  • falls entirely on sellers.
  • falls more heavily on buyers.
  • is evenly distributed between buyers and sellers.

Question 58

Question
The burden of a tax falls more heavily on the buyers in a market when
Answer
  • 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.

Question 59

Question
Which of the following statements about the burden of a tax is correct?
Answer
  • 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.

Question 60

Question
For which of the following products would the burden of a tax likely fall more heavily on the sellers?
Answer
  • clothing
  • food
  • housing
  • entertainment
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