1 Which of the following will cause the demand for a normal good to increase?

A decrease in consumers' income

A decrease in the price of a complementary good

A decrease in the price of a substitute good

A decrease in the price of the good

A decrease in the number of consumers

2

If bologna is an inferior good, which of the following must be true?

The demand curve for bologna is vertical.

The demand curve for bologna is horizontal

An increase in the price of bologna will decrease the supply of bologna.

An increase in consumer income will decrease the demand of bologna.

A decrease in consumer income will decrease the supply of bologna.

3

Which of the following changes will lead to an increase in the supply of good X?

An increase in the price of good X

An increase in the wages of labor used to produce good X

A decrease in the price of energy, a key input to the production of good X

An increase in the demand for good X

A decrease in the number of sellers of good X

4

Which of the following would cause the supply curve for notebook computers to shift to the right?

An increase in the price of notebook computers

An increase in the number of firms producing notebook computer

An increase in the wages of workers in the notebook-computer industry

A decrease in the price of notebook computers

A decrease in the supply of notebook computers

5

Assume that the demand for a certain good is perfectly inelastic and the supply curve of the good is upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the good increases?

A decrease in both the quantity supplied and the equilibrium amount consumed

A decrease in the quantity supplied and an increase in the equilibrium price

A decrease in the supply and an increase in the equilibrium price

A decrease in both the demand and the equilibrium amount consumed

A decrease in both the quantity demanded and the equilibrium price

6

Which of the following will tend to make the demand for a product more elastic?

New firms which produce similar products enter the industry.

A change in taste and preferences makes the product more desirable.

The product is necessary for use with a complement.

Production of the product is protected by a patent.

Production cost of the product decreases.

7

If a one-of-a-kind Etruscan vase is offered for sale at an auction, which, if any, of the following correctly shows the supply curve for the vase? Supply A PRICE QUANTITY Supply B PRICE QUANTITY Supply PRICE C QUANTITYAssume a 10 percent increase in price increased the market quantity supplied by 20 percent. Which of the following is true? The value of the price elasticity of supply is 2. Q The value of the price elasticity of supply is 0.5. Supply is price inelastic. Demand is price elastic. @@ This pricequantity combination yiclatesthe law of supply. The crossprise elasticityr of demand for Goods X and Y is 2.8. Based on this information, what is true about Good X and Good Y? Q.) Good X is a normal good and Good Y is an inferior good. 6 The goods are inferior. The goods are substitutes. The goods are complements @@ The goods have upwardsloping demand curves. A 10 percent increase in Sandra's income causes Sandra's consumption of milk to decrease from 10 cartons to 6 cartons. Sandra's income elasticity of demand for milk is Q) greater than zero and therefore milk is a necessity greater than zero and therefore milk is a normal good 6 less than zero and therefore milk is a normal good less than zero and therefore milk is an inferior good greater than one and therefore milk is a necessity @@ PRICE Supply X U Y Z Demand R S T QUANTITY In a competition equilibrium consumer surplus is the area of A) UVZ B WYZ C RVUT D XVZY E OYZSQuestion 12 In the absence of market failures, a perfectly competitive market equilibrium is efficient for which of the following reasons? Consumer surplus is maximized and consumers are better off relative to producers. 6 Producer surplus is maximized and producers are better off relative to consumers. Total economic surplus is maximized and all mutually benecial transactions are exhausted. Total economic surplus is distributed equally between producers and consumers. The quantity of output is produced at a constant cost so that every consumer pays the same price. @@ Question 13 If growing corn becomes more protable than growing wheat. which of the following will occur? The supply of corn will decrease. G The price of wheat will decrease. The price of corn will decrease. The demand for wheat will increase. The demand for corn will increase. @@ Assume that the market demand for a good is perfectly inelastic, the market supply for the good is perfectly elastic, and the market is in equilibrium. If there is a decrease in the price of a key input used in the production of the good, which of the following will occur? A There will be a decrease in the equilibrium quantity. B There will be no change in the producer surplus. C There will be a decrease in the producer surplus. D There will be a decrease in the consumer surplus. E There will be an increase in the equilibrium price.If cotton is used to produce towels, an increase in the price of cotton will result in which of the following changes in the towel market? A A decrease in the demand for towels, which leads to a shortage of towels followed by upward pressure on the price of towels B A decrease in the demand for towels, which leads to a surplus of towels followed by downward pressure on the price of towels C A decrease in the supply of towels, which leads to a shortage of towels followed by upward pressure on the price of towels D An increase in the supply of towels, which leads to a surplus of towels followed by downward pressure on the price of towels E An increase in both the demand and supply of towels, which leads to a surplus of towels followed by upward pressure on the price of towelsWhich of the following would cause the equilibrium price of good X to increase? A Producers of good X find a new technology that reduces the cost of producing X. B The price of an essential input in the production of good X increases. C Goods X and Y are complements, and the government imposes a tax on good Y. D Good X is a normal good, and the government increases income taxes by 3%. E Good X is an inferior good, and the government decreases income taxes by 10%.The following questions are based on the diagram below, which shows the effect of a unit tax placed on a good. Supply After Tax Supply $11.00 $10.45 $9.45 Demand Q' Q QUANTITY According to the diagram, what is the dollar amount of the unit tax? A) $0.00 B $0.45 C $0.55 D $1.00 E $1.4501 Q2 Supply after lax Supply before tax Demand QUANTITY Bookmark The graph above shows the market for good X The letters in the graph denote the enclosed areas If the government imposes an excise tax of t dollars on each unit of good X, Wthh ofthe following represents the consumer surplus, producer surplus, and deadweight loss afterthe imposition of the tax? Consumer Surplus: A Producer Surplus: G Deadwelgnt Loss: D+E Consumer Surplus: A Producer Surplus: F+E Deadwelgnt Loss: D+E Consumer Surplus: A+B Producer Surplus: G+F+E Deadwelgnt Loss: C+D Consumer Surplus: A+B+H Producer Surplus: G+F ..4....i_;...... Country Z is both a producer and an importer of green tea. If country Z imposes a tariff on imports of green tea, which of the following will occur in the domestic market of green tea? A Consumer surplus will increase. B Domestic production will increase. C Total consumption of green tea will increase. D Producer surplus will decrease. E The price paid by domestic consumers will decrease.Which ofthe following will result in the short run if the government imposes a binding quota? CA) A decrease in the price paid by consumers 0 A rightward shift in the supply curve A leftward shirt in the demand curve An increase in consumer surplus @ A deadweight loss