Question

22) If pasta is a Giffen good, then...

1. pasta is also a normal good.

2. pasta is also a luxury good.

3. an decrease in the price of pasta will increase the quantity

   demanded.

4. an increase in the price of pasta will increase the quantity

   demanded.

5. pasta must make up a small portion of consumers’ total expenditures.

23) An inferior good in which the income effect dominates the substitution effect is called...

a. a normal good b. a luxury good.
c. a Giffen good.
d. a mass-produced good. e. a favored good.

24) The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of

   a) its complements but not its substitutes.
   b) its substitutes but not its complements.
   c) its substitutes and its complements.
   d) neither its substitutes nor its complements.
   e) None of the above..

25) If goods are complements, for sure their a. Cross price elasticities are positive. b. Cross price elasticities are negative. c. Cross price elasticities are zero.

d. Income elasticity is negative e. Income elasticity is positive.

26) Demand is perfectly inelastic when
a. The good in questions has perfect substitutes

B. Shifts in the supply curve results in no change in price

C. Shifts in the supply curve results in no change in quantity demanded

D. Shifts in the supply curve results in no change in the total revenues

28) To say that turnips are necessity goods means that the income elasticity

a) is definitely greater than 1.
b) is negative.
c) is greater than 0 but less than 1. d) is equal to 1.
e) is equal to 0.

29) The fact that the PPF usually bows away from the origin implies that ...

a) as the production of any good increases, there is an increase in the opportunity cost of producing it.

revenues b) as the production of any good increases, there is a decrease in the opportunity cost of producing it.

c) getting more of one good means getting less of another good. d) getting more of one good means getting more of another good.

e) resources are perfectly fungible, easily moved between alternative uses to satisfy consumer demand.

30) What are the two distinguishing characteristics of a public good?

1. a) It is provided by the core sphere; it is freely available to anyone.

2. b) It is provided by the public purpose sphere; it is freely available to anyone.

3. c) It is freely available to anyone; use by one person diminishes the ability of another person to use it.

4. d) It is freely available to anyone; use by one person does not diminish the ability of another person to use it.

5. e) It is provided at low cost; use by one person does not diminish the ability of another person to use it.

31) Which one of the following statements is false?

1. A laissez-faire economy is an economy with little government regulation.

2. A laissez-faire view of the economy favors unregulated markets.

3. A laissez-faire view is that self-interested individuals interact

   in a socially beneficial way.

4. Laissez-faire is a French term that means “let it be.”

5. A laissez-faire economy is an economy with central planning

34) Suppose we observe a large increase in the price of corn but the quantity of corn sold stays the same. What is the most plausible explanation (or combination of explanations) below?

1. a) A drought occurred in corn-growing regions.

2. b) A drought occurred in corn-growing regions and a medical report was

   issued that corn is good for your health.

3. c) A drought occurred in corn-growing regions and a medical report was

   issued that corn is bad for your health.

4. d) A new fertilizer was invented that doubles corn yields.

5. e) A new fertilizer was invented that doubles corn yields and a

   medical report was issued that corn is bad for your health.

35) If the sellers of a good are unable to set their own prices (i.e., there is a “going price”), the demand for the good faced by a particular seller is ...

a) perfectly elastic.
b) moderately elastic. c) perfectly inelastic. d) moderately inelastic. e) zero.

36) If a rise in the price of oranges from $7 to $9 a bushel, caused by a shift of the demand curve, increases the quantity of bushels supplied from 4,500 to 5,500 bushels, the
a) demand for oranges is elastic.

b) supply of oranges is elastic.
c) demand for oranges is inelastic. d) supply of oranges is inelastic.
e) demand for oranges is unit elastic.

Answer 1

1 - Option D

Increase in price of pasta will increase the quantity demanded

The giffen goods are caregory of inferior good. It is exception to law of demand

2 - Option C

A giffen good

3 - Option C

Its substitutes and compliments

Both the goods are related through cross price elasticity of demand

4 - Option B

Cross.price elasticities are negative

Positive cross price elasticity belongs to substitute goods

5 - Option C

Shifts in supply result in no change in quantity demaded

This will be when the change in price does not change the quanitity demanded.

If it changes , it will not be inelastic.