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1 | |
Demand is elastic if: |
| | A) | a 10 percent drop in price causes a 20 percent rise in quantity demanded. |
| | B) | a 20 percent increase in price causes a 10 percent fall in quantity demanded. |
| | C) | a 15 percent increase in price causes quantity demanded to fall by the same percentage. |
| | D) | a rise in price leads to an increase in total revenue. |
| | E) | a decline in price leaves total revenue unaffected. |
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2 | |
When demand is perfectly inelastic |
| | A) | suppliers in the market are price-takers. |
| | B) | the demand curve is vertical. |
| | C) | the demand curve is horizontal. |
| | D) | total revenue in this market is always constant. |
| | E) | price is always constant. |
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3 | |
Which of the following statements is true? |
| | A) | If demand is inelastic, then an increase in price causes a drop in total revenue. |
| | B) | When demand is elastic, a fall in price causes total revenue to be reduced. |
| | C) | A unit-elastic demand curve means that total revenue is constant. |
| | D) | If demand is perfectly inelastic, a rise in price causes total revenue to fall. |
| | E) | A perfectly elastic demand curve means that total revenue is constant. |
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4 | |
Which of the following products is most likely to have an inelastic demand? |
| | A) | a product with few close substitutes |
| | B) | a product with many close substitutes |
| | C) | a product that makes up a large portion of consumers' incomes |
| | D) | a luxury |
| | E) | a complementary product |
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5 | |
Which of the following products is most likely to have an elastic demand? |
| | A) | a pack of chewing gum |
| | B) | a type of medical vaccine |
| | C) | a home entertainment centre |
| | D) | drinking water |
| | E) | none of the above |
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6 | |
The value of the price elasticity of demand is: |
| | A) | equal to 1 when demand is unit-elastic. |
| | B) | greater than 1 when demand is inelastic. |
| | C) | always positive. |
| | D) | between 0 and 1 when demand is elastic. |
| | E) | equal to 0 when demand is perfectly elastic. |
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7 | |
A rise in good's price from $5 to $7 causes quantity demanded for that good to decline from 5000 to 3000 units. This means the value of the price elasticity of demand is: |
| | A) | (-)1 |
| | B) | (-)0.67 |
| | C) | (-)1.5 |
| | D) | (-)0.4 |
| | E) | none of the above |
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8 | |
If a market has a perfectly elastic supply curve, then: |
| | A) | the supply curve is horizontal. |
| | B) | an increase in demand raises equilibrium price, but keeps equilibrium quantity unchanged. |
| | C) | both equilibrium price and equilibrium quantity remain unchanged if demand increases. |
| | D) | the supply curve is upward-sloping. |
| | E) | the supply curve is downward-sloping. |
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9 | |
In the immediate run: |
| | A) | the demand curve is horizontal. |
| | B) | supply is either elastic or inelastic. |
| | C) | supply is perfectly inelastic. |
| | D) | demand is perfectly inelastic. |
| | E) | supply is perfectly elastic. |
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10 | |
In an increasing-cost industry: |
| | A) | the long-run supply curve is vertical. |
| | B) | new units of the product can be produced in the long run only at gradually higher prices. |
| | C) | changes in the quantity of output have no effect on resource prices. |
| | D) | price is always constant. |
| | E) | quantity supplied is always constant. |
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11 | |
An increase in the price of an item from $400 to $800 leads to a rise in the item's quantity supplied from 200,000 to 300,000 units. The value of the price elasticity of supply is therefore: |
| | A) | 2.0 |
| | B) | 1.67 |
| | C) | 0.5 |
| | D) | 1.0 |
| | E) | 0.6 |
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12 | |
Which of the following is not a likely result of a government agricultural price support program? |
| | A) | Consumers are harmed, because they must pay a higher price than without the program. |
| | B) | Farmers are helped, since they are able to produce more output and receive a higher price than without the program. |
| | C) | A government agency must purchase the surplus in the market. |
| | D) | Society as a whole benefits from the program because more of the good is produced. |
| | E) | Taxpayers are hurt, due to the tax revenues that must be spent on the program. |
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13 | |
A price ceiling: |
| | A) | creates a shortage. |
| | B) | is effective only when the ceiling price is below the equilibrium price. |
| | C) | is illustrated by the case of rent controls. |
| | D) | is harmful to producers in the affected market. |
| | E) | all of the above |
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14 | |
If a spillover cost exists in a perfectly competitive market: |
| | A) | a government subsidy will help to correct the oversupply of the product in this market. |
| | B) | a government subsidy will help to correct the undersupply of the product in this market. |
| | C) | a tax will help to correct the oversupply of the product in this market. |
| | D) | a tax will help to correct the undersupply of the product in this market. |
| | E) | neither a tax nor a subsidy is necessary in this market. |
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15 | |
The presence of a spillover benefit in a perfectly competitive market means: |
| | A) | that too few units of the product will be produced without some form of government intervention. |
| | B) | that too many units of the product will be produced without some form of government intervention. |
| | C) | that there must be a spillover cost in the market as well. |
| | D) | that either too many or too few units of the product will be produced without some form of government intervention. |
| | E) | that the right number of units will be produced even without government intervention. |
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16 | |
A public good: |
| | A) | has significant spillover costs. |
| | B) | has benefits that cannot be restricted to those willing to pay for it. |
| | C) | is the same as a private good in capitalist economies. |
| | D) | has costs that cannot be restricted to certain individuals. |
| | E) | is the same as a private good in socialist economies. |
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17 | |
The consumer surplus for a market: |
| | A) | applies only if consumers' marginal benefits are less than the price paid. |
| | B) | is found by subtracting consumers' total expenditure from their total benefit in a particular market. |
| | C) | is measured in imaginary "(utils"( rather than in monetary terms. |
| | D) | is found by subtracting consumers' total benefit from their total expenditure in a particular market. |
| | E) | is found by adding consumers' total benefit and their total expenditure in a particular market. |
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18 | |
Canada's transfer payment programs are criticized because: |
| | A) | these programs are not effective in eliminating poverty. |
| | B) | some of these programs are inequitable, because low-income Canadians do not get the major benefit. |
| | C) | some of these programs are open to abuse. |
| | D) | some of these programs discourage work. |
| | E) | all of the above |
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2002 McGraw-Hill Higher Education