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a producer’s minimum acceptable price for a particular unit of a good

Question 1

1.  

     In the above market, economists would call a government-set minimum price of $50 a:

price ceiling.
price floor.
equilibrium price.
fair price.

\1 points   

Question 2

1.  

     In the above market, economists would call a government-set maximum price of $40 a:

price ceiling.
price floor.
equilibrium price.
fair price.

1 points   

Question 3

1.  

     The above diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the:

immediate market period, long run, and short run respectively.
immediate market period, short run, and long run respectively.
long run, short run, and immediate market period respectively.
short run, long run, and immediate market period respectively.

1 points   

Question 4

1.  

(Consider This) Ticket scalping refers to:

the surplus of tickets that occurs when price is set below equilibrium.
the shortage of tickets that occurs when price is set above equilibrium.
pricing tickets so high that an athletic or artistic event will not be sold out.
reselling a ticket at a price above its original purchase price.

1 points   

Question 5

1.  

A demand curve which is parallel to the horizontal axis is:

perfectly inelastic.
perfectly elastic.
relatively inelastic.
relatively elastic.

1 points   

Question 6

1.  

A market that is achieving allocative efficiency must also be achieving productive efficiency.

 True

 False

1 points   

Question 7

1.  

A market:

reflects upsloping demand and downsloping supply curves.
entails the exchange of goods, but not services.
is an institution that brings together buyers and sellers.
always requires face-to-face contact between buyer and seller.

1 points   

Question 8

1.  

A negative externality or spillover cost occurs when:

firms fail to achieve allocative efficiency.
firms fail to achieve productive efficiency.
the price of the good exceeds the marginal cost of producing it.
the total cost of producing a good exceeds the costs borne by the producer.

1 points   

Question 9

1.  

A normal good is one:

whose amount demanded will increase as its price decreases.
whose amount demanded will increase as its price increases.
whose demand curve will shift leftward as incomes rise.
the consumption of which varies directly with incomes.

1 points   

Question 10

1.  

A perfectly inelastic demand curve:

has a price elasticity coefficient greater than unity.
has a price elasticity coefficient of unity throughout.
graphs as a line parallel to the vertical axis.
graphs as a line parallel to the horizontal axis.

1 points   

Question 11

1.  

A perfectly inelastic demand schedule:

rises upward and to the right, but has a constant slope.
can be represented by a line parallel to the vertical axis.
cannot be shown on a two-dimensional graph.
can be represented by a line parallel to the horizontal axis.

1 points   

Question 12

1.  

A positive externality or spillover benefit occurs when:

product differentiation increases the variety of products available to consumers.
the benefits associated with a product exceed those accruing to people who consume it.
a firm does not bear all of the costs of producing a good or service.
firms earn positive economic profits.

1 points   

Question 13

1.  

A price ceiling means that:

there is currently a surplus of the relevant product.
government is imposing a legal price that is typically below the equilibrium price.
government wants to stop a deflationary spiral.
government is imposing a legal price that is typically above the equilibrium price.

1 points   

Question 14

1.  

A price floor means that:

inflation is severe in this particular market.
sellers are artificially restricting supply to raise price.
government is imposing a maximum legal price that is typically below the equilibrium price.
government is imposing a minimum legal price that is typically above the equilibrium price.

1 points   

Question 15

1.  

A producer’s minimum acceptable price for a particular unit of a good:

is the same for all units of the good.
will, for most units produced, equal the maximum that consumers are willing to pay for the good.
equals the marginal cost of producing that particular unit.
must cover the wages, rent, and interest payments necessary to produce the good, but need not include profit.

1 points   

Question 16

1.  

A product market is in equilibrium:

when there is no surplus of the product.
when there is no shortage of the product.
when consumers want to buy more of the product than producers offer for sale.
where the demand and supply curves intersect.

1 points   

Question 17

1.  

A public good:

can be profitably produced by private firms.
is characterized by rivalry and excludability.
produces no positive or negative externalities.
is available to all and cannot be denied to anyone.

1 points   

Question 18

1.  

According to the marginal-cost-marginal-benefit rule:

only government projects (as opposed to private projects) should be assessed by comparing marginal costs and marginal benefits.
the optimal project size is the one for which MB = MC.
the optimal project size is the one for which MB exceeds MC by the greatest amount.
project managers should attempt to minimize both MB and MC.

1 points   

Question 19

1.  

Allocative efficiency is concerned with:

producing the combination of goods most desired by society.
achieving the full employment of all available resources.
producing every good with the least-cost combination of inputs.
reducing the concavity of the production possibilities curve.

1 points   

Question 20

1.  

Allocative efficiency occurs only at that output where:

marginal benefit exceeds marginal cost by the greatest amount.
consumer surplus exceeds producer surplus by the greatest amount.
the combined amounts of consumer surplus and producer surplus are maximized.
the areas of consumer and producer surplus are equal.

1 points   

Question 21

1.  

Allocative efficiency refers to:

the use of the least-cost method of production.
the production of the product mix most wanted by society.
the full employment of all available resources.
production at some point inside of the production possibilities curve.

1 points   

Question 22

1.  

An inferior good is:

one whose demand curve will shift rightward as incomes rise.
one whose price and quantity demanded vary directly.
one which has not been approved by the Federal Food and Drug Administration.
not accurately defined by any of these statements.

1 points   

Question 23

1.  

Consumer surplus:

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.
is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
rises as equilibrium price rises.

1 points   

Question 24

1.  

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:

the price of some other product.
the price of that same product.
income.
the general price level.

1 points   

Question 25

1.  

Demand-side market failures occur when:

the demand and supply curves don’t reflect consumers’ full willingness to pay for a good or service.
the demand and supply curves don’t reflect the full cost of producing a good or service.
government imposes a tax on a good or service.
a good or service is not produced because no one demands it.

1 points   

Question 26

1.  

Markets, viewed from the perspective of the supply and demand model:

assume many buyers and many sellers of a standardized product.
assume market power so that buyers and sellers bargain with one another.
do not exist in the real-world economy.
are approximated by markets in which a single seller determines price.

1 points   

Question 27

1.  

The law of demand states that, other things equal:

price and quantity demanded are inversely related.
the larger the number of buyers in a market, the lower will be product price.
price and quantity demanded are directly related.
consumers will buy more of a product at high prices than at low prices.

1 points   

Question 28

1.  

Graphically, the market demand curve is:

steeper than any individual demand curve that is part of it.
greater than the sum of the individual demand curves.
the horizontal sum of individual demand curves.
the vertical sum of individual demand curves.

1 points   

Question 29

1.  

Economists use the term “demand” to refer to:

a particular price-quantity combination on a stable demand curve.
the total amount spent on a particular commodity over a fixed time period.
an upsloping line on a graph that relates consumer purchases and product price.
a schedule of various combinations of market prices and amounts demanded.

1 points   

Question 30

1.  

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:

an inferior good.
the rationing function of prices.
the substitution effect.
the income effect.

1 points   

Question 31

1.  

If two goods are complements:

they are consumed independently.
an increase in the price of one will increase the demand for the other.
a decrease in the price of one will increase the demand for the other.
they are necessarily inferior goods.

1 points   

Question 32

1.  

The demand for most products varies directly with changes in consumer incomes. Such products are known as:

complementary goods.
competitive goods.
inferior goods.
normal goods.

1 points   

Question 33

1.  

The rationing function of prices refers to the:

tendency of supply and demand to shift in opposite directions.
fact that ration coupons are needed to alleviate wartime shortages of goods.
capacity of a competitive market to equate quantity demanded and quantity supplied.
ability of the market system to generate an equitable distribution of income.

1 points   

Question 34

1.  

Productive efficiency refers to:

the use of the least-cost method of production.
the production of the product-mix most wanted by society.
the full employment of all available resources.
production at some point inside of the production possibilities curve.

1 points   

Question 35

1.  

The basic formula for the price elasticity of demand coefficient is:

absolute decline in quantity demanded/absolute increase in price.
percentage change in quantity demanded/percentage change in price.
absolute decline in price/absolute increase in quantity demanded.
percentage change in price/percentage change in quantity demanded.

1 points   

Question 36

1.  

Which of the following is not characteristic of the demand for a commodity that is elastic?

The relative change in quantity demanded is greater than the relative change in price.
Buyers are relatively sensitive to price changes.
Total revenue declines if price is increased.
The elasticity coefficient is less than one.

1 points   

Question 37

1.  

The price elasticity of demand is generally:

negative, but the minus sign is ignored.
positive, but the plus sign is ignored.
positive for normal goods and negative for inferior goods.
positive because price and quantity demanded are inversely related.

1 points   

Question 38

1.  

For a linear demand curve:

elasticity is constant along the curve.
elasticity is unity at every point on the curve.
demand is elastic at low prices.
demand is elastic at high prices.

1 points   

Question 39

1.  

If a demand for a product is elastic, the value of the price elasticity coefficient is:

zero.
greater than one.
equal to one.
less than one.

1 points   

Question 40

1.  

The demand schedules for such products as eggs, bread, and electricity tend to be:

perfectly price elastic.
of unit price elasticity.
relatively price inelastic.
relatively price elastic.

1 points   

Question 41

1.  

The elasticity of demand for a product is likely to be greater:

if the product is a necessity, rather than a luxury good.
the greater the amount of time over which buyers adjust to a price change.
the smaller the proportion of one’s income spent on the product.
the smaller the number of substitute products available.

1 points   

Question 42

1.  

The more time consumers have to adjust to a change in price:

the smaller will be the price elasticity of demand.
the greater will be the price elasticity of demand.
the more likely the product is a normal good.
the more likely the product is an inferior good.

1 points   

Question 43

1.  

The price elasticity of supply measures how:

easily labor and capital can be substituted for one another in the production process.
responsive the quantity supplied of X is to changes in the price of X.
responsive the quantity supplied of Y is to changes in the price of X.
responsive quantity supplied is to a change in incomes.

1 points   

Question 44

1.  

The main determinant of elasticity of supply is the:

number of close substitutes for the product available to consumers.
amount of time the producer has to adjust inputs in response to a price change.
urgency of consumer wants for the product.
number of uses for the product.

1 points   

Question 45

1.  

Studies show that the demand for gasoline is:

price inelastic in the short run, but elastic in the long run.
price inelastic in both the short and long run.
price elastic in the short run, but inelastic in the long run.
price elastic in both the short and long run.

1 points   

Question 46

1.  

The formula for cross elasticity of demand is percentage change in:

quantity demanded of X/percentage change in price of X.
quantity demanded of X/percentage change in income.
quantity demanded of X/percentage change in price of Y.
price of X/percentage change in quantity demanded of Y.

1 points   

Question 47

1.  

Which type of goods is most adversely affected by recessions?

Goods for which the income elasticity coefficient is relatively low or negative.
Goods for which the income elasticity coefficient is relatively high and positive.
Goods for which the cross elasticity coefficient is positive.
Goods for which the cross elasticity coefficient is negative.

1 points   

Question 48

1.  

If a firm’s demand for labor is elastic, a union-negotiated wage increase will:

necessarily be inflationary.
cause the firm’s total payroll to increase.
cause the firm’s total payroll to decline.
cause a shortage of labor.

1 points   

Question 49

1.  

Market failure is said to occur whenever:

private markets do not allocate resources in the most economically desirable way.
prices rise.
some consumers who want a good do not obtain it because the price is higher than they are willing to pay.
government intervenes in the functioning of private markets.

1 points   

Question 50

1.  

Which of the following is an example of market failure?

negative externalities
positive externalities
public goods
all of these

1 points   

Question 51

1.  

Supply-side market failures occur when:

the demand and supply curves don’t reflect consumers’ full willingness to pay for a good or service.
the demand and supply curves don’t reflect the full cost of producing a good or service.
government regulates production of a good or service.
a good or service is not supplied because no one wants it.

1 points   

Question 52

1.  

What two conditions must hold for a competitive market to produce efficient outcomes?

Demand curves must reflect all costs of production, and supply curves must reflect consumers’ full willingness to pay.
Supply curves must reflect all costs of production, and demand curves must reflect consumers’ full willingness to pay.
Firms must minimize production costs, and consumers must minimize total expenditures.
Firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay.

1 points   

Question 53

1.  

If the demand curve reflects consumers’ full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?

The benefit surpluses shared between consumers and producers will be maximized.
The benefit surpluses received by consumers and producers will be equal.
There will be no consumer or producer surplus.
Consumer surplus will be maximized, and producer surplus will be minimized.

1 points   

Question 54

1.  

Producer surplus:

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
rises as equilibrium price falls.
is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.

1 points   

Question 55

1.  

Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:

under the demand curve and below the actual price.
under the demand curve and above the actual price.
above the supply curve and above the actual price.
above the supply curve and below the actual price.

1 points   

Question 56

1.  

Graphically, producer surplus is measured as the area:

under the demand curve and below the actual price.
under the demand curve and above the actual price.
above the supply curve and above the actual price.
above the supply curve and below the actual price.

1 points   

Question 57

1.  

The two main characteristics of a public good are:

production at constant marginal cost and rising demand.
nonexcludability and production at rising marginal cost.
nonrivalry and nonexcludability.
nonrivalry and large negative externalities.

1 points   

Question 58

1.  

If one person’s consumption of a good does not preclude another’s consumption, the good is said to be:

nonrival in consumption.
rival in consumption.
nonexcludable.
excludable.

1 points   

Question 59

1.  

Nonexcludability describes a condition where:

one person’s consumption of a good does not prevent consumption of the good by others.
there is no effective way to keep people from using a good once it comes into being.
sellers can withhold the benefits of a good from those unwilling to pay for it.
there is no potential for free-riding behavior.

1 points   

Question 60

1.  

The marginal benefit to society of reducing pollution declines with increases in pollution abatement because of the law of:

increasing costs.
diminishing returns.
diminishing marginal utility.
conservation of matter and energy.

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