Chapter 3 & 6 Review

Refer to the table above. At a price of $3, the total revenues of sellers will be: a. $18 b. $12 c. $45 d. $5

b. $12

Refer to the above table. If demand increased by 100 units at each price level, and the government set a price ceiling of $40, then there will be: a. A shortage b. A surplus c. No shortage or surplus d. Decrease in supply

Answer the question based on the following supply and demand schedules in units per week for a product c. No shortage or surplus

Refer to the above diagram of the market for corn. There will be a surplus of 8 thousand bushels at the price of: a. $4/bushel b. $3/bushel c. $2/bushel d. $5/bushel

a. $4/bushel

At a price of $4 per unit, Gadgets Inc. is willing to supply 20,000 gadgets, while United Gadgets is willing to supply 10,000 gadgets. If the price were to rise to $8 per unit, their respective quantities supplied would rise to 45,000 and 25,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets? a. 1.2 b. 1.0 c. .88 d. .80

a. 1.2

An increase in the quantity of hybrid cars supplied would be caused by which of the following? a. An increase in demand for hybrid cars b. A decrease in the demand for hybrid cars c. Higher prices of car batteries d. Lower prices for gasoline

a. An increase in demand for hybrid cars

It is argued that, with a rising demand for college education, if the supply were to made to become more elastic then college tuition costs would: a. Rise faster b. Decrease slowly c. Increase more slowly d. Decrease steeply

c. Increase more slowly

If a price ceiling is set below the equilibrium price in a market: a. Rationing will be unnecessary b. Surpluses of the commodity will develop c. The quantity demanded will exceed the quantity supplied d. The quantity supplied will exceed the quantity demanded

c. The quantity demanded will exceed the quantity supplied

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that: a. Cheerios are a luxury b. Cereals are a necessity c. There are more substitutes for Cheerios than for cereals as a whole d. Consumption of cereals as a whole is greater than consumption of Cheerios

c. There are more substitutes for Cheerios than for cereals as a whole

Which is most likely to be observed in community where legal ceilings are imposed on residential rents? a. Poor people will be able to find adequate housing b. Homeowners will reduce their own use of housing space, making more available to others c.Those whose needs for housing are most urgent will be able to obtain the space they want d. People moving into the community will have difficulty locating residential space to rent

d People moving into the community will have difficulty locating residential space to rent

Refer to the above table. The largest decline in total rvenue will occur when price falls from: a. $5 to $4 b. $4 to $3 c. $3 to $2 d. $2 to $1

d. $2 to $1

Refer to the above table. A surplus of 500 units will occur when the price is : a. $10 per unit b. $15 per unit c. $20 per unit d. $30 per unit

d. $30 per unit

Refer to the above table. If supply decreased by 2 units at each price, what would the new equilibrium price and quantity be? a. $3 and 5 units b. $ and 4 units c. $5 and 5 units d. $6 and 6 units

d. $6 and 6 units

A consumer's weekly income is $300 and the consumer buys 5 bars of chocolate per week. When income increases to #330, the consumer buys 6 bars per week. The income elasticity of demand for chocolate by this consumer is about: a. 0 b. 0.5 c. 1 d. 2

d. 2

Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), what point on the graph is most likely to be the new equilibrium after a sharp increase in traffic accidents involving cyclists, and the payment of subsidies to bicycle producers? a. 3 b. 4 c. 5 d. 6

d. 6

A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand. As a result the equilibrium price will: a. Increase and the equilibrium quantity will decrease b. Increase and the equilibrium quantity will increase c. Decrease and the equilibrium quantity will decrease d. Decrease and the equilibrium quantity will increase

d. Decrease and the equilibrium quantity will increase

A increase in demand coupled with a simultaneous and bigger decrease in supply will cause equilibrium: a. Price to go up and quantity to go down b. Price to go up and quantity to go up c. Price to go down and quantity to go down d. Price to go down and quantity to go up

a. Price to go up and quantity to go down

Refer to the above market graph for tickets to a "Final Four" sports event. Given its market, if the event organizers pre-set the price at $20, then this action would result in a: a. Shortage of 5,000 units b. Shortage of 55,000 units c. Surplus of 5,000 units d. Surplus of 50,000 units

a. Shortage of 5,000 units

Refer to the above table. If a technological advance lowers production costs such that the quantity supplied increases by 60 units of this product at each price, the new equilibrium price would be: a. $11 b. $12 c. $13 d. $14

b. $12

A price increase from $43 to $49 results in quantity supplied from 220 units to 240 units. The price elasticity of supply is the price range is: a. .3 b. .67 c. 1.50 d. 3.33

b. .67

Refer to the above data. What is the price elasticity of demand over the range of $8 to $10? a. 0.11 b. 0.47 c. 1.93 d. 1.43

b. 0.47

Consider the supply and demand curves depicted in the diagram above. If the government imposed a price ceiling of $15, then buyers will be intending to buy____, but they will be able to legally buy___. a. 30 units; 24 units b. 36 units; 24 units c. 36 units; 30 units d. 24 units; more than 24 units

b. 36 units; 24 units

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge: a. A higher price to the buyers whose demand is elastic b. A higher price to the buyers whose demand is inelastic c. A higher price to the buyers whose demand is unit-elastic d. The same price actually, because price-discrimination will result in lower revenues

b. A higher price to the buyers whose demand is inelastic

What is the likely effect on the market for wine of a simultaneous increase in both consumer incomes and producer taxes on wine? a. An increase in both price and quantity b. An increase in price and a decrease in output c. A decrease in price and an indeterminate effect on quantity d. An increase in price and an indeterminate effect on quantity

b. An increase in price and a decrease in output

Refer to the market graph shown above. A black market where the price is $2.00 could result from price: a. Ceiling set at $2.50 b. Ceiling set at $1.50 c. Floor set at $1.50 d. Floor set at $2.00

b. Ceiling set at $1.50

Chuck Grim has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer? a. It will not change b. It will decrease c. It will increase d. It is impossible to tell

b. It will decrease

Refer to the above table, Which product is a normal good but least responsive to a change in income? a. Product W b. Product X c. Product Y d. Product Z

b. Product X

Which is not characteristic of a product with relatively inelastic demand? a. The good is regarded by consumers as a necessity b. There are a large number of good substitutes for the good c. Buyers spend a small percentage of their total income on the product d. Consumers have had only a short time period to adjust to changes in price

b. There are a large number of good substitutes for the good

Blossom, Inc. sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise price to $9, and the firm only manages to sell 460 bottles of perfume. The price elasticity of demand is: a. 0.33 and elastic b. 3.0 and elastic c. 0.33 and inelastic d. 3.0 and inelastic

c. 0.33 and inelastic

If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by: a. 20 percent b. 0.5 percent c. 5 percent D. 0.05 percent

c. 5 percent

The price of pork may increase as a result of: a. A decrease in the cost of fed for pigs b. Decreased advertising of pork c. An increase in the cost of producing beef d. A subsidy to pork producers

c. An increase in the cost of producing beef

A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; good B makes up a significant portion of most families/ budgets. A price increase for each good would most likely cause total revenues from good A to: a. Increase and total revenues from good B to decrease b. Increase and total revenues from good B to increase c. Decrease and total revenues from good B to increase d. Decrease and total revenues from good B to decrease

c. Decrease and total revenues from good B to increase

A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggest that the price elasticity of demand is: a. Unit-elastic from the union's perspective and unit-inelastic from management's perspective b. Perfectly inelastic from the union's perspective and perfectly elastic from management's perspective c. Elastic from the union's perspective; inelastic from management's perspective d. Inelastic from the union's perspective; elastic from management's perspective

c. Elastic from the union's perspective; inelastic from management's perspective

Refer to the above diagram for the milk market. There would be a shortage of milk whenever the price is : a. Higher that $1.50 per gallon b. Higher than $2.00 per gallon c. Lower than $1.50 per gallon d. Lower than $2.00 per gallon

c. Lower than $1.50 per gallon

Assume that pizza and hamburgers are the only food items available to consumers. If the price of pizza increases, other factors constant, then which of the following will definitely happen? a. Total revenues recived by pizzza sellers will increase b. Total revenues received by pizza seller will decrease c. Total revenues received by hamburger sellers will increase. d. Total revenues received by hamburger sellers will decrease

c. Total revenues received by hamburger sellers will increase

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addict' dollar expenditures to feed their addiction will tend to: a. Increase because their demand is price-elastic b. Decrease because their demand is price-Inelastic c. Decrease because their demand is price-elastic d. Increase because their demand is price-Inelastic

d. Increase because their demand is price-Inelastic

A state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we wold expect its demand to be: a. Elastic, thus the government's cigarette-tax revenues would rise with a tax increase b. Elastic, thus the government's cigarette-tax revenues would fall with a tax increase c. Inelastic, thus the government's cigarette-tax revenues would fall with a tax increase d. Inelastic, thus the government's cigarette-tax revenues would rise with a tax increase

d. Inelastic, thus the government's cigarette-tax revenues would rise with a tax increase