1. A firm supplies nothing when the price is below a dollar. It has a straightlined supply curve that conforms to the law of supply. Price elasticity of supply is _ while as the slope of the supply curve is _.

A. constant, constant

B. negative, constant

C. constant, negative

D. positive, constant

  1. A consumer should not consume more units of a good:

A. if marginal benefit of consumption begins to fall

B. if the marginal cost of consumption begins to rise

C. as soon as marginal utility begins to fall

D. when marginal benefit falls below marginal cost

  1. The demand curve for overseas holidays is most likely to shift rightwards when:

A. car prices fall

B. income rises

C. Both A and B

D. Neither A nor B

10.When a country opens up to international trade, the price elasticity of demand for the country’s domestically produced goods

A. is likely to decrease

B. is likely to increase

C. will not change if the country’s goods are all in the inelastic range of their demand curves

D. will not change if the country’s goods are all in the elastic range of their demand curves

11.The concept of total surplus is a useful but imperfect measure of:

A. wellbeing

B. comparative advantage

C. market power

D. price elasticity of demand

12.Assume that burgers and pizzas are substitute goods in consumption only. When the burger price increases we will see which of the following changes in the pizza market?

A. An increase in demand and an increase in supply

B. An increase in demand and an increase in the quantity supplied

C. An increase in the quantity demanded and an increase in supply

D. An increase in the quantity demanded and no change to the quantity supplied

13.If the current price in a competitive market is $10 and the minimum of the the average total cost curve for a representative firm is $12, what is likely to occur to the market supply curve and the market price?

A. Supply will decrease and the price will rise

B. Supply will decrease and the price will fall

C. Supply will increase and the price will rise

D. Supply will increase and the price will fall

14.Compared to equilibrium, an effective price floor:

A. increases the quantity demanded and decreases the quantity supplied

B. decreases the quantity demanded with no change to the quantity supplied

C. increases the quantity demanded with no change to the quantity supplied

D. decreases the quantity demanded and increases the quantity supplied

15.If a government wants to raise as much revenue as possible with a sales tax, it should target a market with:

A. high price elasticity of demand and high price elasticity of supply

B. low price elasticity of demand and high price elasticity of supply

C. high price elasticity of demand and low price elasticity of supply

D. low price elasticity of demand and low price elasticity of supply

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