1. Excise taxes that raise the most revenue and cause the least deadweight loss are likely to
be those that are imposed on goods for which:
A) demand is inelastic and supply is elastic.
B) demand and supply are both inelastic.
C) demand is elastic and supply is inelastic.
D) demand and supply are both elastic.
2. Which of the following statements about opportunity cost is not true?
A) Opportunity cost may be larger than monetary cost.
B) Opportunity cost includes both explicit and implicit costs.
C) The real or opportunity cost of something is what you must give up to get it.
D) The term opportunity cost is synonymous with explicit costs.\
3. You own a small deli that sells sandwiches, salads, and soup to the community. Which
of the following is an implicit cost of the business?
A) wages paid to part-time employees
B) the job offer you did not accept at a local catering service
C) bread, meat, and vegetables used to produce the items on your menu
D) your monthly utility bill
4. The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you
have $5 to spend. You decide to purchase 8 boxes of popcorn. The maximum quantity
of peanuts that you can purchase is ________ bags.
A) 4
B) 8
C) 10
D) 12
5. John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter
and broccoli. He had just achieved the utility-maximizing solution in his consumption
of the two goods when the price of broccoli rose. As he adjusts to this event, he will
consume:
A) more peanut butter and less broccoli.
B) less peanut butter and less broccoli.
C) more peanut butter and more broccoli.
D) less peanut butter and more broccoli.
6. (Figure: Budget Lines for Tea and Scones) For months now, Agnes has had $20 per
month to spend on tea and scones. The price of each cup of tea and each scone is $1.
Which of the charts in the figure shows what will happen to her budget line if her
income increases to $25?
A) Chart A
B) Chart B
C) Chart C
D) Chart D
7. How much is this price floor and will it be a shortage or surplus?
8. Would this price ceiling affect equilibrum?
A. True
B. False
9. What are two things that you will know from the elasticity?
A. The sign and the expected percent change in quantity for a 1% change in a quantity factor
B. The sign and the expected 2 percent change in demand for a 1% change in a demand factor
C. The sign and the expected percent change in demand for a 1% change in a demand factor
D. The sign and the percent change in demand
10. The sign will tell you:
A. Whether or not demand is positive or negative
B. If the demand elasticity is going in the same or opposite direction
C. The expected percent change in demand being positive or negative
D. How demand effects the percent change in demand
11. Which of the following is not one of the types of elasticity:
A. Own price
B. Complimentary
C. Advertising
D. Substitutes
12. A sentence that describes the own price elasticity of -.2 is:
A. Each 1% change in the price of x, demand for y will change by .2% in the opposite direction
B. Each 1% change in the price of x, demand for x will change by 20% in the opposite direction
C. Each 1% change in the price of x, demand for x will change by .2% in the opposite direction
D. Each 1% change in the price of y, demand for y will change by 2% in the opposite direction
13. In complimentary elasticity if the answer is positive that means the answer is a(n):
A. Compliment
B. Inferior good
C. Normal good
D. Substitute
14. In income elasticity if the answer is negative that means the answer is a(n):
A. Compliment
B. Normal good
C. Substitute
D. Inferior good
15. Why isn’t slope used when figuring out elasticity?
A. Because slope is only used for figuring out opportunity costs
B. Slope is a good indicator of elasticity
C. Because slope varies with various units of measurement
D. Both A and C
16. What is the own price elasticity?
A. -5
B. 5
C. -2
D. 2
17. What is the above answer?
A. Elastic
B. Inelastic
C. Unitary
D. None of the above
18. Which of the following is not a factor that affects own price elasticity?
A. Available substitutes
B. Time
C. Expenditure share
D. Amount of producers
19. T or F More substitutes means demand will be more elastic
20. T or F Demand will be more elastic in the short run
21. T or F Smaller portion of income means demand will be more elastic
22. Which of the following statements is true?
A. Elastic if less than 1, Unitary if 1, Inelastic if greater than 1
B. Elastic if greater than 1, Unitary if 1, Inelastic if less than 1
C. Elastic if greater than 1, Unitary if 1, Inelastic if negative
D. Must use absolute value and then use Elastic if greater than 1, Unitary if 1, Inelastic if less than 1
23. Based on the graph, what is the equation of the line and TR at 50
A. Y=100-x, 250
B. Y= 100+x, 250
C. Y=100-x, 500
D. Y=100+x, 500
24. Label elastic, inelastic, and unitary on the following graph
25. Which one of the following statements is false about how you can use own price elasticity?
A. Calculate the percent change in P needed to bring about desired percent change in Q sold
B. Calculate percent change in Q sold that will result from a given percent change in P
C. Predict how TR will change
D. Predict how supply and demand curve will change
26. A small decrease in P and a large increase in Q results in an increase in TR. That is an example of what?
A. Elastic demand
B. Inelastic demand
C. Unitary demand
D. None of the above
27. A large decrease in P and a small increase in Q results in a decrease in TR. That is an example of what?
A. Elastic demand
B. Inelastic demand
C. Unitary demand
D. None of the above
28. If own price elasticity equals 10 and we’re expecting a 20 percent change in P then what will be the effect on the percent change in Q?
A. 50%
B. 20%
C. 200%
D. 500%
29. Label the Tax TR, DWL, CS, PS, increase in consumer tax, and increase in producer tax.
30. Which elasticity bears the majority of the tax?
A. Elastic
B. Inelastic
C. Unitary
D. None of the above
31. What is the marginal utility after buying the 2nd t-shirt?
A. 10
B. 5
C. 15
D. 3