Question 1

Which of the following is true?

Accepted Answer

A) on a linear demand curve, the higher the price the more elastic is demand 
B) on a linear demand curve, elasticity is 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 more elastic is demand 
B) on a linear demand curve, elasticity is constant 
C) at the same price demand is more elastic on the steeper demand curve 
D) none are true

Question 2

An increase in demand will increase prices least when supply is

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic (but not perfectly inelastic). 
D) perfectly inelastic. 
A) elastic. 
B) unit elastic. 
C) inelastic (but not perfectly inelastic). 
D) perfectly inelastic.

Question 3

When attempting to correct cases of "market failure", economists usually seek policies that maximize

Accepted Answer

A) the sum of consumer and producer surplus. 
B) consumer surplus, not producer surplus. 
C) producer surplus, not consumer surplus. 
D) the difference between consumer and producer surplus. 
A) the sum of consumer and producer surplus. 
B) consumer surplus, not producer surplus. 
C) producer surplus, not consumer surplus. 
D) the difference between consumer and producer surplus.

Question 4

Because the demand curve is downward sloping, the elasticity of demand is

Accepted Answer

A) positive. 
B) negative (however, the negative sign is assumed and therefore ignored). 
C) zero. 
D) decreases from positive to negative. 
A) positive. 
B) negative (however, the negative sign is assumed and therefore ignored). 
C) zero. 
D) decreases from positive to negative.

Question 5

For a given decrease in supply, the condition of demand that will result in no 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 6

If the price of a good decreases by 5% and the quantity demanded increases by 5%, then at that price, the good is

Accepted Answer

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

Question 7

Economists suggest that a market can fail if

Accepted Answer

A) production or consumption can harm an innocent third party. 
B) consumers have to pay more than they want to. 
C) producers get smaller profits than they desire. 
D) governments dictate prices. 
A) production or consumption can harm an innocent third party. 
B) consumers have to pay more than they want to. 
C) producers get smaller profits than they desire. 
D) governments dictate prices.

Question 8

The value to the consumer is

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 under 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 under the supply curve but below the price line from the origin to the quantity purchased.

Question 9

If the price rises and the total amount consumers spend on the good falls to zero, then demand must be

Accepted Answer

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

Question 10

-At point B of Figure 4 within Figure 3.1, demand is

Accepted Answer

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

Question 11

Producer surplus is defined as

Accepted Answer

A) the value that the consumer places on a good over the amount they pay for it. 
B) the money that the producer gets from a good over the amount they are willing to sell it for. 
C) when quantity supplied is greater than quantity demanded. 
D) when quantity demanded is greater than quantity supplied. 
A) the value that the consumer places on a good over the amount they pay for it. 
B) the money that the producer gets from a good over the amount they are willing to sell it for. 
C) when quantity supplied is greater than quantity demanded. 
D) when quantity demanded is greater than quantity supplied.

Question 12

If the price of a good decreases by 10% and the quantity demanded increases by 10%, then at that price, the good is

Accepted Answer

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

Question 13

If the percentage change in price is 5% and the percentage change in quantity supplied 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 14

If the price of a good increases by 5% and the quantity demanded decreases by 10%, then at that price, the good is

Accepted Answer

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

Question 15

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 consumer surplus 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 16

If a consumer can be easily prevented from consuming a good or service by a producer, then the good exhibits

Accepted Answer

A) rivalry. 
B) exclusivity. 
C) an externality. 
D) a moral loss. 
A) rivalry. 
B) exclusivity. 
C) an externality. 
D) a moral loss.

Question 17

An increase in demand will always

Accepted Answer

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

Question 18

If the price falls and the total amount consumers spend on the good rises, then demand must be

Accepted Answer

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

Question 19

If the percentage change in price is 5% and the percentage change in quantity supplied 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 20

If the price of a good falls by 10% and the total amount consumers spend on the good remains the same 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

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

Which of the following is true?

An increase in demand will increase prices least when supply is

When attempting to correct cases of "market failure", economists usually seek policies that maximize

Because the demand curve is downward sloping, the elasticity of demand is

For a given decrease in supply, the condition of demand that will result in no change in quantity is when demand is

If the price of a good decreases by 5% and the quantity demanded increases by 5%, then at that price, the good is

Economists suggest that a market can fail if

The value to the consumer is

If the price rises and the total amount consumers spend on the good falls to zero, then demand must be

-At point B of Figure 4 within Figure 3.1, demand is

Producer surplus is defined as

If the price of a good decreases by 10% and the quantity demanded increases by 10%, then at that price, the good is

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

If the price of a good increases by 5% and the quantity demanded decreases by 10%, then at that price, the good 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 consumer surplus is a

If a consumer can be easily prevented from consuming a good or service by a producer, then the good exhibits

An increase in demand will always

If the price falls and the total amount consumers spend on the good rises, then demand must be

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

If the price of a good falls by 10% and the total amount consumers spend on the good remains the same then the good is

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Fiscal Policy

Monetary Policy

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Federal Deficits, Surpluses, and the National Debt

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Is Economic Stagnation the New Normal

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The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

The Line Between Legal and Illegal Goods

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

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Minimum Wage

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Head Start

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Personal Income Taxes

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