Practice Test All Questions

You see a large group of stranded passengers standing next to a disabled bus, and you only have three seats in your car. You have to decide which three passengers to rescue because of:

Scarcity

A binding minimum wage will MOST likely lead to a situation where:

Some unskilled workers have a difficult time finding a job.

The law of supply indicates that producers will devote more resources to producing a good whenthe selling price of that good increases because

The benefit of producing and selling these goods is higher, so it is worth the cost of devoting additional resources toward the production of these goods.

The determinants of the price elasticity of demand of a particular commodity include all of the following except:

The ease with which resources can be shifted to and from the production of this commodity to other uses

Demand is said to be inelastic when

The percentage change in price exceeds the percentage change in quantity demanded of a good

If the government imposes a price ceiling of $15, what will be the deadweight loss?

Zero

For the demand for digital movies in the adjacentfigure, if the price of online movies increases from $6 to$8, total revenue _____, which means that demand is_____.

Decreases; elastic

What is the main problem addressed with scarcity?

Determining how to address unlimited wants with limited resources.

From which of the following data might you estimate a price elasticity of supply?

Farmers increase soybean plantings 15 percent when the price increases 5 percent

Using the table below, if the price of a bag of cashews is $9, who will purchase a bag?

Gregory only

A perfectly elastic supply curve is:

Horizontal

Which explanation below best describes the Circular Flow Model of Economics?

How resources, money, goods and services flow through an economy.

Suppose that the Board of Directors of the local symphony proposes that the admission priceto hear the orchestra be raised as a means of raising additional funds to support music programs.Its members are implicitly assuming that the price elasticity of demand for a ticket is:

Less than unity

If government decides to set a price floor of 15 rigsdaler (currency of Iceland) for an oil lamp, what will occur?

Nothing will change

What should we expect to happen to the producer surplus if price of a product decreases?

Producer surplus decreases

Consider the accompanying supply and demand graph. What is the value of consumer surplus?

$11.25

The figure below shows the monthly supply of lattes at a local cafe. At $3 per latte, the cafe produces 120 lattes per month. The producer surplus received by this bakery is equal to:

$180

Consider the accompanying supply and demand graph. What is the value of total surplus, also known as or social or economic surplus?

$20

For the demand curve for lattes in the adjacent figure, if the price is $5, total revenue is:

$25

A limited edition of Harry Potter Complete Book Series is sold only to 200 customers for $130 each. The average value of the package for the 200 customers is $280. What is the total consumer surplus?

$30,000

Consider the accompanying supply and demand graph. What is the value of producer surplus?

$8.75

Sam is willing to pay $200 for a daylong admission ticket to a Disney Adventure park. The cost of the ticket is $120. Sam's consumer surplus is:

$80

The Buffalo Bus Service currently charges $0.67 for an all-day ticket, and has an average of513 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.89. The marketing department's studies indicate this price increase would reduce usage to 249 riders per day. What is the price elasticity of demand for bus tickets?

1.6

You are a supplier of peanuts. Your research department estimates that the price elasticity of demand for peanuts is 2.5. By what percentage will quantity demanded rise if you lower price from $4 to $2.

125 percent

Instead of attending class, one could have worked an extra hour at the café for $10 or watched a neighbor's child for $15. The opportunity cost of attending class is:

15

The Generator is a popular youth hostel in London located near Kings Cross. The hostel provides a bed, showers, and breakfast in their nightly fee. The graph characterizes the market for beds at The Generator. In equilibrium, how many beds are rented? What is the total surplus?

50, $2000

If the government imposes a price ceiling of $15, what will be the deadweight loss?

625

The table shows the quantity demanded (Qd) and quantity supplied (Qs) of lemonade at various prices. If the government imposes a price ceiling of $3 per bottle of lemonade, the quantity of lemonade supplied will be _____ bottles.

8

If the price elasticity of demand for basketball shoes is 4:

A 20% decrease in the price of shoes will increase quantity demanded by 80%

If streaming services and satellite TV services are substitutes,

A decrease in the price of streaming services will decrease the demand for satellite TV

A price floor or a price ceiling is an example of:

A price control

Producer surplus is represented by the area ________ the supply curve and ________ the price.

Above; below

Which of the following is true regarding the market for steak shown in the figure below?

All of the above are true regarding the market for steak shown in the figure

Which of the following would most likely lead to a decrease the demand for peanut butter?

An increase in the price of jelly, a complement good that is often used with peanut butter.

Which of the following is most likely to lead to an increase in the rental price of apartments near your campus?

An unexpected increase in enrollment at your college which makes more students move near campus

Consumer surplus is represented by the area ________ the demand curve and ________ the price

Below; above

A price floor often results in:

Black markets, or underground transactions in the good.

What should we expect to happen to the consumer surplus if price of a product increases?

Consumer surplus decreases

Dramatic increases in the price of gasoline have led the government to impose a price ceiling. One effective price ceiling would be the price indicated at point________, creating a _______ equal to the difference between points_________.

D; shortage; i and h

The price of gasoline is $2.50 per gallon at the closest gas station but is only $2.30 per gallon at a gas station two miles away. By driving to the farther gas station, the opportunity cost is:

The value of one's time and expenses to go to the farther gas station.

If government decides to set a price ceiling of 15 rigsdaler (currency of Iceland) for an oil lap, what will occur?

There will be a shortage of oil lamps.