Test on Chapters 1-6TRUE/FALSE : Write the WORD True of False in the blank. Each correct answer is worth 2 points.______...
Get help with any kind of assignment - from a high school essay to a PhD dissertation
Test on Chapters 1-6
TRUE/FALSE : Write the WORD True of False in the blank. Each correct answer is worth 2 points.
________ 1.
As long as neither supply nor demand is perfectly elastic, both suppliers and demanders will
pay part of any tax.
________ 2.
If a tax is imposed on buyers and prices do not instantaneously adjust, a surplus is created.
________ 3.
Trade leads to increased productivity because trade allows people to specialize.
________ 4.
The theory of comparative advantage concludes that people can produce more by specializing
than by doing everything themselves.
________ 5.
A commodity tax increases gains from trade.
________ 6.
An increase in supply causes a temporary surplus at the old equilibrium price.
________ 7.
In addition to monetary incentives, economists also believe people respond to incentives like
fame, power, reputation, and love.
________ 8.
If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, then
total revenue must fall following an increase in price.
________ 9.
With a subsidy, the price paid by the buyers exceeds the price received by the sellers.
________ 10. A higher opportunity cost of producing a good increases the supply of that good.
________ 11. If the price of granite countertops rises, we would expect the demand for quartz countertops (a
substitute product for granite) to decrease.
MULTIPLE CHOICE: Choose the best answer. Write its letter in the blank beside the question number.
Each correct answer is worth 5 points.
________ 1.
The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:
A) set at the equilibrium price since they always sell out.
B) above the equilibrium price.
C) below the equilibrium price.
D) not set by supply and demand, but instead set by the NFL.
________ 2.
Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand
curve for Pepsi to shift to the left?
A) a new Pepsi ad campaign that increases the popularity of Pepsi
B) the price of Coke decreases
C) the price of Pepsi decreases
D) the cost of making Pepsi rises
_________ 3. Which of the following mostly likely has a perfectly inelastic supply curve?
A) seeds for fruit trees
B) health insurance
Figure: Tax on Sellers
C) prehistoric cave paintings
D) Star Wars movies
________ 4. Refer to the Figure: Tax on Sellers. The
imposition of a per-unit tax on sellers
shifts the supply curve from S0 to S1. With
the tax, buyers pay ________ and sellers
receive ________.
A) $6; $3
B) $6; $6
C) $3; $6
D) $3; $4
$________ 5. How much tax is collected?
Figure: Consumer Surplus
________ 6.
Refer to the figure. Calculate the dollar
amount of consumer surplus being earned
in this market when the price is $30 and
there are 300 units consumed.
A) $4,500
B) $9,000
C) $18,000
D) $450
_________
________ 7.
Which of the areas in the Figure:
Deadweight Loss represent the area of
government revenue resulting from a $2
tax?
A) B + C
B) B + E
C) C + F
D) E + F
igure
________ 8.
A subsidy is a:
A) reverse tax.
B) means of shifting the supply curve
left.
C) form of tax increase.
D) movement along the supply curve.
Figure: Demand and Supply with Subsidy
_________ 9. Refer to Figure: Supply and Demand with
Subsidy. Suppose a subsidy allows sellers
to receive their product at the price of $8
with a quantity of 400 units. What is the
dollar amount of the subsidy per unit of the
good?
A) $1
B) $6
C) $2
D) $100
Use the following table for questions 10 and 11.
Table: Equilibrium Adjustment
Price
$10
8
6
4
2
Quantity Demanded
100
120
130
140
150
Quantity Supplied
160
145
130
115
100
_________10. Refer to the Table: Equilibrium Adjustment. If the price in the free market is $8, then a:
A) surplus of 25 units would exist, and price would tend to fall.
B) surplus of 25 units would exist, and price would tend to rise.
C) shortage of 25 units would exist, and price would tend to rise.
D) shortage of 25 units would exist, and price would tend to fall.
________11. Refer to the Table: Equilibrium Adjustment on the preceding page. The equilibrium price is:
A) $2.
B) $4.
C) $6.
D) $8.
_________12. What would cause the supply curve to shift to the right?
A)
B)
C)
D)
________13.
an increase in taxes on firms' output
an increase in the price of inputs used to produce the output
a decrease in the number of firms that produce the output
a decrease in the wages paid to union workers who produce the output
Table: Demand Curves
Demand Curve
A
B
C
D
Qd at P = $90
100
100
100
100
Qd at P = $100
97
96
94
98
In the table, which demand curve is most price elastic over the range of prices considered?
A) demand curve A
B) demand curve B
C) demand curve C
D) demand curve D
________14. Suppose a new study predicts that the price of hybrid cars is expected to decrease in the near
future. As a result, we would expect:
A) consumers to increase demand for hybrid cars today.
B) producers to increase supply of hybrid cars today.
C) no change in either demand or supply of hybrid cars today.
D) producers to decrease supply of hybrid cars today.
________15. A new per unit tax on yacht production decreases the supply of yachts. If yachts are
elastically demanded, what will happen to total revenues from yacht production?
A) They will rise.
B) They will fall.
Figure Market Equlibrium
C) They will remain the same.
D) They will change in an indeterminate direction.
_________16. Refer to Figure: Market Equilibrium). At a price of
$3, quantity supplied is ______ and quantity
demanded is ______, leading to a _______.
A) 6; 2; surplus of 4 units
B) 2; 6; shortage of 8 units
C) 2; 4; surplus of 2 units
D) 4; 2; shortage of 2 units
TRUE/FALSE : Write the WORD True of False in the blank. Each correct answer is worth 2 points.
________ 1.
As long as neither supply nor demand is perfectly elastic, both suppliers and demanders will
pay part of any tax.
________ 2.
If a tax is imposed on buyers and prices do not instantaneously adjust, a surplus is created.
________ 3.
Trade leads to increased productivity because trade allows people to specialize.
________ 4.
The theory of comparative advantage concludes that people can produce more by specializing
than by doing everything themselves.
________ 5.
A commodity tax increases gains from trade.
________ 6.
An increase in supply causes a temporary surplus at the old equilibrium price.
________ 7.
In addition to monetary incentives, economists also believe people respond to incentives like
fame, power, reputation, and love.
________ 8.
If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, then
total revenue must fall following an increase in price.
________ 9.
With a subsidy, the price paid by the buyers exceeds the price received by the sellers.
________ 10. A higher opportunity cost of producing a good increases the supply of that good.
________ 11. If the price of granite countertops rises, we would expect the demand for quartz countertops (a
substitute product for granite) to decrease.
MULTIPLE CHOICE: Choose the best answer. Write its letter in the blank beside the question number.
Each correct answer is worth 5 points.
________ 1.
The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:
A) set at the equilibrium price since they always sell out.
B) above the equilibrium price.
C) below the equilibrium price.
D) not set by supply and demand, but instead set by the NFL.
________ 2.
Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand
curve for Pepsi to shift to the left?
A) a new Pepsi ad campaign that increases the popularity of Pepsi
B) the price of Coke decreases
C) the price of Pepsi decreases
D) the cost of making Pepsi rises
_________ 3. Which of the following mostly likely has a perfectly inelastic supply curve?
A) seeds for fruit trees
B) health insurance
Figure: Tax on Sellers
C) prehistoric cave paintings
D) Star Wars movies
________ 4. Refer to the Figure: Tax on Sellers. The
imposition of a per-unit tax on sellers
shifts the supply curve from S0 to S1. With
the tax, buyers pay ________ and sellers
receive ________.
A) $6; $3
B) $6; $6
C) $3; $6
D) $3; $4
$________ 5. How much tax is collected?
Figure: Consumer Surplus
________ 6.
Refer to the figure. Calculate the dollar
amount of consumer surplus being earned
in this market when the price is $30 and
there are 300 units consumed.
A) $4,500
B) $9,000
C) $18,000
D) $450
_________
________ 7.
Which of the areas in the Figure:
Deadweight Loss represent the area of
government revenue resulting from a $2
tax?
A) B + C
B) B + E
C) C + F
D) E + F
igure
________ 8.
A subsidy is a:
A) reverse tax.
B) means of shifting the supply curve
left.
C) form of tax increase.
D) movement along the supply curve.
Figure: Demand and Supply with Subsidy
_________ 9. Refer to Figure: Supply and Demand with
Subsidy. Suppose a subsidy allows sellers
to receive their product at the price of $8
with a quantity of 400 units. What is the
dollar amount of the subsidy per unit of the
good?
A) $1
B) $6
C) $2
D) $100
Use the following table for questions 10 and 11.
Table: Equilibrium Adjustment
Price
$10
8
6
4
2
Quantity Demanded
100
120
130
140
150
Quantity Supplied
160
145
130
115
100
_________10. Refer to the Table: Equilibrium Adjustment. If the price in the free market is $8, then a:
A) surplus of 25 units would exist, and price would tend to fall.
B) surplus of 25 units would exist, and price would tend to rise.
C) shortage of 25 units would exist, and price would tend to rise.
D) shortage of 25 units would exist, and price would tend to fall.
________11. Refer to the Table: Equilibrium Adjustment on the preceding page. The equilibrium price is:
A) $2.
B) $4.
C) $6.
D) $8.
_________12. What would cause the supply curve to shift to the right?
A)
B)
C)
D)
________13.
an increase in taxes on firms' output
an increase in the price of inputs used to produce the output
a decrease in the number of firms that produce the output
a decrease in the wages paid to union workers who produce the output
Table: Demand Curves
Demand Curve
A
B
C
D
Qd at P = $90
100
100
100
100
Qd at P = $100
97
96
94
98
In the table, which demand curve is most price elastic over the range of prices considered?
A) demand curve A
B) demand curve B
C) demand curve C
D) demand curve D
________14. Suppose a new study predicts that the price of hybrid cars is expected to decrease in the near
future. As a result, we would expect:
A) consumers to increase demand for hybrid cars today.
B) producers to increase supply of hybrid cars today.
C) no change in either demand or supply of hybrid cars today.
D) producers to decrease supply of hybrid cars today.
________15. A new per unit tax on yacht production decreases the supply of yachts. If yachts are
elastically demanded, what will happen to total revenues from yacht production?
A) They will rise.
B) They will fall.
Figure Market Equlibrium
C) They will remain the same.
D) They will change in an indeterminate direction.
_________16. Refer to Figure: Market Equilibrium). At a price of
$3, quantity supplied is ______ and quantity
demanded is ______, leading to a _______.
A) 6; 2; surplus of 4 units
B) 2; 6; shortage of 8 units
C) 2; 4; surplus of 2 units
D) 4; 2; shortage of 2 units
