econ 2
If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about: a. 0.6. b. 0.0. c. 2.5. d. 0.4.
D
a third-party payer system: A. quantity demanded generally falls. B. quantity supplied generally falls. C. total expenditures generally fall. D. total expenditures generally rise.
D
There would be no deadweight loss if: a. demand was perfectly inelastic. b. demand was perfectly elastic. c. demand was to shift by the amount of the tax. d. taxes collected were used for societal good.
a
When marginal utility is positive, total utility is: a. increasing. b. decreasing. c. at its minimum. d. zero.
a
f the price in a market is above its equilibrium level, there will be a: a. surplus and downward pressure on price. b. shortage and upward pressure on price. c. surplus and upward pressure on price. d. shortage and downward pressure on price
a
ome years ago, Stuyvesant Town and Peter Cooper Village in Manhattan were sold for redevelopment. These villages had been rent controlled, but now that these neighborhoods are no longer rent controlled, one would expect: A. the rent to rise in those neighborhoods. B. the quantity of rentals demanded to rise. C. the houses to be not as well maintained since rent will be so high. D. the housing shortage in the neighborhood to worsen.
a
During World War II, the price of rubber went up considerably. The rise in price stimulated research for alternatives. For example, today's automobile tires are made almost entirely from synthetic materials. As a result, the increase in the price of rubber eventually led to a very large drop in quantity demanded. This is an example of how the price elasticity of demand: a. falls the less specifically the good is defined. b. rises the greater the time frame considered. c. rises the less specifically the good is defined. d. falls the greater the time frame considered.
b
A general rule of political economy in a democracy is that when small groups are helped by a government action and large groups are hurt by that action by an equal and offsetting amount, policies tend to reflect: A.the large group's interest. B.neither group's interest over the other. C.the small group's interest. D. the interest of a free market.
c
A per-unit tax will result in a deadweight loss unless the tax causes no change in: a. either equilibrium price or equilibrium quantity. b. the price consumers pay. c. equilibrium quantity sold. d. the price producers receive after paying it.
c
An elasticity of supply of 2.7 means that: a.supply is inelastic. b.. price changes by 2.7 percent for each 1 percent change in quantity supplied. c.. quantity supplied changes 2.7 percent for each 1 percent change in price. d..quantity supplied changes 2.7 units for each 1 percent change in price.
c
An increase in equilibrium price and a decrease in equilibrium quantity is most likely the result of: a. an increase in supply. b. a decrease in demand. c. a decrease in supply. d. an increase in demand.
c
As a result of advances in productivity, farmers can produce more at a lower cost. The effect of these changes has been to: a. increase the demand for farm output. b. increase total revenue for farmers as a group. c. reduce total revenue for farmers as a group. d. increase profits for farmers as a group.
c
For complements: a. cross-price elasticity of demand is positive. b. price elasticity of income is positive. c. cross-price elasticity of demand is negative. d. price elasticity of income is negative.
c
If elasticity of demand is .7, elasticity of supply is .7, and a 5 percent excise tax is levied on the good: a. the tax burden on consumers will be greater. b. one cannot say who will bear the greater burden without knowing the tax. c. the tax burden will be the same for both. d. the tax burden on suppliers will be greater.
c
If milk and cookies are complements and the price of cookies rises, we would expect to see: a. a decrease in the quantity demanded for milk but no change in demand. b. an increase in the demand for milk. c. a decrease in the demand for milk. d. an increase in the quantity demanded for milk but no change in demand.
c
If supply and demand both shift to the right, equilibrium quantity: a. falls, but the equilibrium price may rise, fall, or stay the same. b. may rise, fall, or stay the same, but equilibrium price will fall. c. rises, but the equilibrium price may rise, fall, or stay the same. d. may rise, fall, or stay the same, but equilibrium price will rise.
c
If the demand for agricultural output is highly inelastic, an improvement in the technology used in the agricultural industry most likely will cause a: a. small drop in the price of agricultural output combined with a small increase in quantity. b. small drop in the price of agricultural output combined with a large increase in quantity. c. large drop in the price of agricultural output combined with a small increase in quantity. d. large drop in the price of agricultural output combined with a large decrease in quantity.
c
If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift: A.downward and the price will decrease by less than $5. B.upward and the price will increase by less than $5. C.upward and the price will increase by $5. D.downward and the price will decrease by $5.
c
If the supply curve is perfectly inelastic, the burden of a tax on suppliers is borne: a. entirely by the consumers. b. mostly by the suppliers and partly by the consumers if the demand curve is inelastic. c. entirely by the suppliers. d. partly by the suppliers and mostly by the consumers if the demand curve is elastic.
c
Suppose that when you consume the third piece of chicken, total utility rises from 420 to 520. Marginal utility for the third piece of chicken is: a. 140 b. 520 c. 100 d. 420
c
The principle of diminishing marginal utility states that: a. as you consume more of a good, you enjoy the additional units more than you did the initial units. b. you enjoy consuming more of a good if it is good. c. as you consume more of a good, you enjoy the additional units less than you did the previous units. d. you don't enjoy consuming more of a good.
c
The slower the marginal utility declines as more of a good is consumed: a. the larger the opportunity cost of the good. b. the smaller the elasticity of demand. c. the greater the elasticity of demand. d. the smaller the opportunity cost of the good.
c
The slower the marginal utility declines as more of a good is consumed: a. the smaller the elasticity of demand. b. the smaller the opportunity cost of the good. c. the greater the elasticity of demand. d. the larger the opportunity cost of the good.
c
Which of the following is an example of price discrimination? a. When the price of land rises, landowners do not increase the quantity of land supplied. b. Some retailers hire fewer men than women to sell women's perfume on the shop floor. c. Peak-fare prices are higher than non-peak-fare prices. d. Grocery stores sell 12-ounce bottles of Coke for less than they sell liter bottles.
c
hose with more inelastic demands will bear a larger burden of a tax because they: a. will switch to other products with a tax. b. have more buying power. c. have fewer substitutes for that good. d. have more income.
c
An effective price ceiling is best defined as a price: a. lower than any supplier is willing to sell. b. imposed by government above equilibrium price. c. higher than any consumer is willing to pay. d. imposed by government below equilibrium price.
d
For luxuries, income elasticity is: A. greater than 0. B. less than 0. C.equal to 1. D. greater than 1.
d
For necessities, income elasticity is any value: a. greater than 0. b. greater than 1. c. less than 0. d. between 0 and 1.
d
If a $100 drop in the price of a $10,000 car resulted in an increase in the quantity of cars purchased from 100 to 110 and a $100 drop in the price of a $1,000 vacation rental resulted in an increase in the quantity of weekly vacation homes rented from 100 to 110, the price elasticity of demand is: a. not comparable. b. the same for both the car and the vacation rental. c. less for the car. d. greater for the car.
d
If price is lowered by law from the market equilibrium value of $5 to a lower value of $4: a. there will be lost surplus, as both producer surplus and consumer surplus decrease. b. consumer surplus will decrease and there will be some lost total surplus. c. both producer surplus and consumer surplus will increase. d. producer surplus will decrease and there will be some lost total surplus.
d
If quantity demanded does not change when the price changes, the demand: a. is elastic. b. is inelastic. c. has unit elasticity. d. is perfectly inelastic.
d
If supply is highly elastic and demand shifts to the right: a. price will rise significantly as will quantity. b. price and quantity will hardly change at all. c. price will rise significantly; quantity hardly changes at all. d. price will hardly change at all; quantity will rise significantly.
d
If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the demand curve for gasoline is downward-sloping, the supply of gasoline will: A.shift upward and the price will increase by less than $0.25 per gallon. B. shift downward and the price will decrease by less than $0.25 per gallon. C. shift upward and the price will increase by $0.25 per gallon. D. shift downward and the price will decrease by $0.25 per gallon.
d
In Massachusetts, the price elasticity of license plates is 3.5 and their price is $50. Massachusetts is: a. maximizing revenue since elasticity is greater than 1 and revenue will increase after a price decrease when demand is elastic. b. maximizing revenue since elasticity is greater than 1 and revenue will decrease after a price decrease when demand is elastic. c. not maximizing revenue since elasticity is greater than 1 and revenue will decrease after a price decrease when demand is elastic. d. not maximizing revenue since elasticity is greater than 1 and revenue will increase after a price decrease when demand is elastic.
d
In a third-party payer system: A. quantity demanded generally falls. B. quantity supplied generally falls. C. total expenditures generally fall. D. total expenditures generally rise.
d
Measuring the price of gasoline in dollars per quart, an economist calculates the price elasticity of demand to be 1. What would the price elasticity of demand be if the economist had chosen to measure the price in dollars per gallon? a. 4 b. .5 c. .25 d. 1
d
Supply is said to be inelastic when the: a. change in quantity supplied is less than the change in price. b. percentage change in quantity supplied is greater than the percentage change in price. c. change in quantity supplied is greater than the change in price. d. percentage change in quantity supplied is less than the percentage change in price.
d
Tariffs can be thought of as indirect: a. subsidies to domestic consumers. b. special taxes on domestic producers. c. subsidies to foreign producers. d. subsidies to domestic producers.
d
The principle of diminishing marginal utility states that: a. you enjoy consuming more of a good if it is good. b. you don't enjoy consuming more of a good. c. as you consume more of a good, you enjoy the additional units more than you did the initial units. d. as you consume more of a good, you enjoy the additional units less than you did the previous units.
d
The slower the marginal utility declines as more of a good is consumed: a. the larger the opportunity cost of the good. b. the smaller the opportunity cost of the good. c. the smaller the elasticity of demand. d. the greater the elasticity of demand.
d
When marginal utility is zero, total utility is: a. increasing. b. decreasing. c. zero. d. at its maximum.
d
Which of the following is the best example of an excise tax? a. A tax on all capital gains (the amount by which the value of an asset has risen between the time it was purchased and the time it was sold) b. A tax that is levied on the value of land and buildings You Answered c. A tax paid by employers on income paid to workers d. A tax collected on each gallon of gasoline sold
d
iminishing marginal utility implies that as an individual consumes more of a good, beyond some point another unit will add: a. the same pleasure as the preceding unit. b. more pleasure than the preceding unit. c. more units of utility than the preceding units. d. less pleasure than the preceding unit.
d
income elasticity is 1.22. since it greater than 1, this is a _______
luxury good
income elasticity is 0.56. Since it is greater than 0, this is a __________
normal good
An increase in price and an indeterminate change in quantity are consistent with a: A. leftward shift in supply and a rightward shift in demand. B. leftward shift in demand and no shift in supply. C. rightward shift in supply and a leftward shift in demand. D. leftward shift in supply and no shift in demand.
A
If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the demand curve for gasoline is downward-sloping, the supply of gasoline will: A. shift upward and the price will increase by less than $0.25 per gallon. B.shift downward and the price will decrease by less than $0.25 per gallon. C. shift upward and the price will increase by $0.25 per gallon. D. shift downward and the price will decrease by $0.25 per gallon.
A
Some years ago, Stuyvesant Town and Peter Cooper Village in Manhattan were sold for redevelopment. These villages had been rent controlled, but now that these neighborhoods are no longer rent controlled, one would expect: A. the rent to rise in those neighborhoods. B. the quantity of rentals demanded to rise. C. the houses to be not as well maintained since rent will be so high. D. the housing shortage in the neighborhood to worsen.
A
Suppose a market has an excess demand and price starts to rise. What will the rise in price cause? A. A rise in quantity supplied and a fall in quantity demanded. B.A fall in both quantity supplied and quantity demanded. C.A fall in quantity supplied and a rise in quantity demanded. D. A rise in both quantity supplied and quantity demanded.
A
If demand is highly inelastic and supply shifts to the right, price: A. will rise significantly; quantity hardly changes at all. B. will fall significantly; quantity hardly changes at all. C. will rise significantly as will quantity.
B
Tariffs can be thought of as indirect: A.special taxes on domestic producers. B.subsidies to domestic producers. C. subsidies to domestic consumers. D. subsidies to foreign producers.
B
If elasticity of demand is less than 1: A. a decline in price increases total revenue. b. a decline in price will not change total revenue. c. a rise in price increases total revenue. d. a rise in price decreases total revenue.
C
If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift: A. downward and the price will decrease by less than $5. B. upward and the price will increase by less than $5. C. upward and the price will increase by $5. D. downward and the price will decrease by $5.
C
If the law requires apartment building owners to lower rent, the law of supply predicts that, other things constant, the: A. supply of apartment units will shift rightward. B. quantity of apartment units supplied will rise. C. quantity of apartment units supplied will fall. D. supply of apartment units will shift leftward.
C
Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will be: A. a higher equilibrium price for eggs as the supply curve for eggs shifts left. B. an increase in the quantity of eggs demanded. C. a decrease in the quantity of eggs demanded. D. a lower equilibrium price for eggs as the demand curve for eggs shifts left
C
Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will be: A. a higher equilibrium price for eggs as the supply curve for eggs shifts left. B. an increase in the quantity of eggs demanded. C. a decrease in the quantity of eggs demanded. D. a lower equilibrium price for eggs as the demand curve for eggs shifts left.
C
A decrease in price and an indeterminate change in quantity are consistent with a: a. rightward shift in supply and a leftward shift in demand. b. leftward shift in demand and no shift in supply. c. leftward shift in supply and no shift in demand.
a
A decrease in price and an indeterminate change in quantity are consistent with a: a. rightward shift in supply and a leftward shift in demand. b. leftward shift in supply and no shift in demand. c. leftward shift in supply and a rightward shift in demand. d. leftward shift in demand and no shift in supply.
a
A decrease in quantity and price are consistent with a: a. leftward shift in demand keeping supply constant. b. rightward shift in supply and demand. c. rightward shift in demand and a leftward shift in supply. d. leftward shift in supply keeping demand constant.
a
Measuring the price of gasoline in dollars per quart, an economist calculates the price elasticity of demand to be 1. What would the price elasticity of demand be if the economist had chosen to measure the price in dollars per gallon? a. 1 b. .5 c. .25 d. 4
a
The demand for a good is inelastic. Which of the following would be the most likely explanation for this? a. The good is broadly defined. b. The time interval considered is long. c. The good costs a large portion of one's total income. d. The good is narrowly defined.
a
The explanation for the law of demand involves: a. consumers' ability to substitute different goods. b. the market's ability to equate supply and demand. c. the government's ability to set prices. d. suppliers' ability to substitute inputs.
a
The total satisfaction one gets from one's consumption of a product is called: a. total utility. b. minimum utility. c. a unit of utility. d. marginal utility.
a
European Union subsidizes its farmers. How do these subsidies make it difficult for farmers in developing economies to compete in the world farm market? a. The subsidies function as a tariff, causing imports from developing countries to become artificially expensive, thus denying European consumers the benefits of cheap imported food b. The subsidies shift the supply of EU farm goods to the right, lowering world prices of farm goods and the price developing country farmers can receive for their produce. c. The subsidies set a price ceiling for EU farm goods, keeping prices below the market equilibrium, and lowering the price developing country farmers can receive for their produce. d. The subsidies create ethical problems for Europeans who want to buy farm products from developing countries since the subsidies are raising the price of developing country produce.
b
High gasoline prices hit commuters who live far from their jobs in areas with little public transportation hard. With few alternatives, they just have to bear the higher cost. Based on this information, how would you characterize demand for gasoline by these commuters? a. Gasoline is an inferior good. b. Demand for gasoline is inelastic. c. Gasoline is a luxury good. d. Demand for gasoline is elastic.
b
If elasticity of demand is greater than 1: a. a rise in price increases total revenue. b. a rise in price lowers total revenue. c. a decline in price lowers total revenue. d. a decline in price will not change total revenue.
b
If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be: a. elastic. b. inelastic. c. proportional. d. responsive.
b
If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the demand curve for gasoline is downward-sloping, the supply of gasoline will: a. shift upward and the price will increase by $0.25 per gallon. b. shift upward and the price will increase by less than $0.25 per gallon. c. shift downward and the price will decrease by less than $0.25 per gallon.
b
If the price in a market is above its equilibrium level, there will be a: a. surplus and upward pressure on price. b. surplus and downward pressure on price. c. shortage and upward pressure on price. d. shortage and downward pressure on price.
b
In California, the price elasticity for vanity license plates is .5 and their price is $29. California is: a. maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic. b. not maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic. c. not maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic. d. maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic.
b
It is estimated that a 3 percent drop in the price of Asian and European autos will decrease the demand for American cars by .84 percent. From this information one can conclude that: a. European and Asian cars are complements for American cars. b. European and Asian cars are substitutes for American cars. c. the income elasticity of demand for American cars is less than 1. d. European and Asian cars are luxuries.
b
Price ceilings and price floors: A. make the rationing function of markets more efficient. B. interfere with the allocation function of prices. C. cause surpluses and shortages in markets respectively. D. cause demand and supply curves to shift thus having no effect on the rationing function of prices.
b
Price ceilings and price floors: a. make the rationing function of markets more efficient. b. interfere with the allocation function of prices. c. cause surpluses and shortages in markets respectively. d. cause demand and supply curves to shift thus having no effect on the rationing function of prices.
b
Price-discriminating behavior by a profit maximizer is: a. charging lower prices to those with inelastic demand than to those with elastic demands. b. charging higher prices to those with inelastic demand than to those with elastic demands. c. the inability to pass along cost increases to those with inelastic demands. d. the inability to pass along cost increases to those with elastic demands.
b
Suppose caviar sales soars at the same time price increases. What would lead to both a higher quantity sold and higher price of caviar? a. A shift in demand to the left and a smaller shift in supply to the left. b. A shift in demand to the right and a shift in supply to the left. c. A shift in demand to the right and a larger shift in supply to the right. d. A shift in demand to the left and a smaller shift in supply to the right.
b
Tariffs can be thought of as indirect: A. special taxes on domestic producers. B. subsidies to domestic producers. C. subsidies to domestic consumers. D. subsidies to foreign producers.
b
The distance between the supply curve and the price the producer receives for a product for a given quantity supplied is referred to as: a. consumer surplus. b. producer surplus. c. market surplus. d. market shortage.
b
To choose, based on the principle of rational choice, among combinations of goods with a cost in money, one must know the: a. total utility only. b. marginal utility of each additional good and its price. c. total utility of the combination of goods and their price. d. marginal utility only.
b
When supply is inelastic, consumers face: a. insignificant price increases when demand increases. b. significant price increases when demand increases. c. significant price decreases when demand increases. d. insignificant price decreases when demand increases.
b