Multiple choice questions:

1. The way we measure the sensitivity of quantity demanded to changes in price by elasticity differs from using the slope because elasticity calculates the ratio of the

a. Absolute change in price to the absolute change in quantity demanded

B. Absolute change in quantity demanded to the percentage change in price

C. Percentage change in quantity demanded to the absolute change in price

D. Average change in price to the average change in quantity demanded

2. Suppose demand is price inelastic for a product, then

a. Price and total revenue change in opposite directions

B. A seller should decrease the price to increase total revenue

C. Too few goods are being produced from society's point of view

D. Price and total revenue change in the same direction

E. The market can never be in equilibrium

3. If the price of margarine goes up, the demand for butter will

a. Increase because the two goods are substitutes

B. Increase because it is a complement

C. Decrease because the two goods are substitutes

D. Not change unless the price of butter also changes

4. If demand is inelastic

a. A 1% increase in price will result in less than a 1% decrease in the quantity demanded

B. A 1% increase in price will result in a 1% decrease in the quantity demanded

C. A 1% increase in price will result in more than a 1% decrease in the quantity demanded

D. A 1% increase in price will result in less than a 1% increase in the quantity demanded

E. None of the above

5. If a certain product has a typical, upward-sloping supply curve and a typical, downward sloping demand curve, when tax on the product is doubled, the

a. Deadweight loss of the tax is halved

B. Deadweight loss of the tax is doubled

C. Deadweight loss of the tax is tripled

D. Deadweight loss of the tax is quadrupled

E. None of the above

6. In a supply and demand graph, producer surplus can be pictured as the

a. Vertical intercept of the supply curve

B. Area between the demand curve and the supply curve to the left of equilibrium output

C. Area under the supply curve to the left of the equilibrium output

D. Area under the demand curve to the left of equilibrium output

E. Area between the equilibrium price line and the supply curve to the left of equilibrium output

7. The US imports seafood. When a tariff is imposed on seafood

a. Consumer surplus increases and total surplus increase in the seafood market

B. Consumer surplus increases and total surplus decreases in the seafood market

C. Consumer surplus decreases and total surplus increases in the seafood market

D. Consumer surplus decreases and total surplus decreases in the seafood market

E. Both a. or b. are possible

8. What does the price elasticity of demand measure?

a. Responsiveness of a good's price to a change in quantity demanded

B. Adaptability of suppliers when a change in demand alters the price of a good

C. Responsiveness of quantity demand to a change in a good's price

D. Adaptability of buyers when there is a change in demand

E. Responsiveness of quantity supplied to a change in quantity demanded

9. Minimum price regulations are inefficient because:

a. Both consumers and producers lose

B. Consumers lose, producers gain, but a loss occurs on net

C. Consumers lose, producers may gain or lose, but a loss occurs on net

D. Consumers and producers may gain or lose, but a loss occurs on net

E. None of the above

10. Proctor and Gamble co. is a major soap producer. All of the following, except one, would shift its supply curve of liquid soap inward. Which is the exception?

a. An increase in the price of bar soap

B. An increase i the price of a key ingredient of liquid soap

C. Environmental regulations force proctor and gamble to use more costly technology to produce liquid soap

D. A decrease in the price of liquid soap

E. An increase in the wage rate for factory workers who produce liquid soap

11._____questions have to do with explanation and prediction, _____questions have to do with what out to be.

a. Positive, negative

B. Negative, normative

C. Affirmative, positive

D. Positive, normative

E, Econometic, theoretical

12. Suppose the major soft drink companies develop vending machines for canned and bottled drinks that can determine your maximum willingness to pay for a drink, and the machine charges you that price when you purchase a drink. If this were possible, the consumer surplus in the vended soft drink market would be:

a. Positive because consumer surplus equals consumer expenditures in this case

B. Positive because the market demand curve is perfectly inelastic in this case

C. Negative because people are not actually willing to pay their maximum value

D. Zero because all surplus value is captured by the seller

E. None of the above

13. If the market demand curve for a good is totally elastic, what will the consumer surplus be equal to at the market equilibrium price under perfect competition?

a. Total consumer expenditures

B. Total sales revenue

C. Zero

D. An amount slightly more than total consumer expenditure

E. None of the above

14. You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X?

a. A decrease in the price of X

B. An increase in the price of a good that is complement to good X

C. An increase in the price of a good that is a substitute for X

D. All of the above

E. None of the above

2. Suppose demand is price inelastic for a product, then

a. Price and total revenue change in opposite directions

B. A seller should decrease the price to increase total revenue

C. Too few goods are being produced from society's point of view

D. Price and total revenue change in the same direction

E. The market can never be in equilibrium

3. If the price of margarine goes up, the demand for butter will

a. Increase because the two goods are substitutes

B. Increase because it is a complement

C. Decrease because the two goods are substitutes

D. Not change unless the price of butter also changes

4. If demand is inelastic

a. A 1% increase in price will result in less than a 1% decrease in the quantity demanded

B. A 1% increase in price will result in a 1% decrease in the quantity demanded

C. A 1% increase in price will result in more than a 1% decrease in the quantity demanded

D. A 1% increase in price will result in less than a 1% increase in the quantity demanded

E. None of the above

5. If a certain product has a typical, upward-sloping supply curve and a typical, downward sloping demand curve, when tax on the product is doubled, the

a. Deadweight loss of the tax is halved

B. Deadweight loss of the tax is doubled

C. Deadweight loss of the tax is tripled

D. Deadweight loss of the tax is quadrupled

E. None of the above

6. In a supply and demand graph, producer surplus can be pictured as the

a. Vertical intercept of the supply curve

B. Area between the demand curve and the supply curve to the left of equilibrium output

C. Area under the supply curve to the left of the equilibrium output

D. Area under the demand curve to the left of equilibrium output

E. Area between the equilibrium price line and the supply curve to the left of equilibrium output

7. The US imports seafood. When a tariff is imposed on seafood

a. Consumer surplus increases and total surplus increase in the seafood market

B. Consumer surplus increases and total surplus decreases in the seafood market

C. Consumer surplus decreases and total surplus increases in the seafood market

D. Consumer surplus decreases and total surplus decreases in the seafood market

E. Both a. or b. are possible

8. What does the price elasticity of demand measure?

a. Responsiveness of a good's price to a change in quantity demanded

B. Adaptability of suppliers when a change in demand alters the price of a good

C. Responsiveness of quantity demand to a change in a good's price

D. Adaptability of buyers when there is a change in demand

E. Responsiveness of quantity supplied to a change in quantity demanded

9. Minimum price regulations are inefficient because:

a. Both consumers and producers lose

B. Consumers lose, producers gain, but a loss occurs on net

C. Consumers lose, producers may gain or lose, but a loss occurs on net

D. Consumers and producers may gain or lose, but a loss occurs on net

E. None of the above

10. Proctor and Gamble co. is a major soap producer. All of the following, except one, would shift its supply curve of liquid soap inward. Which is the exception?

a. An increase in the price of bar soap

B. An increase i the price of a key ingredient of liquid soap

C. Environmental regulations force proctor and gamble to use more costly technology to produce liquid soap

D. A decrease in the price of liquid soap

E. An increase in the wage rate for factory workers who produce liquid soap

11._____questions have to do with explanation and prediction, _____questions have to do with what out to be.

a. Positive, negative

B. Negative, normative

C. Affirmative, positive

D. Positive, normative

E, Econometic, theoretical

12. Suppose the major soft drink companies develop vending machines for canned and bottled drinks that can determine your maximum willingness to pay for a drink, and the machine charges you that price when you purchase a drink. If this were possible, the consumer surplus in the vended soft drink market would be:

a. Positive because consumer surplus equals consumer expenditures in this case

B. Positive because the market demand curve is perfectly inelastic in this case

C. Negative because people are not actually willing to pay their maximum value

D. Zero because all surplus value is captured by the seller

E. None of the above

13. If the market demand curve for a good is totally elastic, what will the consumer surplus be equal to at the market equilibrium price under perfect competition?

a. Total consumer expenditures

B. Total sales revenue

C. Zero

D. An amount slightly more than total consumer expenditure

E. None of the above

14. You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X?

a. A decrease in the price of X

B. An increase in the price of a good that is complement to good X

C. An increase in the price of a good that is a substitute for X

D. All of the above

E. None of the above