1. The welfare loss associated with an excise tax is measured by

A. the reduction in consumer surplus plus the reduction in profits due to the tax.

B. the reduction in producer surplus plus the reduction in consumer surplus minus the tax revenue.

C. the reduction in producer surplus plus the reduction in consumer surplus due to the tax.

D. the reduction in producer surplus plus the reduction in consumer surplus plus the reduction in total surplus.

3. Which scenario describes the allocation of the primary burden of an excise tax the best?

a. If demand is elastic, consumers are more burdened by the excise tax than producers.

b. If demand is inelastic but less inelastic than supply, producers are more burdened by the excise tax than consumers.

c. If demand is more elastic than supply, consumers are more burdened by the excise tax than producers.

d. If demand and supply are inelastic, the excise tax is no burden for any market participant.

4. How do you define price elasticity of demand?

a. Absolute change in demand when income changes.

b. Percentage change in price for a percentage change in demand.

c. Relative change in the consumption bundle when price increases.

d. The percentage change in demand caused by a percentage change in price.

5. In which of the following examples are we not expecting the consumer to choose a corner solution over consuming positive quantities of both goods?

a. The consumers utility function is characterized by a minimum function (e.g., min {X, Y})

b. One of the two consumable products are a bad for the consumer while the other one is a good

c. The optimization would suggest that it is optimal for the consumer to consume a negative amount of one of the goods

d .The two goods are perfect substitutes and the budget line as a different slope than the indifference curve

6. When a price ceiling is imposed on a competitive market at a level below the equilibrium price

A. both producers and consumers lose surplus.

B. total surplus is not changed by the price ceiling.

C. consumers lose some or all of consumer surplus.

D. producers lose some or all of producer surplus

7. When you were a child and said "Mum, please buy me this thing. It is very important to have it, everybody in my school has this thing.", which economic principal did you demonstrate:

A. The law of diminishing returns to scale.

B. The law of supply and demand.

D. The principle of scarcity.

C. The bandwagon effect.

8. When do you see that the income effect dominates the substitution effects?

A. While analyzing any good.

B. While analyzing a normal good.

C. While analyzing an inferior good.

D. While analyzing a Giffen good.

9 .An elasticity of -0.5 indicates that a 100 percent increase in price leads to a

A. 0.05 percent decrease in quantity demanded.

B. 5.0 percent decrease in quantity demanded.

C. 50 percent decrease in quantity demanded.

D. 0.5 percent decrease in quantity demanded.