Multiple Choice

QUESTION 9 Coffee and tea are substitutes. If there is an increase in the price of coffee, total surplus in the tea market: will increase. will decrease. O will not change. may change, but we cannot determine the change without more information. QUESTION 10 Market failure arises when the market fails to: achieve an efficient outcome. provide the good for all consumers who desire it. provide a profit for all firms who produce the good. prevent the price of a good from rising in response to an increase in demand. QUESTION 11 A local restaurant has estimated that the price elasticity of demand for meals is equal to 2. If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by and total revenue to 10%; increase 5%; stay constant O 10%; fall O 2.5%; fall QUESTION 12 A tariff is most likely to prices and consumption of the good or service being protected. decrease; increase increase; decrease have no effect on; not change decrease; decreaseQUESTION 13 A tax leads to in consumer surplus and in producer surplus. C an increase; an increase C an increase; a decrease C a decrease; an increase C a decrease; a decrease QUESTION 14 An important determinant of the price elasticity of demand is the: C time period. C price of related goods. C level of technology. C quantity of the good supplied. QUESTION 15 An excise tax imposed on junk food reduces consumer surplus by $50, producer surplus by $80, and results in tax revenue of $40 for the government. What is the welfare effect of this tax? C A. A net loss of$10 C B. A net loss of$130 C C. A net gain of $40 C D.A net loss of $90 QUESTION 16 When the world price of a good exceeds the domestic price. a country is MOST likely to: C import the good. C export the good. C be made worse off by any kind oftrade in that good. C experience lower wages for workers in that industry by engaging in trade