Question 1

A price ceiling is typically set below the equilibrium price.s

Accepted Answer

A) True 
 B)False

Question 2

A price ceiling is

Accepted Answer

A)   the minimum allowable price set by government, and it causes a surplus if effective.
B)   the maximum allowable price set by government, and it causes a shortage if effective.
C)   the equilibrium price.
D)   the maximum allowable price set by government, and it causes a surplus if effective.
E)   the minimum allowable price set by government, and it causes a shortage if effective.F) B) and E)
G) A) and C)

Question 3

A price floor is

Accepted Answer

A)   a minimum allowable price set by government, and it causes a surplus if effective.
B)   the equilibrium price.
C)   a minimum allowable price set by government, and it causes a shortage if seffective.
D)   a maximum allowable price set by government, and it causes a shortage if effective.
E)   a maximum allowable price set by government, and it causes a surplus if effective.F) None of the above
G) C) and E)

Question 4

When demand shifts, knowing supply elasticity can help us anticipate how big the changes in price and quantity might be.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following often occurs as a result of a price ceiling?

Accepted Answer

A)   More of a product is produced than people are willing to buy.
B)   The product becomes unavailable.
C)   Consumers wanting to buy the product form long lines.
D)   Low-income people find it harder to obtain the product.
E)   Black markets for the product disappear.F) A) and B)
G) C) and D)

Question 6

The price elasticity of demand is negative because the demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 7

Income elasticity of demand is the percentage change in

Accepted Answer

A)   demand divided by the percentage change in the price of the product.
B)   demand divided by the percentage change in the price of different products.
C)   quantity demanded divided by the absolute price of the product.
D)   quantity demanded of a product divided by the percentage change in income.
E)   income divided by the percentage change in quantity demanded.F) C) and D)
G) A) and B)

Question 8

Exhibit 4-2
 1 B)  D2 C)  D3 D)  D4 E)  None of the abov" class="answers-bank-image d-inline" rel="preload" >
-In Exhibit 3-4, which of the following demand curve has the highest price elasticity of demand?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   D4
E)   None of the abovF) A) and C)
G) A) and B)

Question 9

The price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 10

If the price elasticity of demand for apples is higher than the price elasticity of demand for oranges, then a given percentage increase in the price of apples and oranges will result in more percentage decrease in the quantity demanded for apples than for oranges.

Accepted Answer

A) True 
 B)False

Question 11

If the percentage change in quantity demanded is greater than the percentage change in the price for a good, then the demand for the good is elastic.

Accepted Answer

A) True 
 B)False

Question 12

The income elasticity of demand

Accepted Answer

A)   is usually zero because "you can only have so much."
B)   could be positive or negative or zero, depending on the nature of the good.
C)   can never be zero.
D)   must be positive because consumers tend to buy more at higher incomes.
E)   must be negative because of the law of increasing cost.F) A) and B)
G) A) and E)

Question 13

Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 14

For a given shift in demand, the more elastic is supply, the

Accepted Answer

A)   smaller is the change in price.
B)   smaller is the shift in demand.
C)   smaller is the change in equilibrium quantity.
D)   greater is the change in price.
E)   greater is the shift in demand.F) B) and D)
G) A) and E)

Question 15

If a price ceiling is imposed on a good, then a shortage for that good will occur.

Accepted Answer

A) True 
 B)False

Question 16

A price floor that is effective results in a surplus.

Accepted Answer

A) True 
 B)False

Question 17

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Accepted Answer

A) True 
 B)False

Question 18

Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is

Accepted Answer

A)   inelastic.
B)   perfectly inelastic.
C)   perfectly elastic.
D)   elastic.
E)   unit elastic.F) A) and C)
G) D) and E)

Question 19

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices, then a sudden drop in gasoline supply due to bad weather will most likely result in

Accepted Answer

A)   an equilibrium in the gasoline market.
B)   a surplus in the gasoline market.
C)   a shortage in the gasoline market.
D)   a sudden increase in the quantity demanded of gaslone.
E)   a sudden decrease in gasoline prices.F) None of the above
G) A) and E)

Question 20

For a given reduction in the supply of oil, the equilibrium price of oil will

Accepted Answer

A)   decrease by a larger amount for a higher price elasticity of demand.
B)   decrease by a smaller amount for a higher price elasticity of demand.
C)   increase by a larger amount for a higher price elasticity of demand.
D)   increase by a smaller amount for a higher price elasticity of demand.
E)   not change, regardless of the price elasticity of demand.F) None of the above
G) A) and E)

Exam 4: Subtleties of the Supply and Demand Model

If the percentage change in quantity demanded is greater than the percentage change in the price for a good, then the demand for the good is elastic.

Correct AnswerverifiedShow Answer

The price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.

Correct AnswerverifiedShow Answer

A price floor is

Correct AnswerverifiedShow Answer

A price ceiling is

Correct AnswerverifiedShow Answer

A price floor that is effective results in a surplus.

Correct AnswerverifiedShow Answer

If a price ceiling is imposed on a good, then a shortage for that good will occur.

Correct AnswerverifiedShow Answer

If the price elasticity of demand for apples is higher than the price elasticity of demand for oranges, then a given percentage increase in the price of apples and oranges will result in more percentage decrease in the quantity demanded for apples than for oranges.

Correct AnswerverifiedShow Answer

When demand shifts, knowing supply elasticity can help us anticipate how big the changes in price and quantity might be.

Correct AnswerverifiedShow Answer

For a given shift in demand, the more elastic is supply, the

Correct AnswerverifiedShow Answer

Which of the following often occurs as a result of a price ceiling?

Correct AnswerverifiedShow Answer

The price elasticity of demand is negative because the demand curve slopes downward.

Correct AnswerverifiedShow Answer

Income elasticity of demand is the percentage change in

Correct AnswerverifiedShow Answer

The income elasticity of demand

Correct AnswerverifiedShow Answer

Exhibit 4-2 -In Exhibit 3-4, which of the following demand curve has the highest price elasticity of demand?

Correct AnswerverifiedShow Answer

Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.

Correct AnswerverifiedShow Answer

For a given reduction in the supply of oil, the equilibrium price of oil will

Correct AnswerverifiedShow Answer

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices, then a sudden drop in gasoline supply due to bad weather will most likely result in

Correct AnswerverifiedShow Answer

Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is

Correct AnswerverifiedShow Answer

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Correct AnswerverifiedShow Answer

A price ceiling is typically set below the equilibrium price.s

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified