Question 1

Economists suggest that a market can fail if

Accepted Answer

A) consumers have to pay more than they want to. 
B) producers get smaller profits than they desire. 
C) governments dictate prices. 
D) the buyer or seller exerts significant power such that they can dictate price. 
A) consumers have to pay more than they want to. 
B) producers get smaller profits than they desire. 
C) governments dictate prices. 
D) the buyer or seller exerts significant power such that they can dictate price.

Question 2

The value of the market to society is

Accepted Answer

A) the consumer surplus it generates. 
B) the producer surplus it generates. 
C) the sum of the producer and consumer surpluses. 
D) consumer surplus minus producer surplus. 
A) the consumer surplus it generates. 
B) the producer surplus it generates. 
C) the sum of the producer and consumer surpluses. 
D) consumer surplus minus producer surplus.

Question 3

For a linear and upward sloping supply curve and a linear downward sloping demand curve, when the consumer has to pay a positive price for the good, the money the consumer pays the producer is a

Accepted Answer

A) Rectangle. 
B) Triangle. 
C) Four-sided figure that is a rectangle on the bottom and a right triangle on the top whose hypotenuse is the demand curve. 
D) Four-sided figure that is a rectangle on the bottom and a right triangle on the top whose hypotenuse is the supply curve. 
A) Rectangle. 
B) Triangle. 
C) Four-sided figure that is a rectangle on the bottom and a right triangle on the top whose hypotenuse is the demand curve. 
D) Four-sided figure that is a rectangle on the bottom and a right triangle on the top whose hypotenuse is the supply curve.

Question 4

If the percentage change in quantity supplied is 10% and the percentage change in price is 10% then the supply for the good is

Accepted Answer

A) Elastic 
B) Inelastic 
C) Unit elastic 
D) Perfectly inelastic 
A) Elastic 
B) Inelastic 
C) Unit elastic 
D) Perfectly inelastic

Question 5

The producer surplus

Accepted Answer

A) the area under the demand curve form the origin to the quantity purchased. 
B) the area under the supply curve form the origin to the quantity produced. 
C) the area under the demand curve but above the price line from the origin to the quantity purchased. 
D) the area above the supply curve but below the price line from the origin to the quantity purchased. 
A) the area under the demand curve form the origin to the quantity purchased. 
B) the area under the supply curve form the origin to the quantity produced. 
C) the area under the demand curve but above the price line from the origin to the quantity purchased. 
D) the area above the supply curve but below the price line from the origin to the quantity purchased.

Question 6

If the percentage change in quantity supplied is 0% and the percentage change in price is 10% then the supply for the good is

Accepted Answer

A) Elastic 
B) Inelastic 
C) Unit elastic 
D) Perfectly inelastic 
A) Elastic 
B) Inelastic 
C) Unit elastic 
D) Perfectly inelastic

Question 7

If the price of a good falls by 10% and the percentage decrease in the total amount consumers spend on the good is 10% then the good is

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly inelastic. 
A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly inelastic.

Question 8

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods holds

Accepted Answer

A) rivalry. 
B) exclusivity. 
C) lucidity. 
D) morality. 
A) rivalry. 
B) exclusivity. 
C) lucidity. 
D) morality.

Question 9

If the percentage change in quantity supplied is 5% and the percentage change in price is 10% then the supply for the good is

Accepted Answer

A) Elastic 
B) Inelastic 
C) Unit elastic 
D) Perfectly inelastic 
A) Elastic 
B) Inelastic 
C) Unit elastic 
D) Perfectly inelastic

Question 10

-In Figure 3.2, what is the producer surplus?

Accepted Answer

A) 0PCQ* 
B) 0ACQ* 
C) P*AC 
D) BP*C 
A) 0PCQ* 
B) 0ACQ* 
C) P*AC 
D) BP*C

Question 11

For an economist to say that too little of the good is produced, what must be true?

Accepted Answer

A) The consumer surplus plus the producer surplus must be smaller than it could be. 
B) The consumer surplus must be smaller than optimal. 
C) The consumer surplus must be larger than optimal. 
D) The producer surplus must be smaller than optimal. 
A) The consumer surplus plus the producer surplus must be smaller than it could be. 
B) The consumer surplus must be smaller than optimal. 
C) The consumer surplus must be larger than optimal. 
D) The producer surplus must be smaller than optimal.

Question 12

If a good is a necessity the income elasticity of demand must be

Accepted Answer

A) Positive 
B) Zero 
C) Negative but less negative than -1 
D) Negative and more negative than -1 
A) Positive 
B) Zero 
C) Negative but less negative than -1 
D) Negative and more negative than -1

Question 13

Which of the following is true?

Accepted Answer

A) on a linear demand curve, the higher the price the less elastic is demand 
B) on a linear demand curve, elasticity is not constant 
C) at the same price demand is more elastic on the steeper demand curve 
D) none are true 
A) on a linear demand curve, the higher the price the less elastic is demand 
B) on a linear demand curve, elasticity is not constant 
C) at the same price demand is more elastic on the steeper demand curve 
D) none are true

Question 14

Policy makers have considered putting computer chips in cars that would allow tax collectors to charge people based on how often they drive during rush hours. These policy makers are dealing with the fact that public roads are

Accepted Answer

A) purely private good. 
B) congestible public good. 
C) purely public good. 
D) excludable public good. 
A) purely private good. 
B) congestible public good. 
C) purely public good. 
D) excludable public good.

Question 15

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods does not hold

Accepted Answer

A) rivalry. 
B) exclusivity. 
C) lucidity. 
D) morality. 
A) rivalry. 
B) exclusivity. 
C) lucidity. 
D) morality.

Question 16

For a given decrease in supply, the condition of demand that will result in the most significant change in quantity is when demand is

Accepted Answer

A) elastic. 
B) inelastic. 
C) perfectly elastic. 
D) perfectly inelastic. 
A) elastic. 
B) inelastic. 
C) perfectly elastic. 
D) perfectly inelastic.

Question 17

A decrease in demand will always

Accepted Answer

A) increase producer surplus. 
B) decrease producer surplus and decrease consumer surplus. 
C) decrease consumer surplus and increase consumer surplus. 
D) increase consumer surplus. 
A) increase producer surplus. 
B) decrease producer surplus and decrease consumer surplus. 
C) decrease consumer surplus and increase consumer surplus. 
D) increase consumer surplus.

Question 18

Demand for a good which comprises a relatively small share of the consumer's budget tends to be

Accepted Answer

A) inelastic. 
B) perfectly inelastic. 
C) elastic. 
D) perfectly elastic. 
A) inelastic. 
B) perfectly inelastic. 
C) elastic. 
D) perfectly elastic.

Question 19

If the price of a good falls by 10% and the percentage increase in the total amount consumers spend on the good is 15% then the good is

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly inelastic. 
A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly inelastic.

Question 20

If a good is normal the income elasticity of demand must be

Accepted Answer

A) Positive and greater than 1 
B) Merely positive (not necessarily greater than 1) 
C) Zero 
D) Negative 
A) Positive and greater than 1 
B) Merely positive (not necessarily greater than 1) 
C) Zero 
D) Negative

Exam 3: The Concept of Elasticity and Consumer and Producer Surplus

Economists suggest that a market can fail if

The value of the market to society is

For a linear and upward sloping supply curve and a linear downward sloping demand curve, when the consumer has to pay a positive price for the good, the money the consumer pays the producer is a

If the percentage change in quantity supplied is 10% and the percentage change in price is 10% then the supply for the good is

The producer surplus

If the percentage change in quantity supplied is 0% and the percentage change in price is 10% then the supply for the good is

If the price of a good falls by 10% and the percentage decrease in the total amount consumers spend on the good is 10% then the good is

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods holds

If the percentage change in quantity supplied is 5% and the percentage change in price is 10% then the supply for the good is

-In Figure 3.2, what is the producer surplus?

For an economist to say that too little of the good is produced, what must be true?

If a good is a necessity the income elasticity of demand must be

Which of the following is true?

Policy makers have considered putting computer chips in cars that would allow tax collectors to charge people based on how often they drive during rush hours. These policy makers are dealing with the fact that public roads are

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods does not hold

For a given decrease in supply, the condition of demand that will result in the most significant change in quantity is when demand is

A decrease in demand will always

Demand for a good which comprises a relatively small share of the consumer's budget tends to be

If the price of a good falls by 10% and the percentage increase in the total amount consumers spend on the good is 15% then the good is

If a good is normal the income elasticity of demand must be

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