Economics Final Exam [Chap. 5-6]

Question 1

Question

A good will tend to have an inelastic demand if

Answer

The good has many close substitutes
The good is a luxury
The market is defined very broadly
The time horizon is long

Question 2

Question

A perfectly elastic demand is represented graphically by a:

Answer

relatively steep demand curve
Relatively flat demand curve
vertical demand curve
Horizontal demand curve

Question 3

Question

What effect will an increase in the price have on total revenue, if demand is elastic?

Answer

total revenue will increase
total revenue will decrease
total revenue will first decrease and then increase
total revenue will remain unchanged

Question 4

Question

The price elasticity of demand tends to be more elastic:

Answer

at points further up and to the left along the demand curve
at points further down into the right along the demand curve
when the demand curve becomes steeper
when the demand curve is vertical

Question 5

Question

Suppose that General Cars increases the price of its Cadillac model from $13,500 to 16,500. As a result of this the quantity demanded of the Cadillac model decreases from $600,000 to $400,000 per year. Find the price elasticity of demand of the Cadillac.

Answer

3.0
0.5
1.5
0.33

Question 6

Question

If a firm needs to increase its total revenue, the firm should ________ the price, if the demand for its product is:

Answer

Drop, inelastic
raise, elastic
Drop, elastic
Drop, unit elastic

Question 7

Question

Suppose that consumers income rise by 3% and that this causes the quantity demanded for a good to increase by 4.5%. What is the income elasticity of demand?

Answer

1.50
0.67
— 1.50
— 0.67

Question 8

Question

Suppose that a good has an income elasticity of -2.0. This means that the good is:

Answer

normal
inferior
substitute
a complement

Question 9

Question

Suppose that two goods have a cross price elasticity of -0.8, this means that these goods are:

Answer

normal
inferior
a substitute
a complement

Question 10

Question

The price of good A increases from $4.50 to $5.50. This causes the quantity demanded of good B to increase from 900 to 1100 units per month. Find the cross price elasticity of demand.

Answer

— 1.0
+ 2.0
+ 1.0
— 2.0

Question 11

Question

Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is above the equilibrium price in the market, this would be an example of a:

Answer

binding price ceiling.
not binding price ceiling.
binding price floor.
not binding price floor.

Question 12

Question

Suppose that a regulation is in place that does not allow the price of a good to fall below $10. If this price is above the equilibrium price in the market, this would be an example of a:

Answer

binding price ceiling.
not binding price ceiling.
binding price floor.
not binding price floor.

Question 13

Question

Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is below the equilibrium price in the market, this would be an example of a:

Answer

binding price ceiling.
not binding price ceiling.
binding price floor.
not binding price floor.

Question 14

Question

If a price floor is in place and it is binding, the market will:

Answer

remain in equilibrium, unaffected by the price floor.
experience a shortage.
experience a surplus.
adjust its equilibrium point toward the price floor.

Question 15

Question

If a price ceiling is in place and it is binding, the market will:

Answer

remain in equilibrium, unaffected by the price floor.
experience a shortage.
experience a surplus.
adjust its equilibrium point toward the price floor.

Question 16

Question

If a price floor is in place and it is not binding, the market will:

Answer

remain in equilibrium, unaffected by the price floor.
experience a shortage.
experience a surplus.
adjust its equilibrium point toward the price floor.

Question 17

Question

If a tax is imposed on buyers of a good, the ________ curve of the good will shift ________ by the amount of the tax.

Answer

demand, upward
demand, downward
supply, upward
supply, downward

Question 18

Question

If a tax is imposed on sellers of a good, the ________ curve of the good will shift ________ by the amount of the tax.

Answer

demand, upward
demand, downward
supply, upward
supply, downward

Question 19

Question

If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the sellers than on the buyers, this will be because:

Answer

demand is more elastic than supply for that good.
demand is less elastic than supply for that good.
the tax was imposed on the buyers of the good.
the tax was imposed on the sellers of the good.

Question 20

Question

If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the buyers than on the sellers, this will be because:

Answer

demand is more elastic than supply for that good.
demand is less elastic than supply for that good.
the tax was imposed on the buyers of the good.
the tax was imposed on the sellers of the good.

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Economics Final Exam [Chap. 5-6]

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Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Question 7

Question 8

Question 9

Question 10

Question 11

Question 12

Question 13

Question 14

Question 15

Question 16

Question 17

Question 18

Question 19

Question 20

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