Question 1

When a binding price floor is imposed on a market, _____.

Accepted Answer

A) price serves more effectively as a rationing device 
B) the quantity demanded at the price floor exceeds the quantity that would have been demanded without the price floor 
C) every producer and every consumer gain from it 
D) the quantity demanded at the price floor exceeds the quantity supplied 
E) the unemployment level in the economy increases

Question 2

Which of the following is true of a good for which the demand is elastic?

Accepted Answer

A) The price change of the good persists over a longer time period. 
B) The price change of the good does not persist over a longer time period. 
C) The amount of income spent on the good is a small proportion of a consumer's budget. 
D) The good does not have close substitutes in the market. 
E) The good does not have complements in the market.

Question 3

Market efficiency occurs when the margin of benefits of the last unit consumed is equal to the marginal cost of productivity.

Accepted Answer

A) True 
 B)False

Question 4

Along the demand curve for a good, _____ as larger quantities of the good are consumed during any period.

Accepted Answer

A) marginal willingness to pay decreases 
B) consumer surplus decreases 
C) marginal valuation of the good increases 
D) marginal benefit derived from consuming one more unit increases 
E) marginal willingness to pay increases

Question 5

When the demand for a good is relatively more elastic than its supply, _____.

Accepted Answer

A) the proportion of the tax on the good paid by the consumers is greater than that paid by the producers 
B) the proportion of the tax on the good paid by the producers is greater than that paid by the consumers 
C) government will impose a binding price ceiling 
D) government will impose a binding price floor 
E) government will impose a price ceiling that is not binding

Question 6

If the demand for apples is highly elastic and the supply is highly inelastic, then a tax imposed on apples will be paid:

Accepted Answer

A) largely by the sellers of apples with more elastic supply. 
B) largely by the buyers of apples with more elastic demand. 
C) equally by the sellers and buyers of apples. 
D) largely by the sellers of apples with less elastic supply. 
E) largely by the buyers of apples with unit elastic demand.

Question 7

Mia have been hired by the city council to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues. The debate has been heated and the city council is divided. One side argues that in order to increase revenues from the transit system, prices must be increased. The opposing side argues that a price increase at this time will lower revenues. What assumptions are each side making about the price elasticity of demand, and how should Mia determine the best course of action?

Accepted Answer

The answer of Mia have been hired by the city...

Question 8

Why will one expect that the longer the time suppliers have to adjust to a permanent increase in demand, the more the quantity supplied will change and the less the price will change? Why will it often mean that sudden increases in demand will result in sharp price increases, followed by them going back down?

Accepted Answer

The answer of Why will one expect that the longer...

Question 9

Graph A below shows an elastic demand curve, and Graph B shows an inelastic demand curve. Graph B shows that as the price decreases from $20 to $10, total revenue _____ and quantity demanded _____.Figure 4.1:

Accepted Answer

A) decreases; increases 
B) decreases; decreases 
C) increases; increases 
D) increases; decreases 
E) remains unchanged; remains unchanged

Question 10

If a price ceiling is set above the equilibrium price, it is not binding.

Accepted Answer

A) True 
 B)False

Question 11

The following table shows Miles's demand for jazz CDs. If the price of a jazz CD equals $15, the total consumer surplus Miles receives from purchasing jazz CDs is equal to _____.Table 4.5:

Accepted Answer

A) $15 
B) $25 
C) $30 
D) $35 
E) $40

Question 12

Erin runs a cookie store in Rhode Island. After raising the price from $1 to $2 per cookie, her total revenue from selling cookies per week decreased from $200 to $150. Thus, it can be said that the demand for Erin's cookies is:

Accepted Answer

A) perfectly inelastic with a price elasticity of demand equal to zero. 
B) elastic with a price elasticity of demand greater than one. 
C) unit elastic with a price elasticity of demand equal to one. 
D) inelastic with a price elasticity of demand less than one. 
E) perfectly elastic with a price elasticity of demand equal to infinity.

Question 13

Ceteris paribus, a decrease in the market price of a good will result in a(n):

Accepted Answer

A) decrease in the quantity demanded of the good. 
B) increase in the quantity supplied of the good. 
C) increase in the consumer surplus derived from the good. 
D) decrease in the supply of the good. 
E) increase in the supply of the good.

Question 14

Which of the following is likely to have a more elastic short-run demand curve?

Accepted Answer

A) Automobiles 
B) Air travel 
C) Medical care 
D) Alcohol 
E) Gasoline

Question 15

Consumer surplus is positive as long as the:

Accepted Answer

A) money value of the marginal benefit derived from one additional unit of a good exceeds the market price. 
B) market price of a good exceeds the money value of the marginal benefit derived from one additional unit of the good. 
C) marginal propensity to consume is less than one. 
D) marginal propensity to consume is more than one. 
E) marginal propensity to consume equals one.

Question 16

When a 5 percent increase in price leads to an 8 percent increase in quantity supplied, the supply is said to be relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 17

At Bailey's Barber Shop, a 5 percent increase in the price of haircuts results in a 15 percent decrease in the number of haircuts per day. Which of the following is the price elasticity of demand of haircuts?

Accepted Answer

A) 0.05 
B) 0.10 
C) 0.33 
D) 3.0 
E) 5.5

Question 18

If the elasticity of demand for mothballs is 0.50, then which of the following is true along the demand curve for mothballs?

Accepted Answer

A) A 20 percent increase in the price of mothballs will lead to a 10 percent decrease in the quantity of mothballs demanded. 
B) A 10 percent increase in the price of mothballs will lead to a 20 percent decrease in the quantity of mothballs demanded. 
C) A 20 percent increase in the price of mothballs will lead to a 10 percent increase in the quantity of mothballs demanded. 
D) A 10 percent increase in the price of mothballs will lead to a 20 percent increase in the quantity of mothballs demanded. 
E) A 20 percent increase in the price of mothballs will lead to a 5 percent decrease in the quantity of mothballs demanded.

Question 19

Which of the following is the most important determinant of the elasticity of supply of a good?

Accepted Answer

A) The number of uses of the good 
B) The availability of close substitutes of the good 
C) The amount of time producers have to adjust their behavior in response to a price change 
D) The percentage of income spent on the good by consumers 
E) The availability of complementary goods

Question 20

The supply curve of a good or service represents a collection of maximum prices that suppliers require to be willing and able to supply each additional unit of a good or service.

Accepted Answer

A) True 
 B)False

Exam 4: Using Supply and Demand

When a binding price floor is imposed on a market, _____.

Which of the following is true of a good for which the demand is elastic?

Market efficiency occurs when the margin of benefits of the last unit consumed is equal to the marginal cost of productivity.

Along the demand curve for a good, _____ as larger quantities of the good are consumed during any period.

When the demand for a good is relatively more elastic than its supply, _____.

If the demand for apples is highly elastic and the supply is highly inelastic, then a tax imposed on apples will be paid:

Graph A below shows an elastic demand curve, and Graph B shows an inelastic demand curve. Graph B shows that as the price decreases from $20 to $10, total revenue _ and quantity demanded _.Figure 4.1:

If a price ceiling is set above the equilibrium price, it is not binding.

The following table shows Miles's demand for jazz CDs. If the price of a jazz CD equals $15, the total consumer surplus Miles receives from purchasing jazz CDs is equal to _____.Table 4.5:

Erin runs a cookie store in Rhode Island. After raising the price from $1 to $2 per cookie, her total revenue from selling cookies per week decreased from $200 to $150. Thus, it can be said that the demand for Erin's cookies is:

Ceteris paribus, a decrease in the market price of a good will result in a(n) :

Which of the following is likely to have a more elastic short-run demand curve?

Consumer surplus is positive as long as the:

When a 5 percent increase in price leads to an 8 percent increase in quantity supplied, the supply is said to be relatively inelastic.

At Bailey's Barber Shop, a 5 percent increase in the price of haircuts results in a 15 percent decrease in the number of haircuts per day. Which of the following is the price elasticity of demand of haircuts?

If the elasticity of demand for mothballs is 0.50, then which of the following is true along the demand curve for mothballs?

Which of the following is the most important determinant of the elasticity of supply of a good?

The supply curve of a good or service represents a collection of maximum prices that suppliers require to be willing and able to supply each additional unit of a good or service.