Economics Test 1
Which of the following is correct? A. If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction. B. If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction. C. If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction. D. The price elasticity coefficient applies to demand, but not to supply.
B. If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction
Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus: A. the demand for peanuts is elastic. B. the demand for peanuts is inelastic. C. the demand curve for peanuts has shifted to the right. D. no inference can be made as to the elasticity of demand for peanuts.
B. the demand for peanuts is inelastic
When the percentage change in price is greater than the resulting percentage change in quantity demanded: A. a decrease in price will increase total revenue. B. demand may be either elastic or inelastic. C. an increase in price will increase total revenue. D. demand is elastic.
C. an increase in price will increase total revenue
(177) Refer to the above diagram. Assuming equilibrium price P1, consumer surplus is represented by areas: a) A + B b) A + B + C + D c) C + D d) A + C
a) A + B
(150) Refer to the above diagram. If price falls from P1 to P2, total revenue will become area(s)" a) B + D b) C + D c) A + C D) C
a) B + D
Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of: a) W and Y b) Y and Z c) X and Z d) Z and W
a) W and Y
Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $190. Amanda experiences: a) a consumer surplus of $10 and Tony experiences a producer surplus of $190 b) a producer surplus of $200 and Tony experiences a consumer surplus of $10 c) a consumer surplus of $670 and Tony experiences a producer surplus of $200 d) a producer surplus of $10 and Tony experiences a consumer surplus of $190
a) a consumer surplus of $10 and Tony experiences a producer surplus of $190
Which of the following is an example of a public good? a) a weather warning system b) a television set c) a sofa d) a bottle of soda
a) a weather warning system
The price elasticity of demand coefficient measures: a) buyer responsiveness to price changes b) the extent to which a demand curve shifts as income changes c) the slope of the demand curve d) how far business executives can stretch their fixed costs
a) buyer responsiveness to price changes
The demand for a product is inelastic with respect to price if: a) consumers are largely unresponsive to a per unit price change b) the elasticity coefficient is greater than 1 c) a drop in price is accompanied by a decrease in the quantity demanded d) a drop in price is accompanied by an increase in the quantity demanded
a) consumers are largely unresponsive to a per unit price change
The price elasticity of demand of a straight-line demand curve is: a) elastic in high-price ranges and inelastic in low-price ranges b) elastic, but does not change at various points on the curve c) inelastic, but does not change at various points on the curve d) 1 at all points on the curve
a) elastic in high-price ranges and inelastic in low-price ranges
Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be: a) inelastic for price declines that increase quantity demanded from 6 units to 7 units b) elastic for price declines that increase quantity demanded from 6 units to 7 units c) inelastic for price increases that reduce quantity demanded from 4 units to 3 units d) elastic for price increases that reduce quantity demanded from 8 units to 7 units
a) inelastic for price declines that increase quantity demanded from 6 units to 7 units
An efficiency loss (or deadweight loss): a) is measured as the combined loss of consumer surplus and producer surplus b) results from producing a unit of output for which the maximum willingness to pay exceeds to minimum acceptable price c) can result from underproduction, but not overproduction d) can result from overproduction, but not underproduction
a) is measured as the combined loss of consumer surplus and producer surplus
Consumer surplus: a) is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price b) is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept c) is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price d) rises as equilibrium price rises
a) is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price
When economists say that people act rationally in their self interest, they mean that individuals: a) look for and pursue opportunities to increase their utility b) generally disregard the interests of others c) are mainly creatures of habit d) are usually impulsive and unpredictable
a) look for and pursue opportunities to increase their utility
Economics involves marginal analysis because: a) most decisions involve change from the present situation b) marginal benefits always exceed marginal costs c) marginal costs always exceed marginal benefits d) much economic behavior is irrational
a) most decisions involve change from the present situation
Market failure is said to occur whenever: a) private markets do not allocate resources in the most economically desirable way b) prices rise c) some consumers who want a good do not obtain it because the price is higher than they are willing to pay d) government intervenes in the functioning of private markets
a) private markets do not allocated resources in the most economically desirable way
Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as: a) rational self-interest, because he's attempting to increase his own income by identifying and satisfying someone else's wants b) greedy, because he is asking for a high wage c) selfish, because he is asking for a wage that is higher than others might charge d) irrational, because some neighbors refused his offer
a) rational self-interest, because he's attempting to increase his own income by identifying and satisfying someone else's wants
A demand curve for a public good is determined by: a) summing vertically the individual demand curves for the public good b) summing horizontally the individual demand curves for the public good c) combining the amounts of the public good that the individual members of society demand at each price d) multiplying the per-unit cost of the public good by the quantity made available
a) summing vertically the individual demand curves for the public good
If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true? a) the benefit surpluses shared between consumers and producers will be maximized b) the benefit surpluses received by consumers and producers will be equal c) there will be no consumer or producer surplus d) consumer surplus will be maximized, and producer surplus will be minimized
a) the benefit surpluses shared between consumers and producers will be maximized
Demand-side market failures occur when: a) the demand and supply curves don't reflect consumers' full willingness to pay for a good or service b) the demand and supply curves don't reflect the full cost of producing a good or service c) government imposes a tax on a good or service d) a good or service is not produced because no one demands it
a) the demand and supply curves don't reflect consumers' full willingness to pay for a good or service
A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus, a) the demand for pizza is elastic above $5 and inelastic below $5 b) the demand for pizza is elastic both above and below $5 c) the demand for pizza is inelastic above $5 and elastic below $5 d) $5 is not the equilibrium price of pizza
a) the demand for pizza is elastic above $5 and inelastic below $5
If a firm finds that it can sell $13,000 worth of product when its price is $5 per unit and $11,000 worth of it when its price is $6, then: a) the demand for the product is elastic in the $6-$5 price range b) the demand for the product must have increased c) elasticity of demand is 0.74 d) the demand for the product is inelastic in the $6-$5 price range
a) the demand for the product is elastic in the $6-$5 price range
Macroeconomics approaches the study of economics from the viewpoint of: a) the entire economy b) governmental units c) the operation of specific product and resource markets d) individual firms
a) the entire economy
Which of the following most closely relates to the idea of opportunity costs? a) tradeoffs b) economic growth c) technological change d) capitalism
a) tradeoffs
(149) Refer to the above diagram. Total revenue at price P1 is indicated by the area(s): a) C + D b) A + B c) A + C d) A
b) A + B
Which of the following is a correct statement? a) economic concepts or laws that are valid during depression are necessarily valid during prosperity b) although they are generalizations, economic laws are useful because they allow us to predict and therefore control or adjust to events c) economics is as scientific as are physics and chemistry because economic laws are as quantitatively precise as the laws of physics or chemistry d) because economics is concerned with questions of "ought," it is a branch of applied ethics and not scientific
b) although they are generalizations, economic laws are useful because they allow us to predict and therefore control or adjust to events
Kara was out jogging and despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara: a) must be an avid runner b) decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile c) decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile d) was not very tired, so the marginal cost of the extra mile was very low
b) decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile
The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to: a) increase by approximately 12 percent b) decrease by approximately 12 percent c) decrease by approximately 32 percent d) decrease by approximately 26 percent
b) decrease by approximately 12 percent
Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded: a) increased by 7 percent b) decreased by 7 percent c) decreased by 9 percent d) decreased by 1.75 percent
b) decreased by 7 percent
The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to increase tuition fees to compensate for the loss of revenue. The board is assuming that the: a) demand for education at GSU is elastic b) demand for education at GSU is inelastic c) coefficient of price elasticity of demand for education at GSU is unity d) coefficient of rice elasticity of demand for education at GSU is greater than unity
b) demand for education at GSU is inelastic
If the supply of product X is perfectly elastic, an increase in the demand for it will increase: a) equilibrium quantity but reduce equilibrium price b) equilibrium quantity but equilibrium price will be unchanged c) equilibrium price but reduce equilibrium quantity d) equilibrium price but equilibrium quantity will be unchanged
b) equilibrium quantity but equilibrium price will be unchanged
If a demand for a product is elastic, the value of the price elasticity coefficient is: a) zero b) greater than one c) equal to one d) less than one
b) greater than one
Unlike a private good, a public good: a) has no opportunity costs b) has benefits available to all, including nonpayers c) produces no positive or negative externalities d) is characterized by rivalry and excludability
b) has benefits available to all, including nonpayers
You should decide to go to a movie: a) if the marginal cost of the movie exceeds its marginal benefit b) if the marginal benefit of the movie exceeds its marginal cost c) if your income will allow you to buy a ticket d) because movies are enjoyable
b) if the marginal benefit exceeds its marginal cost
If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will: a) decrease the amount demanded by more than 10 percent b) increase the amount demanded by more than 10 percent c) decrease the amount demanded by less than 10 percent d) increase the amount demanded by less than 10 percent
b) increase the amount demanded by more than 10 percent
Supply curves tend to be: a) perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply b) more elastic in the long run because there is time for firms to enter or leave the industry c) perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production d) less elastic in the long run because there if time for firms to enter or leave the industry
b) more elastic in the long run because there is time for firms to enter to leave the industry
The basic formula for the price elasticity of demand coefficient is: a) absolute decline in quantity demanded/absolute increase in price b) percentage change in quantity demanded/percentage change in price c) absolute decline in price/absolute increase in quantity demanded d) percentage change in price/percentage change in quantity demanded
b) percentage change in quantity demanded/percentage change in price
Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of: a) resource scarcity and the necessity of choice b) purposeful behavior c) marginal costs that exceed marginal benefits d) the tradeoff problem that exists between competing goals
b) purposeful behavior
What two conditions must hold for a competitive market to produce efficient outcomes? a) demand curves must reflect all costs of production, and supply curves must reflect consumers' full willingness to pay b) supply curves must reflect all costs of production and demand curves must reflect consumers' full willingness to pay c) firms must minimize production costs, and consumers must minimize total expenditures d) firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay
b) supply curves must reflect all costs of production and demand curves must reflect consumers' full willingness to pay
Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the 3rd unit of a public good. Also, assume that the marginal cost of the 3rd unit is $17. We can conclude that: a) the 3rd unit should not be produced b) the 3rd unit should be produced c) zero units should be produced d) 4 units should be produced
b) the 3rd unit should be produced
Supply-side market failures occur when: a) the demand and supply curves don't reflect consumers' full willingness to pay for a good or service b) the demand and supply curves don't reflect the full cost of producing a good or service c) government regulates production of a good or service d) a good or service is not supplied because no one wants it
b) the demand and supply curves don't reflect the full cost of producing a good or service
The elasticity of demand for a product is likely to greater: a) if the product is a necessity, rather than a luxury good b) the greater the amount of time over which buyers adjust to a price change c) the smaller the proportion of one's income spent on the product d) the smaller the number of substitute products available
b) the greater the amount of time over which buyers adjust to a price change
The more time consumers have to adjust to a change in price: a) the smaller will be the price elasticity of demand b) the greater will be the price elasticity of demand c) the more likely the product is a normal good d) the more likely the product is an inferior good
b) the greater will be the price elasticity of demand
Because of the free-rider problem: a) the market demand for a public good is overstated b) the market demand for a public good is nonexistent or understated c) government has increasingly yielded to the private sector in producing public goods d) public goods often create serious negative externalities
b) the market demand for a public good is nonexistent or understated
At the output where the combined amounts of consumer and producer surplus are largest: a) the areas of consumer and producer surplus necessarily are equal b) the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit c) consumer surplus exceeds producer surplus by the greatest amount d) marginal benefit exceeds marginal cost by the greatest amount
b) the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit
According to the marginal-cost-benefit rule: a) only government projects (as opposed to private projects) should be assessed by comparing marginal costs and marginal benefits b) the optimal project size is the one for which MB = MC c) the optimal project size is the one for which MB exceeds MC by the greatest amount d) project managers should attempt to minimized both MB and MC
b) the optimal project size is the one for which MB = MC
Which of the following generalizations is not correct? a) the larger an item is in one's budget, the greater the price elasticity of demand b) the price elasticity of demand is greater for necessities than it is for luxuries c) the larger the number of close substitutes available, the greater will be the price elasticity of demand for a particular product d) the price elasticity of demand is greater the longer the time period under consideration
b) the price elasticity of demand is greater for necessities than it is for luxuries
The market system does not produce public goods because: a) there is no need or demand for such goods b) the private firms cannot stop consumers who are unwilling to pay or such goods from benefitting from them c) public enterprises can produce such goods at lower cost than can private enterprises d) their production seriously distorts the distribution of income
b) the private firms cannot stop consumers who are unwilling to pay from benefitting from them
The process by which economists test hypotheses against facts to develop theories, principles, and models is called: a) the economic perspective b) the scientific method c) policy economics d) microeconomics
b) the scientific method
Graphically, if the supply and demand curves are linear, consumer surplus is messed as the triangle: a) under the demand curve and below the actual price b) under the demand curve and above the actual price c) above the supply curve and above the actual price d) above the supply curve and below the actual price
b) under the demand curve and above the actual price
Which one of the following expressions best states the idea of opportunity cost? a) "A penny saved is a penny earned." b) "He who hesitates is lost." c) "There is no such thing as a free lunch." d) "All that glitters is not gold."
c) "There is no such thing as a free lunch."
(192) Refer to the above data. The collective willingness of this society to pay for the 2nd unit of this public good is: a) $2 b) $4 c) $6 d) $8
c) $6
Refer to the above diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about: a) 5 and supply is elastic b) 1 and supply is unit elastic c) .25 and supply is inelastic d) 2.5 and supply is elastic
c) .25 and supply is inelastic
(178) Refer to the above diagram. Assuming equilibrium price P1 producer surplus is represented by areas: a) A + B b) A + B + C + D c) C + D d) A + C
c) C + D
Which of the following statements pertains to macroeconomics? a) Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force b) A decline in the price of soybeans caused farmer Wanek to plant more land in wheat c) National income grew by 2.7 percent last year d) The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point
c) National income grew by 2.7 percent last year
Which of the following is a positive statement? a) The humidity is too high b) It is too hot to jog today c) The temperature is 92 degrees today d) Summer evenings are nice when it cools off
c) The temperature is 92 degrees today
Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences: a) a consumer surplus of $12 and Nathan experiences a producer surplus of $3 b) a producer surplus of $9 and Nathan experiences a consumer surplus of $3 c) a consumer surplus of $9 and Nathan experiences a producer surplus of $3 d) a producer surplus of $9 and Nathan experiences a producer surplus of $12
c) a consumer surplus of $9 and Nathan experiences a producer surplus of $3
The term "other things equal" means that: a) the associated statement is normative b) many variables affect the variable under consideration c) a number of relevant variables are assumed to be constant d) when variable X increases so does related variable Y
c) a number of relevant variables are assumed to be constant
People enjoy outdoor holiday lighting displays, and would be willing to pay to see these displays, but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of: a) negative externality b) supply-side market failure c) demand-side market failure d) government failure
c) demand-side market failure
The total-revenue test for elasticity: a) is equally applicable to both demand and supply b) does not apply to demand because price and quantity are inversely related c) does not apply to supply because price and quantity are directly related d) applies to the short-run supply curve, but not to the long-run supply curve
c) does not apply to supply because price and quantity are directly related
A producer's minimum acceptable price for a particular unit of a good: a) is the same for all units of the good b) will, for most units produced, equal the maximum that consumers are willing to pay for the good c) equals the marginal cost of producing that particular unit d) must cover the wages, rent, and interest payments necessary to produce the good, but need not include profit
c) equals the marginal cost of producing that particular unit
A perfectly inelastic demand curve: a) has a price elasticity coefficient greater than unity b) has a price elasticity coefficient of unity throughout c) graphs as a line parallel to the vertical axis d) graphs as a line parallel to the horizontal axis
c) graphs as a line parallel to the vertical axis
Which of the following is correct? a) if demand is elastic, an increase in price will increase total revenue b) if demand is elastic, a decrease in price will decrease total revenue c) if demand is elastic, a decrease in price will increase total revenue d) if demand is inelastic, an increase in price will decrease total revenue
c) if demand is elastic, a decrease in price will increase total revenue
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will: a) increase the quantity demanded by about 2.5 percent b) decrease the quantity demanded by about 2.5 percent c) increase the quantity demanded by about 25 percent d) increase the quantity demanded by about 250 percent
c) increase the quantity demanded by about 25 percent
Purposeful behavior suggest that: a) everyone will make identical choices b) resource availability exceeds economic wants c) individuals may make different choices because of different desired outcomes d) an individual's economic goals cannot involve tradeoffs
c) individuals may make different choices because of different desired outcomes
If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is: a) parallel to the horizontal axis b) shifting to the left c) inelastic d) elastic
c) inelastic
An economic hypothesis: a) has the same meaning as an economic principle or economic law b) is usually a normative statement c) is a possible explanation of cause and effect d) is a stronger generalization than an economic law
c) is a possible explanation of cause and effect
Producer surplus: a) is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price b) rises as equilibrium price falls c) is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price d) is the difference between the maximum price consumers are willing to pay for a product and the minimum prices producers are willing to accept
c) is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price
Suppose the price of product X rises by 20 percent and the quantity supplied of X increases by about 15 percent. The coefficient of price elasticity of supply for good X is: a) negative and therefore X is an inferior good b) positive and therefore X is a normal good c) less than 1 and therefore supply is inelastic d) more than 1 and therefore supply is elastic
c) less than 1 and therefore supply is inelastic
At the optimal quantity of a public good: a) marginal benefit exceeds marginal cost by the greatest amount b) total benefit equals total cost c) marginal benefit equals marginal cost d) marginal benefit is zero
c) marginal benefit equals marginal cost
The two main characteristics of a public good are: a) production at constant marginal cost and rising demand b) non excludability and production at rising marginal cost c) nonrivalry and nonexcludability d) nonrivalry and large negative externalities
c) nonrivarly and nonexcludability
For economists, the world "utility" means: a) versatility and flexibility b) rationality c) pleasure or satisfaction d) purposefulness
c) pleasure or satisfaction
The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred? a) positive externality b) demand-side market failure c) supply-side market failure d) all of these
c) supply-side market failure
Allocative efficiency occurs only at that output where: a) marginal benefit exceeds marginal cost by the greatest amount b) consumer surplus exceeds producer surplus by the greatest amount c) the combined amounts of consumer surplus and producer surplus are maximized d) the areas of consumer and producer surplus are equal
c) the combined amounts of consumer surplus and producer surplus are maximized
Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that: a) farm products are normal goods b) farm products are inferior goods c) the price elasticity of demand for farm products is less than 1 d) the price elasticity of demand for farm products is greater than 1
c) the price elasticity of demand for farm products is less than 1
The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rate by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that: a) both groups felt that the demand was elastic but for different reasons b) both groups felt that the demand was inelastic but for different reasons c) the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic d) the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic
c) the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic
Which of the following conditions does not need to occur for a market to achieve allocative efficiency? a) consumers' maximum willingness to pay equals producers' minimum acceptable price b) the sum of producer and consumer surplus is maximized c) the total revenue received by producers equals the total cost of production d) the marginal benefit of the last unit produced equals the marginal cost of producing that unit
c) the total revenue received by producers equals the total cost of production
(159) Refer to the above information and assume the stadium capacity is 5,000. If the Mudhen's management charges $7 per ticket: a) some fans who want to see the game will find that tickets are not available b) there will be 2,000 empty seats c) there will be 1,000 empty seats d) the game will be sold out
c) there will be 1,000 empty seats
Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from ay to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to: a) conclude definitively that people buy more ice cream when the temperature rises b) state her findings as a well-tested economic principle c) use the observed data to form an hypothesis about ice cream buying behavior d) throw out the data if it does not show a perfect relationship between buying habits and the other information she has collected
c) use the observed data to form an hypothesis about ice cream buying behavior
(194) Refer to the above data. Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the 4th unit is: a) $14 b) $5 c) $2 d) $0
d) $0 (not sure tbh)
(193) Refer to the above data. If the marginal cost of producing this good at the optimal quantity is $4, the optimal quantity must be: a) 1 unit b) 2 units c) 3 units d) 4 units
d) 4 units
(195) Refer to the above data. If this good were a private good instead of a public one, the total quantity demanded at $3 market price would be: a) 2 units b) 3 units c) 6 units d) 4 units
d) 4 units
Graphically, producer surplus is measured as the area: a) under the demand curve and below the actual price b) under the demand curve and above the actual price c) above the supply curve and above the actual price d) above the supply curve and below the actual price
d) above the supply curve and below the actual price
Which of the following is an example of market failure? a) negative externalities b) positive externalities c) public goods d) all of these
d) all of these
Cost-benefit analysis attempts to: a) compare the real worth, rather than the market values, of various goods and services b) compare the relative desirability of alternative distributions of income c) determine whether it is better to cut government expenditures or reduce taxes d) compare the benefits and costs associated with any economic project or activity
d) compare the benefits and costs associated with any economic project or activity
From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically: a) generates more of a benefit than it costs to produce b) produces a benefit exactly equal to the cost of producing the last unit c) maximizes the net benefit to society d) costs more to produce than it provides in benefits
d) costs more to produce than it provides in benefits
Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be: a) inelastic for price declines that increase quantity demanded from 2 units to 3 units b) elastic for price declines that increase quantity demanded from 5 units to 6 units c) inelastic for price increases that reduce quantity demanded from 4 units to 3 units d) elastic for price increases that reduce quantity demanded from 4 units to 3 units
d) elastic for price increases that reduce quantity demanded from 4 units to 3 units
Most demand curves are relatively elastic in the upper-left portion because then original price: a) and quantity from which the percentage changes in price and quantity are calculated are both large b) and quantity from which the percentage changes in price and quantity are calculated are both small c) from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large d) from which the percentage price change is calculated is large and the original quantity from which the percentage in quantity is calculated is small
d) from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small
A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the: a) more elastic the supply curve b) larger the elasticity of demand coefficient c) more elastic the demand for the product d) more inelastic the demand for the product
d) more inelastic the demand for the product
Refer to the above diagram which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be: a) elastic at high prices and inelastic at low prices b) elastic at low prices and inelastic at high prices c) impossible to generalize about its elasticity d) of unit elasticity throughout
d) of unit elasticity throughout
Nonrivalry and non excludability are the main characteristics of: a) consumption goods b) capital goods c) private goods d) public goods
d) public goods
Which of the following statements is not true? a) some public goods are paid for by private philanthropy b) private provision of public goods is usually unprofitable c) the free-rider problem results from the characteristics of nonrivalry and non excludability d) public goods are only provided by the government
d) public goods are only provided by the government
Economists contend that most economic decisions are: a) random b) chaotic c) spontaneous d) purposeful
d) purposeful
Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is: a) decreasing b) relatively elastic c) perfectly elastic d) relatively inelastic
d) relatively inelastic
The demand for a luxury good whose purchase would exhaust a big portion of one's income is: a) perfectly price inelastic b) perfectly price elastic c) relatively price inelastic d) relatively price elastic
d) relatively price elastic
Refer to the above diagram which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. In comparing the price elasticity and the slope of this demand curve we can conclude that the: a) slope of the demand curve measures it elasticity b) elasticity of a demand curve measures its slope c) slope and elasticity of the curve are both constant throughout d) slope of the curve varies, but its elasticity is constant
d) slope of the curve varies, but its elasticity is constant
At the output level defining allocative efficiency: a) the areas of consumer and producer surplus necessarily are equal b) marginal benefit exceeds marginal cost by the greatest amount c) consumer surplus exceeds producer surplus by the greatest amount d) the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output
d) the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output
A negative externality or spillover cost occurs when: a) firms fail to achieve allocative efficiency b) firms fail to achieve productive efficiency c) the price of the good exceeds the marginal cost of producing it d) the total cost of producing a good exceeds the costs borne by the producer
d) the total cost of producing a good exceeds the costs borne by the producer
In economics, the pleasure, happiness, or satisfaction received from a product is called: a) marginal cost b) rational outcome c) status fulfillment d) utility
d) utility
