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MICROECONOMICS > Multiple choice questions > Flashcards

Multiple choice questions Flashcards

1
Q

CHT3

  1. A perfectly competitive market has
    a. only one seller.
    b. at least a few sellers.
    c. many buyers and sellers.
    d. firms that set their own prices.
    e. none of the above.
A

c

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2
Q

CHT3

  1. If an increase in the priCe of blue jeans leads to an increase in the’demand for tennis shoes, then blue jeans and tennis shoes are
    a. substitutes.
    b. complements.
    c. normal goods.
    d. inferior goods.
    e. none of the above.
A

a

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3
Q

CHT3

  1. The law of demand states that an increase in the price of a good
    a. decreases the demand for that good.
    b. decreases the quantity demanded for that good.
    c. increases the supply of that good.
    d. increases the quantity supplied of that good.
    e. does none of the above.
A

b

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4
Q

CHT3

  1. The law of supply states that an increase in the price of a good
    a. decreases the demand for that good.
    b. decreases the quantity demanded for that good.
    c. increases the supply of that good.
    d. increases the quantity supplied of that good.
    e. does none of the above.
A

d

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5
Q

CHT3

  1. If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is
    a. a complementary good.
    b. a substitute good.
    e. a normal good.
    d. an inferior good.
    e. none of the above.
A

d

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6
Q

CHT3

  1. A monopolistic market has
    a. only one seller.
    b. at least a few sellers.
    c. many buyers and sellers.
    d. firms that are price takers.
    e. none ofthe above.
A

a

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7
Q

CHT3

  1. Which of the following shifts the demand for watches to the right?
    a. a decrease in the price of watches
    b. a decrease in consumer incomes if watches are a normal good
    e. a decrease in the price of watch batteries if watch batteries and watches are complements
    d. an increase in the price of watches
    e. none of the above
A

c

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8
Q

CHT3

  1. All of the following shift the supply of watches to the right except
    a. an increase in the price of watches.
    b. an advance in the technology used to manufacture watches.
    c. a decrease in the wage of workers employed to manufacture watches.
    d. manufacturers’ expectations of lower watch prices in the future.
    e. All of the above cause an increase in the supply of watches.
A

a

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9
Q

CHT3

  1. If the price of a good is above the equilibrium price,
    a. there is a surplus and the price will rise.
    b. there is a surplus and the price will fall.
    e. there is a shortage and the price will rise.
    d. there is a shortage and the price will fall.
    e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.
A

b

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10
Q

CHT3

  1. If the price of a good is below the equilibrium price,
    a. there is a surplus and the price will rise.
    b. there is a surplus and the price will fall.
    c. there is a shortage and the price will rise.
    d. there is a shortage and the price will fall.
    e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.
A

c

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11
Q

CHT3

  1. If the price of a good is equal to the equilibrium price,
    a. there is a surplus and the price will rise.
    b. there is a surplus and the price will faIL
    c. there is a shortage and the price will rise.
    d. there is a shortage and the will fall.
    e. the quantity demanded is equal. to the quantity supplied and the price remains
    unchanged.
A

e

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12
Q

CHT3

  1. An increase (rightward shift) in the demand for a good will tend to cause
    a. an increase in the equilibrium price and quantity.
    h. a decrease in the equilibrium price and quantity.
    c. an increase in the equilibrium price and a decrease in the equilibrium quantity.
    d. a decrease in the equilibrium price and an increase in the equilibrium quantity.
    e. none of the above.
A

a

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13
Q

CHT3

  1. A decrease (leftward shift) in the supply for a good will tend to cause
    a. an increase in the equilibrium price and quantity.
    b. a decrease in the equilibrium price and quantity.
    c. an increase in the equilibrium price and a decrease in the equilibrium quantity.
    d. a decrease in the equilibrium price and an increase in the equilibrium quantity.
    e. none of the above.
A

c

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14
Q

CHT3

  1. Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the
    a. equilibrium quantity to rise and the equilibrium price to rise.
    b. equilibrium quantity to rise and the equilibrium price to fall.
    c. equilibrium quantity to rise and the equilibrium price to remain constant.
    d. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
    e. change in the equilibrium quantity to be ambiguous and the equilibrium to rise.
A

d

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15
Q

CHT3

  1. Suppose there is an increase in both the supply and demand for personal computers. Furthermore, suppose the supply of personal computers increases more than demand for personal computers. [n the market for personal computers, we would expect the
    a. equilibrium quantity to rise and the equilibrium price to rise.
    b. equilibrium quantity to rise and the equilibrium price to fall.
    c. equilibrium quantity to rise and the equilibrium price to remain constant.
    d. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
    e. change in the equilibrium quantity to be ambiguous and the equilibrium price to fall.
A

b

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16
Q

CHT3

  1. Which of the following statements is true about the impact ofan increase in the price of lettuce?
    a. The demand for lettuce will decrease.
    b. The supply of lettuce will decrease.
    c. The equilibrium price and quantity of salad dressing will rise.
    d. The equilibrium price and quantity of salad dressing will fall.
    e. Both a and d are true.
A

d

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17
Q

CHT3

  1. Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice?
    a. Price will increase; quantity is ambiguous.
    b. Price will increase; quantity will increase.
    c. Price will increase; quantity will decrease.
    d. Price will decrease; quantity is ambiguous.
    e. The impact on both price and quantity is ambiguous:
A

a

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18
Q

CHT3

  1. Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples?
    a. There is an increase in the demand for apples and an increase in the quantity supplied of apples.
    b. There is an increase in the demand and supply of apples.
    c. There is an increase in the quantity demanded of apples and in the supply for apples.
    d. There is an increase in the demand for apples and a decrease in the supply of apples.
    e. There is a decrease in the quantity demanded of apples and an increase in the supply for apples.
A

a

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19
Q

CHT3

  1. Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?
    a. The impact on both price and quantity is ambiguous.
    b. Price will increase; quantity is ambiguous.
    c. Price will increase; quantity will increase.
    d. Price will increase; quantity will decrease.
    e. Price will decrease; quantity is ambiguous.
A

b

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20
Q

CHT3

  1. An inferior good is one for which an increase in income causes a(n)
    a. increase in supply.
    b. decrease in supply.
    c. increase in demand.
    d. decrease in demand.
A

d

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21
Q

CHT4

  1. A perfectly competitive market has
    a. only one seller.
    b. at least a few sellers.
    c. many buyers and sellers.
    d. firms that set their own prices.
    e. none of the above.
A

c

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22
Q

CHT4

  1. If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are
    a. substitutes.
    b. complements.
    c. normal goods.
    d. inferior goods.
    e. none of the above.
A

a

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23
Q

CHT4

  1. The law of demand states that an increase in the price of a good
    a. decreases the demand for that good.
    b. decreases the quantity demanded for that good.
    c. increases the supply of that good.
    d. increases the quantity supplied of that good.
    e. does none of the above.
A

b

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24
Q

CHT4

  1. The law of supply states that an increase in the price of a good
    a. decreases the demand for that good.
    b. decreases the quantity demanded for that good.
    c. increases the supply of that good.
    d. increases the quantity supplied of that good.
    e. does none of the above.
A

d

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25
Q

CHT4

  1. If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is
    a. a complementary good.
    b. a substitute good.
    e. a normal good.
    d. an inferior good.
    e. none of the above.
A

d

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26
Q

CHT4

  1. A monopolistic market has
    a. only one seller.
    b. at least a few sellers.
    c. many buyers and sellers.
    d. firms that are price takers.
    e. none of the above.
A

a

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27
Q

CHT4

  1. Which of the following shifts the demand for watches to the right?
    a. a decrease in the price of watches
    b. a decrease in consumer incomes if watches are a normal good
    e. a decrease in the price of watch batteries if watch batteries and watches are complements
    d. an increase in the price of watches
    e. none of the above
A

c

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28
Q

CHT4

  1. All of the following shift the supply of watches to the right except
    a. an increase in the price of watches.
    b. an advance in the technology used to manufacture watches.
    c. a decrease in the wage of workers employed to manufacture watches.
    d. manufacturers’ expectations of lower watch prices in the future.
    e. All of the above cause an increase in the supply of watches.
A

a

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29
Q

CHT4

  1. If the price of a good is above the equilibrium price,
    a. there is a surplus and the price will rise.
    b. there is a surplus and the price will fall.
    c. there is a shortage and the price will rise.
    d. there is a shortage and the price will fall.
    e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.
A

b

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30
Q

CHT4

  1. If the price of a good is below the equilibrium price,
    a. there is a surplus and the price will rise.
    b. there is a surplus and the price will fall.
    c. there is a shortage and the price will rise.
    d. there is a shortage and the price will fall.
    e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.
A

c

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31
Q

CHT4

  1. If the price of a good is equal to the equilibrium price,
    a. there is a surplus and the price will rise.
    h. there is a surplus and the price will faIL
    c. there is a shortage and the price will rise.
    d. there is a shortage and the will fall.
    e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.
A

e

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32
Q

CHT4 12. An increase (rightward shift) in the demand for a good will tend to cause

a. an increase in the equilibrium price and quantity.
h. a decrease in the equilibrium price and quantity.
c. an increase in the equilibrium price and a decrease in the equilibrium quantity.
d. a decrease in the equilibrium price and an increase in the equilibrium quantity.
e. none of the above.

A

a

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33
Q

CHT4

  1. A decrease (leftward shift) in the supply for a good will tend to cause
    a. an increase in the equilibrium price and quantity.
    b. a decrease in the equilibrium price and quantity.
    c. an increase in the equilibrium price and a decrease in the equilibrium quantity.
    d. a decrease in the equilibrium price and an increase in the equilibrium quantity.
    e. none of the above.
A

c

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34
Q

CHT4

  1. Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the
    a. equilibrium quantity to rise and the equilibrium to rise.
    b. equilibrium quantity to rise and the equilibrium price to fall.
    c. equilibrium quantity to rise and the equilibrium price to remain constant.
    d. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
    e. change in the equilibrium quantity to be ambiguous and the equilibrium to rise.
A

d

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35
Q

CHT4

  1. Suppose there is an increase in both the supply and demand for personal computers. Furthermore, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect the
    a. equilibrium quantity to rise and the equilibrium price to rise.
    b. equilibrium quantity to rise and the equilibrium price to fall.
    c. equilibrium quantity to rise and the equilibrium price to remain constant.
    d. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
    e. change in the equilibrium quantity to be ambiguous and the equilibrium price to fall.
A

b

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36
Q

CHT4

  1. Which of the following statements is true about the impact ofan increase in the price of lettuce?
    a. The demand for lettuce will decrease.
    b. The supply of lettuce will decrease.
    c. The equilibrium price and quantity of salad dressing will rise.
    d. The equilibrium price and quantity of salad dressing will fall.
    e. Both a and d are true.
A

d

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37
Q

CHT4

  1. Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice.What would we expect to happen to the equilibrium price and quantity in the market for orange juice?
    a. Price will increase; quantity is ambiguous.
    b. Price will increase; quantity will increase.
    c. Price will increase; quantity will decrease.
    d. Price will decrease; quantity is ambiguous.
    e. The impact on both price and quantity is ambiguous:
A

a

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38
Q

CHT4

  1. Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples?
    a. There is an increase in the demand for apples and an increase in the quantity supplied of apples.
    b. There is an increase in the demand and supply of apples.
    c. There is an increase in the quantity demanded of apples and in the supply for apples.
    d. There is an increase in the demand for apples and a decrease in the supply of apples.
    e. There is a decrease in the quantity demanded of apples and an increase in the supply for apples.
A

a

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39
Q

CHT4

  1. Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?
    a. The impact on both price and quantity is ambiguous.
    b. Price will increase; quantity is ambiguous.
    c. Price will increase; quantity will increase.
    d. Price will increase; quantity will decrease.
    e. Price will decrease; quantity is ambiguous.
A

b

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40
Q

CHT4

  1. An inferior good is one for which an increase in income causes a(n)
    a. increase in supply.
    b. decrease in supply.
    c. increase in demand.
    d. decrease in demand.
A

d

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41
Q 
#CHT5
1. If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is 
a, price inelastic.
b. price elastic.
c. unit price elastic.
d. income inelastic. 
e. income elastic.
A

b

42
Q 
#CHT5
2. The price elasticity of demand is defIned as
a. the percentage change in price of a good divided by the percentage change in the quantity demanded of that good.
b. the percentage in income divided by the percentage change in the 
quantity demanded. 
c. the percentage change in the quantity demanded of a good divided by the percentage change in the of that good, 
d. the percentage in the quantity demanded divided by the percentage
change in income. 
e. none of the above.
A

c

43
Q

CHT5

  1. In general, a flatter demand curve is more likely to be
    a. price elastic.
    b. price inelastic.
    c. unit price elastic.
    d. none of the above.
A

a

44
Q

CHT5

  1. In general, a steeper supply curve is more likely to be
    a. price elastic.
    b. price inelastic,
    c. unit price elastic.
    d. none of the above.
A

b

45
Q

CHT5

  1. Which of the following would cause a demand curve for a good to be inelastic?
    a. There are a great number of substitutes for the good.
    b. The good is inferior.
    c. The good is a luxury.
    d. The good is a necessity.
A

d

46
Q 
#CHT5
6. The demand for which of the following is likely to be the most inelastic?
a, airline tickets 
b. bus tickets 
c. taxi rides
d. transportation
A

d

47
Q

CHT5

  1. If the cross-price elasticity between two is the two goods are likely to be
    a. luxuries.
    b. necessities.
    c. complements.
    d. substitutes.
A

c

48
Q

CHT5

  1. If a supply curve for a good is price elastic, then
    a. the quantity supplied is sensitive to changes in the price of that good.
    b. the quantity supplied is insensitive to changes in the price of that good.
    c. the quantity demanded is sensitive to changes in the price of that good.
    d. the quantity demanded is insensitive to in the price of that good.
    e. none of the above.
A

a

49
Q

CHT5

  1. If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman of supply for fresh fish is
    a. zero.
    b. one.
    c. infinite.
    d. unable to be determined from this information.
A

a

50
Q

CHT5

  1. A decrease in supply (shift to the left) will increase total revenue in that market if
    a. supply is price elastic.
    h. supply is price inelastic.
    c. demand is price elastic.
    d. demand is price inelastic.
A

d

51
Q

CHT5

  1. If an increase in the of a good has no impact on the total revenue in that market, demand must be
    a. price inelastic.
    b. price elastic.
    c. unit price elastic.
    d. all of the above.
A

c

52
Q

CHT5

  1. If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is
    a. 0.15.
    h. 1.00.
    c. 1.15.
    d. 1.50.
    e. none of the above.
A

b

53
Q

CHT5

  1. Technological improvements in that shift the supply agricultural
    commodities to the right tend to
    a. reduce total revenue to farmers as a whole because the demand for food is inelastic.
    b. reduce total revenue to farmers as a whole because the demand for food is elastic.
    c. increase total revenue to farmers as a whole because the demand for food is inelastic.
    d. increase total revenue to farmers as a whole because the demand for food is elastic.
A

a

54
Q

CHT5

  1. If supply is price inelastic, the value of the price elasticity of supply must be a. zero.
    b. less than 1.
    c. greater than 1.
    d. infinite.
    e. none of the above.
A

b

55
Q

CHT5

  1. If there is excess capacity in a production facility, it is likely that the firm’s supply curve is
    a. price inelastic.
    b. price elastic.
    c. unit price elastic.
    d. none of the above.
A

b

56
Q

CHT5

  1. Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable television in Small Town?
    a. 0.66
    b. 0.75
    c. 1.0
    d. 1.4
    e. 2.0
A

d

57
Q

CHT5

  1. Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue?
    a. either $30 or $40 per month because the price elasticity of demand is 1.0
    b. $30 per month
    c. $40 per month
    d. $0 per month
A

b

58
Q

CHT5

  1. If demand is linear (a straight line), then price elasticity of demand is
    a. constant along the demand curve.
    b. inelastic in the upper portion and elastic in the lower portion.
    c. elastic in the upper portion and inelastic in the lower portion.
    d. elastic throughout.
    e. inelastic throughout.
A

c

59
Q

CHT5

  1. If the income elasticity of demand for a good is negative, it must be
    a. a luxury good.
    b. a normal good.
    c. an inferior good.
    d. an elastic good.
A

c

60
Q

CHT5

  1. If consumers think that there are very few substitutes for a good, then
    a. supply would tend to bl’ price elastic.
    b. supply would tend to be price inelastic.
    c. demand would tend to be price elastic.
    d. demand would tend to be price inelastic.
    e. none of the above is true.
A

d

61
Q

CHT6

  1. For a price ceiling to be a binding constraint on the market, the government must set it
    a. above the equilibrium price.
    b. below the equilibrium price.
    c. precisely at the equilibrium price.
    d. at any price because all price ceilings are binding constraints.
A

b

62
Q

CHT6

  1. A binding price ceiling creates
    a. a shortage.
    b. a surplus.
    c. an equilibrium.
    d. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price.
A

a

63
Q

CHT6

  1. Suppose the equilibrium price for apartments is $500 per month and the government imposes rent controls of $250.Which of the following is unlikely to occur as a result of the rent controls?
    a. There will be a shortage of housing.
    b. Landlords may discriminate among apartment renters.
    c. Landlords may be offered bribes to rent apartments.
    d. The quality of apartments will improve.
    e. There may be long lines of buyers waiting for apartments.
A

d

64
Q

CHT6

  1. A price floor
    a. sets a maximum on the price at which a good can be sold.
    b. sets a legal minimum on the price at which a good can be sold.
    c. always determines the price at which a good must be sold.
    d. is not a binding constraint if it is set above the equilibrium price.
A

b

65
Q

CHT6

  1. Which of the following statements about a binding price ceiling is true?
    a. The surplus created by the price ceiling is greater in the short run than in the long run.
    b. The surplus created by the price ceiling is greater in the long run than in the short run.
    c. The shortage created by the price ceiling is greater in the short run than in the long run.
    d. The shortage created by the price ceiling is greater in the long run than in the short run.
A

d

66
Q

CHT6

  1. Which side of the market is more likely to lobby government for a price floor?
    a. Neither buyers nor sellers desire a price floor.
    b. Both buyers and sellers desire a price floor.
    c. the sellers
    d. the buyers
A

c

67
Q

CHT6

  1. The surplus caused by a binding price floor will be greatest if
    a. both supply and demand are elastic.
    b. both supply and demand are inelastic.
    c. supply is inelastic and demand is elastic.
    d. demand is inelastic and supply is elastic.
A

a

68
Q

CHT6

  1. Which of the following is all example of a price floor?
    a. rent controls
    b. restricting gasoline prices to $1.00 per gallon when the equilibrium price is $1.50 per gallon
    c. the minimum wage
    d. All of the above are price floors.
A

c

69
Q

CHT6

  1. Which of the following statements is true if the government places a price ceiling on gasoline at $1.50
    per gallon and the equilibrium price is $1.00 per gallon?
    a. There will be a shortage of gasoline.
    b. There will be a surplus of gasoline.
    c. A significant increase in the supply of gasoline could cause the price ceiling to become a binding constraint.
    d. A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint.
A

d

70
Q

CHT6

  1. Studies show that a 10 percent increase in the minimum wage
    a. decreases teenage employment by about 10 to 15 percent.
    b. increases teenage employment by about 10 to 15 percent.
    c. decreases teenage employment by about 1 to 3 percent.
    d. increases teenage employment by about 1 to 3 percent.
A

c

71
Q

CHT6

  1. Within the supply-and-demand model, a tax collected from the buyers of a good shifts the
    a. demand curve upward by the size of the tax per unit.
    b. demand curve downward by the size of the tax per unit.
    c. supply curve upward by the size of the tax per unit.
    d. supply curve downward by the size of the tax per unit.
A

b

72
Q

CHT6

  1. Within the supply-and-demand model, a tax collected from the sellers of a good shifts the
    a. demand curve upward by the size of the tax per unit.
    b. demand curve downward by the size of the tax per unit.
    c. supply curve upward by the size of the tax per unit.
    d. supply curve downward by the size of the tax per unit.
A

c

73
Q

CHT6

  1. Which of the following takes place when a tax is placed on a good?
    a. an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold
    b. an increase in the price buyers pay; a decrease in the price sellers receive, and an increase in the quantity sold
    c. a decrease in the price buyers pay, an increase in the price sellers receive, and a decrease in the quantity sold
    d. a decrease in the price buyers pay, an increase in the price sellers receive, and an increase in the quantity sold
A

a

74
Q

CHT6

  1. When a tax is collected from the buyers in a market,
    a. the buyers bear the burden of the tax.
    b. the sellers bear the burden of the tax.
    c. the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers.
    d. the tax burden falls most heavily on the buyers.
A

c

75
Q

CHT6

  1. A tax of $1.00 per gallon on gasoline
    a. increases the price the buyers pay by $1.00 per gallon.
    b. decreases the price the sellers receive by $1.00 per gallon.
    c. increases the price the buyers pay by precisely $0.50 and reduces the price received by sellers by precisely $0.50.
    d. places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive.
A

d

76
Q

CHT6

  1. The burden of a tax falls more heavily on the sellers in a market when
    a. demand is inelastic and supply is elastic.
    b. demand is elastic and supply is inelastic.
    c. both supply and demand are elastic.
    d. both supply and demand are inelastic.
A

b

77
Q

CHT6

  1. A tax placed on a good that is a necessity for consumers will likely generate a tax burden that
    a. falls more heavily on buyers.
    b. falls more heavily on sellers.
    c. is evenly distributed between buyers and sellers.
    d. falls entirely on sellers.
A

a

78
Q

CHT6

  1. The burden of a tax falls more heavily on the buyers in a market when
    a. demand is inelastic and supply is elastic.
    b. demand is elastic and supply is inelastic.
    c. both supply and demand are elastic.
    d. both supply and demand are inelastic.
A

a

79
Q

CHT6

  1. Which of the following statements about the burden of a tax is correct?
    a. The tax burden generated from a tax placed on good consumers perceived to be a necessity will fall most heavily on the sellers of the good.
    b. The tax burden falls most heavily on the side of the market (buyers or sellers) that is most willing to leave the market when price movements are unfavorable to them.
    c. The burden of a tax lands on the side of the market (buyers or sellers) from which it is collected.
    d. The distribution of the burden of a tax is determined by the relative elasticity of supply and demand and is not determined by legislation.
A

d

80
Q

CHT6

  1. For which of the following products would the burden of a tax likely tall more heavily on the sellers?
    a. food
    b. entertainment
    c. clothing
    d. housing
A

b

81
Q

CHT7

  1. Consumer surplus is the area
    a. above the supply curve and below the price.
    b. below the supply curve and above the price.
    c. above the demand curve and below the price.
    d. below the demand curve and above the price.
    e. below the demand curve and above the supply curve.
A

d

82
Q

CHT7

  1. A buyer’s willingness to pay is
    a. that buyer’s consumer surplus.
    b. that buyer’s producer surplus.
    c. that buyer’s maximum amount he is willing to pay for a good.
    d. that buyer’s minimum amount he is willing to pay for a good.
    e. none of the above.
A

c

83
Q

CHT7

  1. If a buyer’s willingness to pay for a new Honda is $20,000 and she is able to actually buy it for $18,000, her consumer surplus is
    a. $0.
    b. $2,000.
    c. $18,000.
    d. $20,000.
    e. $38,000.
A

b

84
Q

CHT7

  1. An increase in the price of a good along a stationary demand curve
    a. increases consumer surplus.
    b. decreases consumer surplus.
    c. improves the material welfare of the buyers.
    d. improves market efficiency.
A

b

85
Q

CHT7

  1. Suppose there are three identical vases available to be purchased. Buyer 1 is willing to
    pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market?
    a. One vase will be sold, and consumer surplus is $30.
    b. One vase will be sold, and consumer surplus is $5.
    c. Two vases will be sold, and consumer surplus is $5.
    d. Three vases will be sold, and consumer surplus is $0.
    e. Three vases will be sold, and consumer surplus is $80.
A

c

86
Q

CHT7

  1. Producer surplus is the area
    a. above the supply curve and below the price.
    b. below the supply curve and above the price.
    c. above the demand curve and below the price.
    d. below the demand curve and above the price.
    e. below the demand curve and above the supply curve.
A

a

87
Q

CHT7

  1. If a benevolent social planner chooses to produce less than the equilibrium quantity of
    a good, then
    a. producer surplus is maximized.
    b. consumer surplus is maximized.
    c. total surplus is maximized.
    d. the value placed on the last unit of production by buyers exceeds the cost of production.
    e. the cost ofproduction on the last unit produced exceeds the value placed on it by buyers.
A

d

88
Q

CHT7

  1. If a benevolent social planner chooses to prodlTCe more than the equilibrium quantity
    of a good, then
    a. producer surplus is maximized.
    b. consumer surplus is maximized.
    c. total surplus is maximized.
    d. the value placed on the last unit of production by buyers exceeds the cost of production.
    e. the cost ofproduction on the last unit produced exceeds the value placed on it by buyers.
A

c

89
Q

CHT7

  1. The seller’s cost ofproduction is
    a. the seller’s consumer surplus.
    b. the seller’s producer surplus.
    c. the maximum amount the seller is willing to accept for a good.
    d. the minimum amount the seller is willing to accept for a good.
    e. none of the above.
A

d

90
Q

CHT7

  1. Total surplus is the area
    a. above the supply curve and below the price.
    b. below the supply curve and above the price.
    c. above the demand curve and below the price.
    d. below the demand curve and above the price.
    e. below the demand curve and above the supply curve.
A

e

91
Q

CHT7

  1. An increase in the price of a good along a stationary supply curve
    a. increases producer surplus.
    b. decreases producer surplus.
    c. improves market equity.
    d. does all ofthe above.
A

a

92
Q

CHT7

  1. Adam Smith’s “invisible hand” concept suggests that a competitive market outcome
    a. minimizes total surplus.
    b. maximizes total surplus.
    c. generates equality among the members of society.
    d. does both b band c.
A

b

93
Q

CHT7

  1. In general, if a benevolent social planner wanted to maximize the total benefits
    received by buyers and sellers in a the planner should
    a. choose a price above the market equilibrium price.
    b. choose a price below the market equilibrium price.
    c. allow the market to seek equilibrium on its own.
    d. choose any price the planner wants because the losses to the sellers (buyers) from
    any change in are exactly offset by the gains to the buyers (sellers).
A

c

94
Q

CHT7

  1. If buyers are rational and there is no market failure,
    a. free market solutions are efficient.
    b. free market solutions generate equality.
    c. free market solutions maximize total surplus.
    d. all of the above are true.
    e. a and c are correct.
A

e

95
Q 
#CHT7
15. If a producer has market power (can influence the price of the product in the market)
then tree market solutions 
a. generate equality.
b. are efficient. 
c. are inefficient.
d. maximize consumer surplus.
A

c

96
Q

CHT7

  1. If a market is then
    a. the market allocates output to the’ buyers who value it the most.
    b. the market allocates to the sellers who can produce the good at least cost.
    c. the quantity in the market maxlITnzes the sum of consumer and producer surplus.
    d. all of the above are true.
    e. none of the above is true.
A

d

97
Q

CHT7

  1. If a market generates a side effect or externality, then free market solutions
    a. generate equality.
    b. are efficient.
    c. are inefficient.
    d. maximize producer surplus.
A

c

98
Q

CHT7

  1. Medical care enhances people’s lives. Therefore, we should consume medical care until
    a. everyone has as much as they would like.
    b. the benefit buyers place on medical care is equal to the cost ofproducing it.
    e. buyers receive no benefit from another unit of medical care.
    d. we must cut back on the consumption of other goods.
A

b

99
Q

CHT7

  1. Joe has ten baseball gloves and Sue has none. A baseball glove costs $50 to produce. If Joe values an additional baseball glove at $100 and Sue values a baseball at $40, then to maximize
    a. efficiency, Joe should receive the glove.
    b. efficiency, Sue should receive the glove.
    c. consumer surplus, both should receive a glove.
    d. equity, Joe should receive the glove.
A

a

100
Q

CHT7

  1. Suppose that the price ofa new bicycle is $300. Sue values a new bicycle at £400. It costs for the seller to produce the new bicycle. What is the value of total surplus if Sue buys a new bike?
    a. $100
    b. $200
    c. $300
    d. $400
    e. $500
A

b

MICROECONOMICS (5 decks)

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