46-51

49. Allocating kidneys to those with the highest net benefit (where net benefit is measured as the expected increase in lifespan from a transplant) is an attempt to maximize a. consumer surplus. b. producer surplus. c. profit. d. equity. e. respect for elders.

A

51. The optimal consumption rule states that total utility is maximized when all income is spent and a. MU/P is equal for all goods. b. MU is equal for all goods. c. P/MU is equal for all goods. d. MU is as high as possible for all goods. e. The amount spent on each good is equal.

A

46. If a decrease in price from $2 to $1 causes an increase in quantity demanded from 100 to 120, using the midpoint method, price elasticity of demand equals a. 0.17. b. 0.27. c. 0.40. d. 2.5. e. 3.72.

B

47. Which of the following is correct for a price increase? When demand is ______, total revenue will______. a. Demand is inelastic, total revenue will decrease b. Demand is elastic, total revenue will decrease c. Demand is unit-elastic, total revenue will increase d. Demand is unit-elastic, total revenue will decrease e. Demand is elastic, total revenue will increase

B

48. If the cross-price elasticity between two goods is negative, this means that the two goods are a. substitutes. b. complements. c. normal. d. inferior. e. luxuries.

B

49. Consumer surplus is found as the area a. above the supply curve and below the price. b. below the demand curve and above the price. c. above the demand curve and below the price. d. below the supply curve and above the price. e. below the supply curve and above the demand curve.

B

50. Which of the following is true regarding equity and efficiency in competitive markets? a. Competitive markets ensure equity and efficiency. b. There is often a trade-off between equity and efficiency. c. Competitive markets lead to neither equity nor efficiency. d. There is generally agreement about the level of equity and efficiency in a market. e. None of the above.

B

51. A consumer is spending all of her income and receiving 100 utils from the last unit of good A and 80 utils from the last unit of good B. If the price of good A is $2 and the price of good B is $1, to maximize total utility the consumer should buy a. more of good A. b. more of good B. c. less of good B. d. more of both goods. e. less of both goods.

B

51. Assume there are two goods, good X and good Y. Good X costs $5 and good Y costs $10. If your income is $200, which of the following combinations of good X and good Y is on your budget line? a. 0 units of good X and 18 units of good Y b. 0 units of good X and 20 units of good Y c. 20 units of good X and 0 units of good Y d. 10 units of good X and 12 units of good Y e. all of the above

B

51. The optimal consumption bundle is always represented by a point a. inside the consumer's budget line. b. outside the consumer's budget line. c. at the highest point on the consumer's budget line. d. on the consumer's budget line. e. at the horizontal intercept of the consumer's budget line.

D

46. Which of the following is likely to have the highest price elasticity of demand? a. eggs b. beef c. housing d. gasoline e. foreign travel

E

50. When a competitive market is in equilibrium, total surplus can be increased by I. reallocating consumption among consumers. II. reallocating sales among sellers. III. changing the quantity traded. a. I only b. II only c. III only d. I, II, and III e. None of the above

E

49. Other things equal, a rise in price will result in which of the following? a. Producer surplus will rise; consumer surplus will rise. b. Producer surplus will fall; consumer surplus will fall. c. Producer surplus will rise; consumer surplus will fall. d. Producer surplus will fall; consumer surplus will rise. e. Producer surplus will not change; consumer surplus will rise.

C

49. Refer to the graph below. What is the value of consumer surplus when the market price is $40? a. $400 b. $800 c. $4,000 d. $8,000 e. $16,000

C

50. An excise tax will be paid mainly by producers when a. it is imposed on producers. b. it is imposed on consumers. c. the price elasticity of supply is low and the price elasticity of demand is high. d. the price elasticity of supply is high and the price elasticity of demand is low. e. the price elasticity of supply is perfectly elastic.

C

47. Total revenue is maximized when demand is a. elastic. b. inelastic. c. unit-elastic. d. zero. e. infinite.

C

46. If a 2% change in the price of a good leads to a 10% change in the quantity demanded of a good, what is the value of price elasticity of demand? a. 0.02 b. 0.2 c. 5 d. 10 e. 20

C

46. The income effect is most likely to come into play for which of the following goods? a. water b. clothing c. housing d. transportation e. entertainment

C

47. Which of the following is true if the price elasticity of demand for a good is zero? a. The slope of the demand curve is zero. b. The slope of the demand curve is one. c. The demand curve is vertical. d. The demand curve is horizontal. e. The price of the good is high.

C

48. Which of the following leads to a more inelastic price elasticity of supply? I. the use of inputs that are easily obtained II. a high degree of substitutability between inputs III. a shorter time period in which to supply the good a. I only b. II only c. III only d. I and II only e. I, II, and III

C

49. Refer to the graph below. What is the value of producer surplus when the market price is $60? a. $100 b. $150 c. $1,000 d. $1,500 e. $3,000

C

50. At market equilibrium in a competitive market, which of the following is necessarily true? I. Consumer surplus is maximized. II. Producer surplus is maximized. III. Total surplus is maximized. a. I only b. II only c. III only d. I and II only e. I, II, and III

C

46. Which of the following statements is true? I. When a good absorbs only a small share of consumer spending, the income effect explains the demand curve's negative slope. II. A change in consumption brought about by a change in purchasing power describes the income effect. III. In the case of an inferior good, the income and substitution effects work in opposite directions. a. I only b. II only c. III only d. II and III only e. I, II, and III

D

47. A perfectly elastic demand curve is a. upward sloping. b. vertical. c. not a straight line. d. horizontal. e. downward sloping.

D

47. A perfectly elastic supply curve is a. positively sloped. b. negatively sloped. c. vertical. d. horizontal. e. U-shaped

D

47. Which of the following would cause the demand for a good to be relatively inelastic? a. The good has a large number of close substitutes. b. Expenditures on the good represent a large share of consumer income. c. There is ample time to adjust to price changes. d. The good is a necessity. e. The price of the good is in the upper left section of a linear demand curve.

D

48. If Kylie buys 200 units of good X when her income is $20,000 and 300 units of good X when her income increases to $25,000, her income elasticity of demand, using the midpoint method, is a. 0.06. b. 0.5. c. 1.65. d. 1.8. e. 2.00.

D

48. The income elasticity of demand for a normal good is a. zero. b. 1. c. infinite. d. positive. e. negative.

D

50. An excise tax imposed on sellers in a market will result in which of the following? I. an upward shift of the supply curve II. a downward shift of the demand curve III. deadweight loss a. I only b. II only c. III only d. I and III only e. I, II, and III

D

51. Generally, each successive unit of a good consumed will cause marginal utility to a. increase at an increasing rate. b. increase at a decreasing rate. c. increase at a constant rate. d. decrease. e. either increase or decrease.

D