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Multiple Choice Quiz
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1.
After a price floor is imposed above equilibrium, the total economic surplus in that market will:
A)be reallocated from producers to consumers.
B)remain unchanged.
C)rise
D)fall
E)become negative
2.
Which of the following is not guaranteed by the efficiency of the market equilibrium?
A)Price represents the value of an extra unit of consumption.
B)Rich and poor will have adequate access to the good.
C)Price represents the cost of an extra unit of production.
D)Neither shortage nor surplus will exist.
E)All mutually beneficial trades will have been made.
3.
The more elastic demand is the ______ the burden of the tax borne by ______.
A)smaller; consumer and producers
B)larger; consumers
C)larger; producers
D)smaller; producers
E)larger; consumers and producers
4.
Which of the following statements expresses the justification for making efficiency the first goal of economic interaction?
A)Efficiency gives the poor an incentive to improve their economic status.
B)Since consensus on what is a fair distribution of goods is impossible, efficiency is the next best goal.
C)People are not really concerned about the problems of the poor.
D)It is too difficult to pursue more than one goal at a time.
E)Efficiency maximizes total economic surplus and thereby allows other goals to be more fully achieved.
5.
The more inelastic is supply the ______ is the burden of tax borne by ______.
A)larger; producers and consumers
B)smaller; consumers and producers
C)smaller; producers
D)smaller; consumers
E)None of the above.
6.
A public utility should set price equal to _______ if its goal is to maximize economic surplus.
A)average cost
B)average revenue
C)marginal revenue
D)marginal cost
E)marginal profit
7.
The reduction in total economic surplus that results from the adoption of a policy is called _________.
A)deadweight loss
B)externality loss
C)collateral damage
D)welfare loss
E)rent seeking loss
8.
When the supply curve for a good is perfectly ________, the burden of a tax collected from sellers falls entirely on _______.
A)elastic; buyers
B)elastic; sellers
C)inelastic; buyers
D)vertical; buyers
E)horizontal; sellers
9.
Taxes on activities that cause harm to others
A)discourage people from pursuing the harmful activities.
B)generate revenue to pay for useful public services.
C)encourage people to pursue the harmful activities even more.
D)result in unnecessary wastage of public funds.
E)Both A and B.
10.
Price subsidies to sellers
A)prevent sellers from charging less than a certain amount.
B)lead to efficiency in the market.
C)must be above equilibrium price to have an effect on the market.
D)result in a loss in total economic surplus.
E)all of the above.





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