Q46. Recal the Application about French restaurants and the Value Added Tax(VAT) to answer the following question.

Recall the Application. According to theApplication, how would lowering the VAT on restaurants withsit-down meals result in more employment in theindustry?

A.

A lower VAT lowers the price of themeals, increasing the quantity demanded for meals and increasing the demand for workers.

B.

A lower VAT raises the price of themeals, increasing the quantity demanded for meals and increasing the demand for workers.

C.

A lower VAT lowers the price of themeals, increasing the tips that workers receive and inducing these workers to eat out.

D.

A lower VAT raises thegovernment's taxrevenues, allowing the government to purchase more meals and hire more workers.

Q47. Price Hikes and Cable TV Revenue. Four yearsago, the cable television company in your area increased its price by 17 percent. As aresult, its total revenue increased. Lastyear, a new company started providing television service using satellite dishes. This year the cable company increased its price by 17 percent, but its total revenue fell. This is likely the result of which of thefollowing?

A.

Demand facing an individual store is generally more elastic than demand facing the entire industry.

B.

Thisyear, demand for television service is elastic due to the presence of an available substitute.

C.

Four yearsago, demand for television service was inelastic due to a lack of available substitutes.

D.

All of the above are correct.

Q48. Demand for low budgetitems, such ascandy, is generally________ than demand for large budgetitems, such as automobiles.

A.

more elastic

B.

higher

C.

less elastic

D.

lower

Q49. Suppose that consumers expect that the price of a product will increase in the future. The result is that

A.

the current supply of the product increases.

B.

the current supply of the product decreases.

C.

the current demand for the product increases.

D.

the current demand for the product decreases.

Q50. Adam Smith taught that individual buyers and sellers who act in their own self interest frequently promotesociety's interest. What assumption is needed forsociety's interest to bepromoted?

A.

There are no external benefits or costs.

B.

Buyers and sellers can make informed decisions.

C.

Markets are perfectly competitive.

D.

all of the above

Q51. The price elasticity of demand for higher education is about 1.4. A5% increase in tuition would leadto:

A.

a decrease in enrollment by7%.

B.

a decrease in enrollment by6.4%.

C.

a decrease in enrollment by3.6%.

D.

a decrease in enrollment by2.8%.

Q52. Suppose the price of a package of guitar strings is$5. IfMark's marginal cost of producing that package of guitar strings is$3, his producer surplus from that package of guitar stringsis:

A.

$1.

B.

$3.

C.

$0.

D.

$2.

Q53. Suppose the price of a package of guitar strings is$5. IfMark's marginal cost of producing that package of guitar strings is$5, his producer surplus from that package of guitar stringsis:

A.

$1.

B.

$3.

C.

$2.

D.

$0.

Q54. If a product is a necessity and has no substitutes atall, demand for the product is most likely tobe:

A.

unit elastic.

B.

elastic.

C.

inelastic.

D.

very inelastic.