C) 72/3 d)*3/2 6) 74/3 26) Suppose we observe that the revenue a music store receives from CD sales increases when the price of CDs is decreased. What can we conclude? a) The price elasticity of demand for CBS is zero. b) The demand for CDs is perfectly inelastic. c)The price elasticity of demand for CDs is *1. d)The price elasticity of demand for CBS is greater than *1 . e) The price elasticity of demand for CDs is less than 71. 27) Suppose the price elasticity of supply for shampoo is 20. If the price of shampoo increases by 0.7 %, what would we expect to happen to the quantity of shampoo supplied? a) Increase by 27% b) Increase by 14% c) Increase by 13% d) Decrease by 13% e) Decrease by 27% 28) If pasta is a Giffen good, thenm a)pasta is also a normal good. b)pasta is also a luxury good. c)an decrease in the price of pasta will increase the quantity demanded. d)an increase in the price of pasta will increase the quantity demanded. e) 29) pasta must make up a small portion of Consumers' total expenditures. An inferior good in which the income effect dominates the substitution effect is called... a) b) C) d) e) 30) a normal good. a luxury good. a Giffen good. a massiproduced good. a favored good. The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of a) b) C) d) e) 31) 32) its complements but not its substitutes. its substitutes but not its complements. its substitutes and its complements. neither its substitutes nor its complements. None of the above.. If goods are complements, for sure their a) Cross price elasticities are positive. b) Cross price elasticities are negative. c) Cross price elasticities are zero. d) Income elasticity is negative e) Income elasticity is positive. Demand is perfectly inelastic when a) The good in questions has perfect substitutes 10 b) Shifts in the supple curve results in no change in price. c) Shifts in the supply curve results in no change in quantity demanded. d) Shifts in the supply curve results in no change in the total revenues e) An upward shift in the supply curve results in a decrease in the total revenues 33) The income elasticity of demand is high for shelter luxuries clothing food inferior goods 34) To say that turnips are necessity goods means that the income elasticity is definitely greater than 1. is negative. is greater than 0 but less than 1. is equal to l. is equal to 0. 35) The fact that the PPF usually bows away from the origin implies that m a)as the production of any good increases, there is an increase in the opportunity cost of producing it. b) as the production of any good increases, there is a decrease in the opportunity cost of producing it. c) getting more of one good means getting less of another good. H d)getting more of one good means getting more of another good. e) resources are perfectly fungible, easily moved between alternative uses to satisfy consumer demand. 36) What are the two distinguishing characteristics of a public good? a)1t is provided by the core sphere; it is freely available to anyone. b) It is provided by the public purpose sphere; it is freely available to anyone. c)1t is freely available to anyone; use by one person diminishes the ability of another person to use it. d)It is freely available to anyone; use by one person does not diminish the ability of another person to use it. e)1t is provided at low cost; use by one person does not diminish the ability of another person to use it. 37) which one of the following statements is false? a)A laissezifaire economy is an economy with little government regulation. b) A laissezifaire view of the economy favors unregulated markets. c)A laissezifaire view is that selfiinterested individuals interact in a socially beneficial way. d)Laissezifaire is a French term that means \"let it be.\" e)A laissezifaire economy is an economy with central planning. 38) The term \"effective demand\" refers to m a)a change in demand sufficient to change the market price. b) a change in demand that increases efficiency. c) demand that is aggregated among individuals. d) demand backed by the willingness and ability to pay. e) a change in demand that leads to a change in supply. 17 39) which one of the following is not a nonprice determinant of a) demand for oranges is elastic. demand? a) The number of consumers b) SprlY Of oranges lS ElaSth. b) Producer expectations of future prices c) demand for oranges ls inelastic. c) Tastes and preferences d) SUPply of oranges ls inelastic. d) Prices of related goods and services e) demand for oranges 15 unit elaStlc' e) Available assets 43) Suppose we observe a large increase in the price of corn but the quantity of corn sold stays the same. What is the most plausible 40) Suppose we observe a large increase in the price of corn but the explanation (or combination of explanations) below? quantity of corn sold stays the same. What is the most plausible explanation (or combination of explanations) below? a)A drought occurred in cornigrowing regions a) A drought occurred in cornigrowing regions. b) A drought occurred in cornigrowing regions and a medical report was b) A drought occurred in cornigrowing regions and a medical report was lSSUEd that corn 15 good for your health. issued that corn is 900d for your health. c) A drought occurred in cornigrowing regions and a medical report was c) A drought occurred in cornigrowing regions and a medical report was lSSUEd that corn 15 bad for your health. issued that corn is bad for your health. d) A new fertilizer was invented that doubles corn yields. d) A new fertilizer was invented that doubles corn yields. e) A new fertilizer was invented that doubles corn yields and a e) A new fertilizer was invented that doubles corn yields and a medical report was lSSHEd that corn is bad for your health. medical report was issued that corn is bad for your health. 44) Suppose we observe that the price of paper has increased and the 41) If the sellers of a good are unable to set their own prices quantity of paper sold has decreased. What is the most plausible ' a (i.e., there is a \"going price"), the demand for the good faced by a explanation. . particular seller is a)Consumers demand less paper because of increased use of the Internet. a) perfectly elastic . b) The price of pens and pencils increased dramatically. b) moderately elastic. c) The number of children in schools decreased dramatically. c) perfectly inelastic. d) More logging for pulpwood was permitted in National Forests. d) moderately inelastic. e) A new law was enacted that forces all paper producers to use e) zero. expensive nonichlorine bleaching methods. 42) If a rise in the price of oranges from $7 to $9 a bushel, caused by a shift of the demand curve, increases the quantity of bushels supplied from 4,500 to 5,500 bushels, the 13 14 45) \"During 2013, the price of personal computers (PCs) fell drastically, but the quantity supplied increased.\" This statement a) refutes the soacalled \"law of supply.\" b) illustrates the fact that the supply curve of PCs is downwarda sloping. c) suggests that the supply of PCs increased during 2013. d) implies that PCs are complementary goods. e) suggests that the supply of PCs decreased during 2013. For Questions 46 - 50, refer to the graph below. Pm! m what '1' \"v WWW... 46) In the graph above, suppose the government mandates that the price of wheat rice can be no lower than $4 per bushel. Areas (C+G) in this scenario would be referred to as a) net social welfare. b) a deadweight loss. c) consumer surplus. d) producer surplus. e) marginal benefits. 47) In the graph above, suppose the government mandates that the price of wheat rice can be no lower than $4 per bushel. What area(s) represent the producer surplus after the implementation of this policy? a) Areas (B+C) b) Areas (F+G) c) Areas (A+B+F) d) Areas (B+F) e) Area F 48) In the graph above, suppose the government mandates that the price of wheat rice can be no lower than $4 per bushel. What areas represent the deadweight loss as a result of this policy? a) Areas (D+E) b) Areas (B+C) c) Areas (C+G) d) Areas (F+G) e) Areas (A+E) 49) In the graph above, suppose the government mandates that the price of wheat rice can be no lower than $4 per bushel. What area(s) represent the consumer surplus after the implementation of this policy? a) Area A b) Areas (A+E) (2) Areas (A+E+C) d) Areas (E+C) e) Areas (A+E+E') 50) In the graph above, suppose the government mandates that the price of wheat rice can be no lower than $4 per bushel. What area(s) represent a transfer of welfare from consumers to producers as a result of this policy? a) Area A b) Area B c) Areas (B+C) d) Area C e) Areas (A+E) 51) Suppose that John is willing to pay a maximum of 5 dollars per cup of regular coffee at a Coffee shop on campus. What is John's consumer surplus from buying one cup of coffee if the actual price of coffee is 3 dollars per cup? a. $5 b. $3 c. $2 d. $1 e. $0 52) Suppose Luis, Madeleine, and Emma are the only consumers in the entire coffee market, and that their maximum willingness to pay for a cup of coffee is $2, $4, and $6 respectively. Assume that the price of coffee is $2 per cup and that they each buy one cup of coffee. What is the market consumer surplus? a.$7 b. $6 c.$5 d.$4 e.$2 53) Suppose that the cost of producing the 600th cup of coffee to the local coffee shop is $2, and the price of coffee is $3.40 per cup. What is the producer surplus of selling the 600th cup of coffee? a. $2.40 b. $1.40 c.$l d.$0.40 e.$0