Econ Exam #2 Practice exams

We predict the long-run price elasticity of demand for gasoline to be _____ the short-run price elasticity of demand for it. A) less than B) larger than C) equal to D) not comparable to

B) larger than

If the government imposes binding rent control: A) rent will be set above the equilibrium price. B) it may result in some landlords leaving the business because they cannot cover costs. C) it will lead to rental units being higher in quality because landlords are guaranteed a high price. D) it will cause a surplus of housing.

B) may result in some landlords leaving the business because they can't cover costs

If the price of emergency visits to the doctor rose, we would expect: A) a large decline in the number of emergency visits to the doctor. B) only a slight decline in the number of emergency visits to the doctor. C) the number of emergency visits to the doctor to increase. D) the total income of doctors to fall dramatically.

B) only a slight decline in the number of emergency visits to the doctor

The burden of a tax on a good is said to fall completely on the consumers if the: A) price paid by consumers for the good declines by the amount of the tax. B) price paid by consumers for the good increases by the amount of the tax. C) price paid by consumers does not change. D) wages received by workers who produce the good increase by the amount of the tax.

B) price paid by the consumers for the good increases by the amount of the tax

When the government removes a binding price floor: A) quantity demanded will decrease and quantity supplied will increase. B) quantity demanded will increase and quantity supplied will decrease. C) excess demand will develop. D) excess supply will develop

B) quantity demanded will increase and quantity supplied will decrease

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross-price elasticity for water and lemons is -0.13. This means that butter and margarine are _____, while water and lemons are _____. A) complements; substitutes B) substitutes; complements C) inelastic goods; elastic goods D) elastic goods; complements

B) substitutes, complements

The United States and the European Union impose price floors on many agricultural products. These price floors lead to unwanted surpluses. To deal with a surplus: A) the U.S. government typically pays farmers to produce as much as possible. B) the U.S. government in some cases has destroyed the surplus production. C) the European Union pays farm exporters to sell products for a profit overseas. D) the U.S. government holds auctions to sell the surplus to the highest bidder.

B) the U.S government in some cases has destroyed the surplus production

A consumer's willingness to pay depends on: A) the cost of producing the good or service. B) the expected additional benefit of consuming the good or service. C) the size of the shortage of the good or service. D) the size of the surplus of the good or service.

B) the expected additional benefit of consuming the good or service

A consumer's willingness to pay reflects: A) the maximum price at which he or she would buy the good or service. B) the minimum price at which he or she would buy the good or service. C) the cost of producing the good or service. D) the equilibrium price of the good or service.

A) the maximum price at which he or she would buy the good or service

Each month Jessica buys exactly 15 Big Macs regardless of the price. Jessica's price elasticity of demand for Big Macs is: A) 0. B) 1. C) greater than 1. D) less than 1 but greater than 0.

A) 0

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____. A) 0.2; inelastic B) 5; inelastic C) 0.2; elastic D) 5; elastic

A) 0.2, inelastic

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What will happen? A) More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price. B) The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price. C) More people will be able to see the doctor, since the price is lower. D) Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price.

A) More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price

Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax? A) Yacht builders will pay more. B) Yacht buyers will pay more. C) Yacht builders and buyers will pay equally. D) It's impossible to tell without additional information.

A) Yacht builders will pay more

If the estimated price elasticity of demand for foreign travel is 4: A) a 20% decrease in the price of foreign travel will increase quantity demanded by 80%. B) the demand for foreign travel is inelastic. C) a 10% increase in the price of foreign travel will increase quantity demanded by 40%. D) a 20% increase in the price of foreign travel will increase quantity demanded by 80%.

A) a 20% decrease in the price of foreign travel will increase quantity demanded by 80%

Which of the following is an excise tax? A) a tax of $0.41 per gallon of gas B) a tax of 12.4% of your wages C) a tax on the value of your property D) a one-time local per capita tax of $50

A) a tax of .41 cents per gallon of gas

If the demand curve is downward-sloping and supply is perfectly elastic, then the burden of an excise tax is: A) borne entirely by consumers. B) borne entirely by producers. C) shared by consumers and producers, with the burden falling mainly on consumers. D) shared by consumers and producers, with the burden falling mainly on producers.

A) borne entirely by consumers

Ashley bought a new pair of jeans. When she walked out of the store, she thought, "I got such a great deal; I would have paid $40 more for these jeans!" This best represents the concept of: A) consumer surplus. B) producer surplus. C) total surplus. D) equilibrium.

A) consumer surplus

Suppose the United States removes sugar quotas and the market price of sugar drops. If the demand curve for candy bars is downward-sloping, in the candy bar market we would expect: A) the consumer surplus to increase. B) the consumer surplus to decrease. C) the consumer surplus to be unchanged. D) the deadweight loss to increase

A) consumer surplus to increase

Use of the midpoint method to calculate the price elasticity of demand eliminates the problem of computing: A) different elasticities, depending on whether price decreases or increases. B) different elasticities, because price and quantity are inversely related on the demand curve. C) total revenue when price falls and demand is inelastic. D) total revenue when price falls and demand is elastic.

A) different elasticities, depending on whether price decreases or increases

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price. If the demand for beef is perfectly elastic, this rancher's quantity demanded will: A) fall to 0. B) not change. C) fall slightly. D) increase slightly.

A) fall to 0

Along a given supply curve, an increase in the price of a good will: A) increase producer surplus. B) decrease producer surplus. C) increase consumer surplus. D) decrease producer surplus and increase consumer surplus.

A) increase producer surplus

If demand _____ and the University of Michigan increases the price of football tickets, revenues will increase. A) is price-inelastic B) is price-elastic C) has price elasticity equal to 1 D) is perfectly price-elastic

A) is price-inelastic

West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States: A) leads to cotton surpluses in the United States and lower prices for West African farmers on world markets. B) raises the world price of cotton. C) has led to a global shortage of cotton. D) has led to an increase in the demand for West African cotton.

A) leads to cotton surpluses in the US and lower prices for West African farmers on world markets

Suppose the government decides to fight obesity in America by imposing an excise tax based on the saturated fat content of food. The most likely effect of this tax would be to: A) lower the profits of ice cream suppliers. B) decrease revenue for the government. C) decrease black market activity. D) raise the profits of ice cream suppliers

A) lower profits of ice cream suppliers

To be binding, a price ceiling must be set at a price: A) lower than the equilibrium price. B) higher than the equilibrium price. C) the same as the equilibrium price. D) Any price ceiling is binding.

A) lower than the price equilibrium price

If the income elasticity of demand for a good is _____, the good is said to be _____. A) negative; inferior B) negative; negative C) positive; positive D) negative; normal

A) negative, inferior

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand. A) price B) quantity C) income D) cross-price

A) price

The most likely reason that the government implements a _____ is because it feels the price is too high for _____. A) price ceiling; consumers B) price floor; consumers C) price ceiling; producers D) price floor; producers

A) price ceiling, consumers

The price elasticity of demand for skiing lessons in New Hampshire is over 1. This means that the demand is _____ in New Hampshire. A) price elastic B) price inelastic C) price unit-elastic. D) perfectly price elastic

A) price elastic

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____. A) reduce; less than 5% B) reduce; more than 5% C) reduce; exactly 5% D) increase; 5%

A) reduce the number of students enrolling by less than 5%

The university hopes to raise more revenue by increasing parking fees. This plan will work only if: A) the price effect is larger than the quantity effect. B) the price effect is smaller than the quantity effect. C) the price effect and quantity effect are the same. D) there is no price or quantity effect.

A) the price effect is larger than the quantity effect

When a market is efficient: A) there is no way to make some people better off without making other people worse off. B) consumers who value buying a good the least are the ones who can purchase the good. C) producers whose willingness to accept a price above the market price can sell their good. D) there are ways to make everyone better off

A) there is no way to make some people better off without making other people worse off

Coffee and tea are substitutes in consumption. If there is an increase in the price of coffee, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus in the tea market: A) will increase. B) will decrease. C) will not change. D) may change, but we cannot determine the change without more information

A) will increase

If the technology of producing peanuts improves, total surplus in the peanut butter market: A) will increase. B) will decrease. C) will not change. D) may change, but we cannot determine the change without more information

A) will increase

Peanut butter and jelly are complements in consumption. Assuming that the supply curve of peanut butter is upward-sloping, if there is a decrease in the price of jelly, producer surplus in the peanut butter market: A) will increase. B) will decrease. C) will not change. D) may change, but it is impossible to tell whether it will increase or decrease.

A) will increase

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for: A) a home entertainment system to be more price-elastic. B) a home entertainment system to be more price-inelastic. C) newspapers to be more price-elastic. D) the two to be equally price-elastic.

A)a home entertainment system to be more price-elastic

The total producer surplus for a good can be calculated in all of the following ways EXCEPT as: A) the sum of the individual producer surpluses for all sellers of the good. B) the area below the supply curve for the good up to the quantity of the good sold. C) the area above the supply curve and below the price at which the good is being sold. D) the sum, for all sellers of the good, of the difference between what each seller receives and the minimum amount he or she is willing to accept for selling the good.

B)

The price elasticity of supply for a good is 3 if a _____ in price leads to a 3% decrease in the quantity supplied. A) 1% increase B) 1% decrease C) 9% decrease D) 9% increase

B) 1% decrease

Producer surplus is represented by the area _____ the supply curve and _____ the price. A) above; above B) above; below C) below; above D) below; below

B) area above the supply curve and below the price

Along a given downward-sloping demand curve, an increase in the price of a good will: A) increase consumer surplus. B) decrease consumer surplus. C) have no effect on consumer surplus. D) decrease producer surplus.

B) decrease consumer surplus

After a price decrease, the quantity effect tends to: A) decrease total revenue. B) increase total revenue. C) make the price effect stronger. D) make the price effect weaker.

B) decrease total revenue

Taxes on the purchase of specific items such as gasoline, cigarettes, or alcoholic beverages are called: A) personal income taxes. B) excise taxes. C) property taxes. D) sales taxes.

B) excise taxes

Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce the price of gasoline sold at state-owned gas stations to 50% of the previous price. Assuming a downward-sloping demand curve for gasoline, in theory, this policy would result in the quantity of gasoline demanded to be _____ the quantity of gasoline supplied. A) equal to B) greater than C) less than D) greater than or equal to

B) greater than

The long-run price elasticity of supply of crude oil is _____ the short-run price elasticity of supply of crude oil. A) less than B) greater than C) equal to D) not comparable to

B) greater than

One of the ways rent control is inefficient is that it leads to: A) higher-quality apartments. B) high opportunity costs associated with wasted time searching for apartments. C) markets that maximize total surplus. D) the construction of more apartments.

B) high opportunity costs associated with wasting time searching for apartments

Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the overall demand for cheeseburgers is: A) price elastic. B) price inelastic. C) price unit-elastic. D) perfectly price inelastic.

B) inelastic

If a good has a price-inelastic demand, then which of the following is NOT likely to be characteristic of this good? A) It is a necessity and is relatively small proportion of the household budget. B) It has many substitutes. C) Consumers spend a small percentage of their income on it. D) Consumers do not have much time to adjust to market changes

B) it has many substitutes

A price floor is likely to cause deadweight loss because: A) buyers incur additional search costs looking for the scarce good. B) the quantity of the good is less than the equilibrium quantity. C) a black market emerges and the good sells at prices above the price floor. D) some buyers who want to buy at the controlled price are unable to find a seller willing to sell at that price.

B) the quantity of the good is less than the equilibrium quantity

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling: A) it is inefficient. B) the transaction takes place on a black market. C) there is an increase in quantity demanded. D) there is a decrease in quantity demanded.

B) the transaction takes place on a black market

If a frost destroys much of the grapefruit crop, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus: A) will increase. B) will decrease. C) will not change. D) may change, but we cannot determine the change without more information.

B) will decrease

Peanut butter is an inferior good. If there is an increase in income, total surplus in the peanut butter market: A) will increase. B) will decrease. C) will not change. D) may change, but we cannot determine the change without more information

B) will decrease

Which of the following is NOT true regarding a price-elastic demand curve? A) Total revenue increases when the price falls. B) The absolute value of the price elasticity is a fraction less than 1. C) The absolute value of the price elasticity is greater than 1. D) The percent changes in the quantity demanded exceed the percent changes in the price for any small change in price.

B)the absolute value of the price elasticity is a fraction less than 1

Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. According to this finding, the price elasticity of demand for gas is: A) 5. B) 2. C) 0.2. D) 0.5.

C) 0.2

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _____ and total revenue to _____. A) 10%; increase B) 5%; stay constant C) 10%; fall D) 2.5%; fall

C) 10%, fall

When demand is _____, a rise in price leads to a(n) _____ in total revenue. A) perfectly inelastic; decrease B) perfectly elastic; increase C) inelastic; increase D) elastic; decrease

C) C, or D

If the government removed the excise tax on gasoline, assuming that neither demand nor supply is perfectly inelastic, which of the following would NOT occur? A) an increase in consumer surplus B) an increase in producer surplus C) a decrease in producer surplus D) an increase in total surplus

C) a decrease in producer surplus

If total revenue goes up when the price falls, demand is said to: A) be price-inelastic. B) be price unit-elastic. C) be price-elastic. D) have positive price elasticity

C) be price elastic

Consumer surplus can be found by computing the area _____ the _____ curve and _____ the price. A) above; supply ; below B) below; supply; above C) below; demand; above D) below; demand; below

C) below the demand curve and above the price

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will: A) improve efficiency, since the low prices will force producers to find cheaper production methods. B) result in gasoline surpluses even in an oil-rich country. C) cause gasoline shortages even in an oil-rich country. D) improve equality between rich and poor, since the poor can now afford gasoline.

C) cause gas shortages even in an oil-rich country

The price elasticity of demand can be found by: A) examining only the slope of the demand curve. B) measuring absolute changes in price and quantity demanded. C) comparing the percentage change in quantity demanded to the percentage change in price. D) knowing that when price changes, quantity demanded goes in the opposite direction.

C) comparing the % change in quantity demanded to the 5 change in price

Anna is willing to sell her 20-year-old boat, but not for less than $2,300. For Anna, the cost of selling this boat is _____ $2,300. A) more than B) less than C) equal to D) There is not enough information to answer the question.

C) equal to

Suppose a competitive market has a downward-sloping demand curve and a horizontal supply curve. If the supply curve shifts downward, equilibrium price will _____, equilibrium quantity will _____, consumer surplus will _____, and producer surplus will _____. A) decrease; increase; increase; decrease B) decrease; decrease; increase; not change C) decrease; increase; increase; not change D) decrease; increase; not change; increase

C) equilibrium price will decrease, equilibrium quantitity will increase, consumer surplus will increase, and producer surplus will not change

For which of the following is the cross-price elasticity of demand most likely a large positive number? A) hockey pucks and hockey sticks B) DVDs and milk C) french fries and onion rings D) all of these, because the cross-price elasticity is always a positive number

C) french fries and onion rings

Suppose the government sets a price floor below the current price of a good. This price floor will: A) result in an excess supply of the good. B) result in an excess demand for the good. C) have no effect on the price of the good. D) increase the quantity supplied of the good.

C) have no effect on price of good

A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is: A) 1. B) highly elastic. C) highly inelastic. D) 0.

C) highly inelastic

Which of the following statements is TRUE? A) When the income elasticity of demand is positive, the good is inferior. B) When the income elasticity of demand is negative, the good is normal. C) Income elasticity of demand measures how much the quantity demanded of a good is affected by changes in consumers' incomes. D) Income elasticity of demand measures the effect of the change in one good's price on the quantity demanded of the other good.

C) income elasticity of demand measures how much the quantity demanded of a good is affected by changes in consumers' incomes.

An agricultural market price support policy establishes a binding price floor, which: A) decreases the price paid by consumers. B) does not change the price paid by consumers. C) increases the price received by farmers. D) decreases the price received by farmers.

C) increases price received by farmers

State governments levy excise taxes on alcohol because: A) they want to subsidize alcohol production. B) they want to encourage individuals to produce their own alcohol. C) it discourages drinking alcohol while raising revenue for the government. D) it is politically popular with religious groups.

C) it discourages drinking alcohol while raising revenue for the gov.

Price ceilings will impose costs on society because they: A) will eliminate long waiting lines. B) may result in black market prices, which are lower than the market-determined price would be. C) lead to a smaller quantity offered on the market. D) help businesses instead of consumers.

C) lead to a smaller quantity offered on the market

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should: A) lower prices in each state. B) raise prices in each state. C) lower prices in South Carolina and raise prices in Alabama. D) leave prices unchanged in South Carolina and raise prices in Alabama.

C) lower prices in South Carolina and raise prices in Alabama

A student organization is formed on your college campus to protest against the high rent for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for? A) a laissez faire policy B) a price floor C) a price ceiling D) a quantity control

C) price ceiling

The supply curve for a good will be more elastic if: A) spending on the good accounts for a large share of a consumer's income. B) the good is a luxury item. C) production inputs are readily available at a relatively low cost. D) there is very little time for producers to respond to a price change.

C) production inputs are readily available at a readily low cost

The incidence of a tax: A) is a measure of the revenue the government receives from it. B) refers to who writes the check to the government. C) refers to how much of the tax is actually paid by consumers and producers. D) is a measure of the deadweight loss from the tax.

C) refers to how much of the tax is actually paid by consumers and producers

The total consumer surplus for good X can be calculated in all ways EXCEPT as: A) the sum of the individual consumer surpluses for all buyers of X. B) the area below the demand curve for X and above the price of X. C) the area bounded by the demand curve for X and the two axes. D) the sum, for all buyers of X, of the difference between what each buyer is willing to pay for X and the amount actually paid.

C) the area counded by the demand curve for X and the two axes

Consumer surplus for an individual buyer is equal to: A) the consumer's willingness to pay for the good minus the marginal cost of producing the good. B) the price of the good minus the marginal cost of producing the good. C) the consumer's willingness to pay for the good minus the price of the good. D) the marginal cost of the good minus the consumer's willingness to pay for the good.

C) the consumer's willingness to pay for the good minus the price of the good

A hotel has a capacity of 100 rooms in the short run. Which of the following statements best describes the short-run elasticity of supply for rooms at this hotel? A) The supply is elastic at quantities above 100 rooms but inelastic at quantities below 100 rooms. B) The elasticity of supply is equal to 1 in the short run but infinitely elastic in the long run. C) The elasticity of supply is zero in the short run because the short-run supply curve is vertical. D) The supply is infinitely elastic in the short run but perfectly inelastic in the long run.

C) the elasticity of supply is zero in the short run because the short-run supply curve is vertical

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged? A) Total revenue will remain unchanged. B) Total revenue will fall. C) Total revenue will rise. D) The information is insufficient to answer the question.

C) total revenue will rise

An analysis of the effect of excise taxes on markets allows us to conclude that: A) when the price elasticity of supply is equal to zero, an excise tax falls entirely on the consumers. B) when the price elasticity of demand is lower than the price elasticity of supply, an excise tax falls mainly on the producers. C) whether the tax is levied on consumers or producers, the quantity sold will be the same. D) when the price elasticity of demand is higher than the price elasticity of supply, an excise tax falls mainly on the consumers.

C) whether the tax is levied on consumers or producers, the quantity sold will be the same

The only producer of chocolate bunnies in the world, Choco's Bunny Company, recently expanded its production capacity from 1,000 to 2,000 bunnies per day. If the price elasticity of demand for bunnies is 3.33, by how much will the company have to reduce its price to sell the additional 1,000 bunnies (by the midpoint method)? A) 2.5% B) 25% C) 125% D) 20%

D) 25%

Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by: A) 0.1%. B) 1%. C) 5%. D) 50%.

D) 50%

Which of the following goods is likely to have the largest price elasticity of demand? A) a bicycle B) a mountain bike C) a Cannondale mountain bike D) a green Cannondale mountain bike

D) a green Cannondale mountain bike

Rent controls in New York City cause all of the following EXCEPT: A) inefficiently low-quality apartments. B) wasted resources resulting from the opportunity cost of time associated with trying to find an apartment. C) black markets. D) an increase in the quantity supplied of rent-controlled apartments.

D) an increase in the quantity supplies of rent-controlled apartments

When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve: A) consumer surplus falls. B) producer surplus falls. C) a deadweight loss occurs. D) consumer surplus falls, producer surplus falls, and a deadweight loss occurs.

D) consumer and producer both falls, and deadweight loss occurs

If the market for grapefruit is in equilibrium without any outside intervention to change the equilibrium price: A) total surplus is minimized. B) there is some deadweight loss. C) a few mutually beneficial trades are missed. D) consumer and producer surplus are maximized

D) consumer and producer surplus are maximized

Which of the following is most likely to have a vertical supply curve? A) salt B) oil C) insulin D) paintings by Van Gogh

D) paintings by Van Gogh

The most likely reason that the government would implement a _____ is because it feels that the price is too low for _____. A) price ceiling; consumers B) price floor; consumers C) price ceiling; producers D) price floor; producers

D) price floor, producers

If demand is elastic, the _____ effect dominates the _____ effect, and a(n) _____ in price will cause total revenue to rise. A) price; quantity; decrease B) price; quantity; increase C) quantity; price; increase. D) quantity; price; decrease

D) quantity, price, decrease

Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are _____, and the cross-price elasticity of demand is _____. A) complements; 0.5 B) substitutes; -0.5 C) complements; 2 D) substitutes; 2

D) substitutes, 2

The demand for textbooks is price-inelastic. Which of the following would explain this? A) Many alternative textbooks can be used as substitutes. B) Students have a lot of time to adjust to price changes. C) Textbook purchases consume a large portion of most students' income. D) Textbooks are a necessity.

D) textbooks are a necessity

Maximum total surplus in the market for chocolate occurs when: A) total net gain to producers is minimized. B) all consumers who value chocolate can buy chocolate. C) all producers can sell their chocolate. D) the market is in equilibrium.

D) the market is in equilibrium

When the price goes down, the quantity demanded goes up. The price elasticity of demand measures: A) how much the price goes down. B) how much the equilibrium price goes up. C) the responsiveness of the price change to an income change. D) the responsiveness of the quantity change to the price change.

D) the responsiveness to the quantity change to the price change

Which of the following is NOT a factor in determining the price elasticity of demand? A) the number of available substitutes B) time C) the proportion of the budget spent on the item D) the slope of the supply curve

D) the slope of the supply curve

The total surplus in a market is: A) the excess supply due to a price above the equilibrium price. B) the surplus that accrues when a good is not scarce, defined as the total amount (if any) by which quantity supplied exceeds quantity demanded at a zero price. C) the net benefit to consumers, defined as the excess of consumer surplus over producer surplus. D) the sum of consumer surplus and producer surplus.

D) the sum of the consumer surplus and producer surplus

When the minimum wage increases: A) unemployment among skilled workers decreases. B) fewer workers are willing to work off the books. C) employment of unskilled workers increases. D) unemployment among unskilled workers increases.

D) unemployment among unskilled workers increases

Total revenue will decrease if the price goes _____ and demand is _____. A) up; perfectly price-inelastic B) up; price-inelastic C) down; price-elastic D) up; price-elastic

D) up; price-elastic

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases, there is a(n) _____ in _____ surplus. A) increase; producer B) increase; consumer C) increase; total D) decrease; producer

D)decrease in producer surplus

If an excise tax is imposed on automobiles and collected from consumers: A) the demand curve will shift downward by the amount of the tax. B) the supply curve will shift upward by the amount of the tax. C) the equilibrium quantity supplied will increase relative to the pretax level. D) the equilibrium quantity demanded will increase relative to the pretax level.

a) demand curve will shift downward by the amount of the tax

Along a given downward-sloping demand curve, an increase in the price of a good will _____ consumer surplus. A) increase B) decrease C) not change D) The answer cannot be determined without information about the supply curve.

b) decrease

If an excise tax is imposed on wine and collected from the consumers, the _____ curve will shift _____ by the amount of the tax. A) demand; upward B) demand; downward C) supply; upward D) supply; downward

b) demand; downward

Governments continue to impose price controls. Which of the following is NOT a valid reason for this? A) Some people do benefit from such price controls. B) People fear that prices will change dramatically if the price controls are removed. C) It is politically expedient to enact regulations that benefit influential voting groups. D) Price controls are always effective.

d) price controls are always effective