Question 1

Which one of the following goods is likely to have the highest income elasticity of demand?

Accepted Answer

A) Diamonds 
B) Water 
C) Pretzels 
D) Beer 
A) Diamonds 
B) Water 
C) Pretzels 
D) Beer A

Question 2

A supply curve for a good depicts the:

Accepted Answer

A) maximum quantities sellers are willing to offer for sale at alternative prices. 
B) maximum quantities that can be produced at alternative prices. 
C) quantities sellers will offer as their production costs change. 
D) quantities sellers can legally supply. 
A) maximum quantities sellers are willing to offer for sale at alternative prices. 
B) maximum quantities that can be produced at alternative prices. 
C) quantities sellers will offer as their production costs change. 
D) quantities sellers can legally supply. A

Question 3

Explain how a change in price affects total expenditure by filling in each cell with the change in price that must have occurred.

Accepted Answer

$$\begin{array} { | l | c | c | } 
\hline \text { Demand is } . . & \text { Higher Total Expenditure } & \text { Lower Total Expenditure } \
\hline \text { Elastic } & \text { Price decreased } & \text { Price increased } \
\hline \text { Inelastic } & \text { Price increased } & \text { Price decreased } \
\hline
\end{array}$$

Question 4

At every point on an individual's demand curve,the height to the demand curve measures:

Accepted Answer

A) the quantity demanded of the good. 
B) the marginal benefit of the good to the consumer. 
C) the real income of the consumer. 
D) the consumer surplus. 
A) the quantity demanded of the good. 
B) the marginal benefit of the good to the consumer. 
C) the real income of the consumer. 
D) the consumer surplus.

Question 5

Britain and Canada impose strict limits on reimbursements to hospitals and physicians as part of their universal "free" health care.This is a form of a:

Accepted Answer

A) price floor leading to lengthy delays before receiving treatment. 
B) price ceiling leading to lengthy delays before receiving treatment. 
C) price floor leading to shorter waiting times. 
D) price ceiling leading to shorter waiting times. 
A) price floor leading to lengthy delays before receiving treatment. 
B) price ceiling leading to lengthy delays before receiving treatment. 
C) price floor leading to shorter waiting times. 
D) price ceiling leading to shorter waiting times.

Question 6

An increase in supply occurs when:

Accepted Answer

A) there is technological advance. 
B) the costs of production rise. 
C) the price of the good increases. 
D) the price of the good falls. 
A) there is technological advance. 
B) the costs of production rise. 
C) the price of the good increases. 
D) the price of the good falls.

Question 7

When the per-unit cost of producing a commodity is constant,the price elasticity of supply is:

Accepted Answer

A) zero. 
B) infinite. 
C) one. 
D) negative. 
A) zero. 
B) infinite. 
C) one. 
D) negative.

Question 8

If the average price of an automobile increased from $7,000 to $8,000 from 1979 to 1980,then we know that:

Accepted Answer

A) the real price of automobiles must have increased. 
B) the absolute price of automobiles increased but its real price declined. 
C) the absolute price of automobiles increased but we do not have enough information to say what happened to its real price. 
D) the demand for automobiles increased during that period. 
A) the real price of automobiles must have increased. 
B) the absolute price of automobiles increased but its real price declined. 
C) the absolute price of automobiles increased but we do not have enough information to say what happened to its real price. 
D) the demand for automobiles increased during that period.

Question 9

Elasticity of demand tends to be greater:

Accepted Answer

A) the longer the time period involved. 
B) the more complements the good has. 
C) the lower the number of substitutes available. 
D) the more widely defined the commodity class. 
A) the longer the time period involved. 
B) the more complements the good has. 
C) the lower the number of substitutes available. 
D) the more widely defined the commodity class.

Question 10

Which of the following violates the law of demand?

Accepted Answer

A) After receiving an annual raise of $10,000,a young man buys more steak than before,even though the price of steak increased by 5 percent. 
B) A woman with a small baby continues to purchase diapers even after the price of diapers went up. 
C) After the price of bowling increases,a woman increases her frequency of bowling. 
D) Despite butter being more expensive than margarine,a woman buys more butter after the price of margarine (a close substitute)increases. 
A) After receiving an annual raise of $10,000,a young man buys more steak than before,even though the price of steak increased by 5 percent. 
B) A woman with a small baby continues to purchase diapers even after the price of diapers went up. 
C) After the price of bowling increases,a woman increases her frequency of bowling. 
D) Despite butter being more expensive than margarine,a woman buys more butter after the price of margarine (a close substitute)increases.

Question 11

An increase in quantity supplied occurs when:

Accepted Answer

A) there is technological advance. 
B) the costs of production fall. 
C) the price of the good increases. 
D) the price of the good falls. 
A) there is technological advance. 
B) the costs of production fall. 
C) the price of the good increases. 
D) the price of the good falls.

Question 12

Which of the following is a disadvantage of rent control to the tenants?

Accepted Answer

A) Fluctuations in the rental rates 
B) Predominance of a black market 
C) Low demand for houses 
D) Poor quality of houses 
A) Fluctuations in the rental rates 
B) Predominance of a black market 
C) Low demand for houses 
D) Poor quality of houses

Question 13

Identify the black market that can emerge from rent controls.

Accepted Answer

A) Rationing 
B) Subletting 
C) Leasing 
D) Licensing 
A) Rationing 
B) Subletting 
C) Leasing 
D) Licensing

Question 14

An excess demand for a product indicates that:

Accepted Answer

A) the price is below the equilibrium price. 
B) there is a rightward shift in the demand curve. 
C) there will be a downward movement along the supply curve. 
D) the supply curve will shift rightward. 
A) the price is below the equilibrium price. 
B) there is a rightward shift in the demand curve. 
C) there will be a downward movement along the supply curve. 
D) the supply curve will shift rightward.

Question 15

Which of the following would result in a higher equilibrium price and an ambiguous change in the equilibrium quantity?

Accepted Answer

A) An increase in both supply and demand 
B) An increase in supply and a decrease in demand 
C) A decrease in both supply and demand 
D) A decrease in supply and an increase in demand 
A) An increase in both supply and demand 
B) An increase in supply and a decrease in demand 
C) A decrease in both supply and demand 
D) A decrease in supply and an increase in demand

Question 16

The price elasticity of demand for a good is equal to:

Accepted Answer

A) the percentage change in quantity demanded divided by the percentage change in price. 
B) the percentage change in price divided by the percentage change in quantity demanded. 
C) the percentage change in quantity divided by the change in price. 
D) the percentage change in price divided by the change in quantity demanded. 
A) the percentage change in quantity demanded divided by the percentage change in price. 
B) the percentage change in price divided by the percentage change in quantity demanded. 
C) the percentage change in quantity divided by the change in price. 
D) the percentage change in price divided by the change in quantity demanded.

Question 17

Which of the following market outcomes can be explained by the supply-demand model?

Accepted Answer

A) An increase in the demand for cigarettes after an increase in its price 
B) A decrease in household consumption following an increase in average monthly income 
C) An increase in supply in spite of a decline in input prices 
D) An increase in the per capita consumption of medical care in a country due to an epidemic 
A) An increase in the demand for cigarettes after an increase in its price 
B) A decrease in household consumption following an increase in average monthly income 
C) An increase in supply in spite of a decline in input prices 
D) An increase in the per capita consumption of medical care in a country due to an epidemic

Question 18

Which of the following statements about demand elasticity is correct?

Accepted Answer

A) If demand is price-inelastic,an increase in price will reduce total expenditures. 
B) If demand is price-elastic,an increase in price will increase total expenditures. 
C) If demand is price-inelastic,an increase in price will increase total expenditures. 
D) If demand is price-elastic,an increase in price will leave total expenditure unchanged. 
A) If demand is price-inelastic,an increase in price will reduce total expenditures. 
B) If demand is price-elastic,an increase in price will increase total expenditures. 
C) If demand is price-inelastic,an increase in price will increase total expenditures. 
D) If demand is price-elastic,an increase in price will leave total expenditure unchanged.

Question 19

Which one of the following will not cause a change in the demand for gasoline?

Accepted Answer

A) More people deciding to live closer to their workplace 
B) More people purchasing large pickup trucks and sports utility vehicles 
C) New technology that lowers the cost of producing gasoline 
D) Expectations of consumers that the price of gasoline will be significantly greater next week 
A) More people deciding to live closer to their workplace 
B) More people purchasing large pickup trucks and sports utility vehicles 
C) New technology that lowers the cost of producing gasoline 
D) Expectations of consumers that the price of gasoline will be significantly greater next week

Question 20

Explain how a change in price affects total expenditure by filling in each cell with the resulting change in total expenditure.

Accepted Answer

\[\begin{array} { | l | c | c | } 
\hlin

Which one of the following goods is likely to have the highest income elasticity of demand?

A supply curve for a good depicts the:

Explain how a change in price affects total expenditure by filling in each cell with the change in price that must have occurred.

At every point on an individual's demand curve,the height to the demand curve measures:

Britain and Canada impose strict limits on reimbursements to hospitals and physicians as part of their universal "free" health care.This is a form of a:

An increase in supply occurs when:

When the per-unit cost of producing a commodity is constant,the price elasticity of supply is:

If the average price of an automobile increased from $7,000 to $8,000 from 1979 to 1980,then we know that:

Elasticity of demand tends to be greater:

Which of the following violates the law of demand?

An increase in quantity supplied occurs when:

Which of the following is a disadvantage of rent control to the tenants?

Identify the black market that can emerge from rent controls.

An excess demand for a product indicates that:

Which of the following would result in a higher equilibrium price and an ambiguous change in the equilibrium quantity?

The price elasticity of demand for a good is equal to:

Which of the following market outcomes can be explained by the supply-demand model?

Which of the following statements about demand elasticity is correct?

Which one of the following will not cause a change in the demand for gasoline?

Explain how a change in price affects total expenditure by filling in each cell with the resulting change in total expenditure.

An Introduction to Microeconomics

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 2: Supply and Demand

Which one of the following goods is likely to have the highest income elasticity of demand?

A supply curve for a good depicts the:

Explain how a change in price affects total expenditure by filling in each cell with the change in price that must have occurred.

At every point on an individual's demand curve,the height to the demand curve measures:

Britain and Canada impose strict limits on reimbursements to hospitals and physicians as part of their universal "free" health care.This is a form of a:

An increase in supply occurs when:

When the per-unit cost of producing a commodity is constant,the price elasticity of supply is:

If the average price of an automobile increased from $7,000 to $8,000 from 1979 to 1980,then we know that:

Elasticity of demand tends to be greater:

Which of the following violates the law of demand?

An increase in quantity supplied occurs when:

Which of the following is a disadvantage of rent control to the tenants?

Identify the black market that can emerge from rent controls.

An excess demand for a product indicates that:

Which of the following would result in a higher equilibrium price and an ambiguous change in the equilibrium quantity?

The price elasticity of demand for a good is equal to:

Which of the following market outcomes can be explained by the supply-demand model?

Which of the following statements about demand elasticity is correct?

Which one of the following will not cause a change in the demand for gasoline?

Explain how a change in price affects total expenditure by filling in each cell with the resulting change in total expenditure.

An Introduction to Microeconomics

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters