Q23. When pricesdecrease, total revenue

A.

falls when demand is unit elastic.

B.

falls when demand is price elastic.

C.

rises when demand is price inelastic.

D.

rises when demand is price elastic.

Q24. Suppose that in a month the price of a gallon of milk increases from$2 to$2.50. At the sametime, the quantity of gallons of milk demanded decreases from 100 to 80. The price elasticity of demand for gallons of milk(calculated using the midpointformula) isapproximately:

A.

0.2

B.

0.11

C.

1.2

D.

1.

Q25. Olives are used to produce olive oil. If the price of olives increases

A.

the demand for olive oil increases.

B.

the demand for olive oil decreases.

C.

the supply of olive oil decreases.

D.

the supply of olive oil increases.

Q26. Figure 4.2 illustrates the supply and demand for tshirts. If the actual price of tshirts is$7, we would expect that

A.

demand will decrease until quantity demanded equals quantity supplied.

B.

supply will increase until quantity demanded equals quantity supplied.

C.

price will increase until quantity demanded equals quantity supplied.

D.

there will be no change in the price since the market is in equilibrium.

Q27. Atlantic Coffee has recently decided to raise its prices by10%. It was shocked by itscustomers' reaction to the price increase when sales dropped24%.

Such a sharp drop in sales occurred because

A.

Atlantic Coffeedoesn't taste as good as Pacific Coffee.

B.

the demand for coffee as a commodity is highly inelastic.

C.

the demand for a specific brand of coffee is highly elastic.

D.

Atlantic Coffee has changed to a new type of bean.

Q28. Prices above the free market equilibrium are inefficientbecause:

A.

all mutually beneficial transactions happen.

B.

they prevent mutually beneficial transactions.

C.

more goods could be produced usingsociety's resources.

D.

no one can be made better off without hurting someone by participating in another transaction.

Q29.If the government intervenes in themarket, while the market meets the efficiencyconditions, then thegovernment:

A.

causes inefficiency.

B.

reduces the producer surplus only.

C.

reduces the consumer surplus only.

D.

promotes more efficiency.

Q31. An increase in supply of a product results when

A.

the government reduces subsidies on the product.

B.

taxes on the product are increased.

C.

the companies that produce the product have higher materials costs.

D.

technological innovations are introduced in the manufacturing.

Q32. When demand increases and the demand curve shifts to theright, equilibrium price________ and equilibrium quantity________.

A.

decreases; decreases

B.

increases; decreases

C.

decreases; increases

D.

increases; increases

Q33. A good for which demand decreases when income increases is known asa(n) ________ good.

A.

normal

B.

complementary

C.

substitute

D.

inferior

Q34. Suppose the price of a liter of soda is$2. If Sara is willing to pay$3 for that liter ofsoda, her consumer surplus when she buys the sodais:

A.

$3.

B.

$1.

C.

$2.

D.

$0.

Q35. Relatedto: Cigarette Prices and TeenagersLOADING...

.

The price elasticity of demand for cigarettes among teenagers is 1.3. If the price of cigarettes increases by20%, the quantity of cigarettes demanded by teenagers will

A.

increase by26%.

B.

decrease by26%.

C.

decrease by32.5%.

D.

increase by32.5%.